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EMPLOYMENT AGREEMENT
This AGREEMENT is made as of September 30, 1997, by and between,
Physicians Clinical Laboratory, Inc., a Delaware corporation (the "Company"),
and J. XXXXXX XXXXXXXXXX, an individual (hereinafter referred to as the
"Employee").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the operation of a medical
laboratory and related business enterprise; and
WHEREAS, the Company employs and desires to continue the employment
of the Employee for the purpose of securing to the Company the experience,
ability and services of the Employee; and
WHEREAS, the Employee desires to continue his present employment
with the Company, pursuant to the terms and conditions herein set forth,
superseding all prior agreements between the Company, its subsidiaries and/or
predecessors and Employee;
NOW THEREFORE, it is mutually agreed by and between the parties
hereto as follows:
ARTICLE I
EMPLOYMENT
Subject to and upon the terms and conditions of this Agreement, the
Company hereby employs and agrees to continue the employment of the Employee,
and the Employee hereby accepts such continued employment in his capacity as
Chairman of the Board, President and Chief Executive Officer. In this capacity,
Employee will report to the Board of Directors of the Company.
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ARTICLE II
DUTIES
(A) The Employee shall, during the term of his employment with the
Company, perform such services and duties of an executive nature in connection
with the business, affairs and operations of the Company as may be reasonably
and in good faith assigned or delegated to him from time to time by or under the
authority of the Board of Directors of the Company and consistent with the
position of Chairman of the Board, President and Chief Executive Officer.
(B) Employee agrees to use his best efforts in the promotion and
advancement of the Company and its welfare and business. Employee agrees to
devote such time and effort to the business of the Company as is reasonably
necessary to fulfill the duties of Chairman of the Board, President and Chief
Executive Officer; provided, however, that the Company acknowledges that (i)
Employee is serving and will continue to serve as Chairman, President and Chief
Executive Officer of NU-TECH BIO-MED, INC. ("Nu-Tech") and Nu-Tech's
subsidiaries, and Employee will devote a portion of his professional time to the
business of Nu-Tech consistent with such duties and (ii) Employee may devote a
portion of his time to charitable work or positions on boards of directors or
committees of other companies or charitable organizations, provided that such
actions do not interfere with the performance by Employee of his duties
hereunder.
(C) Employee shall not be required to perform all of his duties at
the facilities of the Company, and Employee may utilize telephone, computer and
facsimile communications to perform services while he is not located at the
Company's facilities, but Employee shall spend such portion of his time at the
facilities of the Company as is necessary to satisfactorily perform his duties
as Chairman of the Board, President and Chief Executive Officer of the Company.
Additionally, Employee shall undertake such occasional travel, within or without
the United States, as is or may be necessary to satisfactorily perform his
duties and Chairman of the Board, President and Chief Executive Officer of the
Company.
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ARTICLE III
COMPENSATION
(A) Commencing with the date hereof, the Company shall pay to
Employee a salary at the rate of $104,000 per annum until October 31, 1997
(payable in equal weekly installments or pursuant to such regular pay periods
adopted by the Company) (the "Base Salary"). On November 1, 1997, the Base
Salary shall be increased to $208,000 per annum.
(B) Employee may receive such other additional compensation as may
be determined from time to time by the Board of Directors. Nothing herein shall
be deemed or construed to require the Board to award any bonus or additional
compensation.
(C) The Company shall deduct from Employee's compensation all
federal, state and local taxes which it may now or may hereafter be required to
deduct.
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ARTICLE IV
BENEFITS
(A) During the term hereof, (i) the Company shall provide Employee
with Blue Cross/Blue Shield or equivalent health insurance benefits and major
medical insurance, to the extent that Employee does not have such insurance
coverage pursuant to other employment arrangements, including his employment by
Nu-Tech, and long-term disability insurance, all in accordance with the
Company's policies; (ii) Employee shall be reimbursed by the Company upon
presentation of appropriate receipts, in accordance with the Company's policies,
for all reasonable and necessary business expenses incurred by the Employee on
behalf of the Company, including reasonable travel expenses, expenses related to
Employee's lodging and transportation incurred while Employee is performing
services hereunder at the Company's facilities, and telephone, cellular
telephone and facsimile expenses incurred by Employee to perform his duties
hereunder; and (iii) Employee shall receive the sum of $500 per month as and for
an automobile allowance and shall be reimbursed for all reasonable gasoline,
automobile maintenance and related expenses in connection with the use of an
automobile in the performance of his duties for the Company in the state of
California.
(B) In the event the Company wishes to obtain Key Man life insurance
on the life of Employee, Employee agrees to cooperate with the Company in
completing any applications necessary to obtain such insurance and promptly
submit to such physical examinations and furnish such information as any
proposed insurance carrier may request.
(C) The Company will obtain and maintain during the full term hereof
and at its sole cost and expense a policy of term life insurance on the life of
Employee in the face amount of $500,000 payable to a beneficiary named and
designated by Employee. Upon the conclusion or termination of this Agreement,
all right, title and interest in the policy shall be transferred to the
Employee, and the Employee shall be responsible for any premium due after such
transfer.
(D) For each year of the term hereof, Employee shall be entitled to
four weeks paid vacation. Unused vacation shall accrue and Employee may, at his
option, for each year in which he
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has any unused vacation elect to be paid cash compensation for such unused
vacation at a rate equal to his prevailing Base Salary.
ARTICLE V
NON-DISCLOSURE
The Employee shall not, at any time during or after the termination
of his employment hereunder except when acting an behalf of and with the
authorization of the Company, make use of or disclose to any person,
corporation, or other entity, for any purpose whatsoever, any trade secret or
other confidential information concerning the Company's business, finances,
proposed and current products, customers and pricing (collectively referred to
as the "Proprietary Information"). For the purposes of this Agreement, trade
secrets and confidential information shall mean information disclosed to the
Employee or known by him as a consequence of his employment by the Company,
whether or not pursuant to this Agreement, and not generally known in the
industry, concerning the business, finances, methods, operations, market
information, research and development, pricing and information relating to
proposed expansion of the Company or the Company's business plans. The Employee
acknowledges that trade secrets and other items of confidential information, as
they may exist from time to time, are valuable and unique assets of the Company,
and that disclosure of any such information would cause substantial injury to
the Company. The Company acknowledges that the Employee has been previously
employed in the medical laboratory industry and acknowledges that general
information regarding the industry known to the Employee prior to his employment
by the Company shall not be considered Proprietary Information. The provisions
of this Article V shall survive termination of this Agreement.
ARTICLE VI
RESTRICTIVE COVENANT
(A) Employee agrees that during the period of time that Employee is
employed by the Company he will not directly or indirectly enter into or become
associated with or engage in any other business (whether as a partner, officer,
director, shareholder, employee, consultant, representative, agent,
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franchisor, franchisee or otherwise), which business is directly or indirectly
involved in the provision of clinical laboratory services (each, a "Competitive
Act") anywhere in the United States and that, in the event that Employee's
employment hereunder is terminated pursuant to paragraph (D) or (E) of Article
VIII hereof, Employee will not engage in any Competitive Act anywhere in the
United States prior to the fourth anniversary of the date hereof (the
"Noncompete Period"). Employee further agrees that, in the event that Employee's
employment hereunder is terminated pursuant to paragraph (A), (C), (F) or (G) of
Article VIII hereof, he will not engage in any Competitive Act in any state
listed on Schedule I attached hereto during the Noncompete Period and during
such period he will not solicit clinical laboratory service business from any of
such states.
(B) During the Noncompete Period, the Employee shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee,
consultant, independent contractor or agent of the Company or any of its
subsidiaries to leave the employ of the Company or such subsidiary, or in any
way interfere with the relationship between the Company or any of its
subsidiaries and any employee, consultant, independent contractor or agent
thereof, (ii) hire or otherwise retain any person who was an employee,
consultant, independent contractor or agent of the Company or any of its
subsidiaries at any time during the six-month period immediately prior to the
date on which such hiring or engagement would take place, provided that this
clause (ii) shall not apply with respect to hiring or retaining any bona fide
agent, consultant or independent contractor of the Company that is also retained
by persons other than the Company or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other business relation of
the Company or any of its subsidiaries to cease doing business with the Company
or such subsidiary, or in any way interfere with the relationship between any
such customer, supplier, licensee, franchisee or business relation and the
Company or any of its subsidiaries (including making any negative statements or
communications about the Company or any of its subsidiaries).
(C) The parties hereto agree that, based upon the Company's present
business and plans for future expansion, the covenants and agreements contained
in this Article VI are reasonable in duration, scope and geographic area and are
necessary to protect the goodwill of the Company's business. The
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breach of the provisions of this Article VI would irreparably harm the Company.
If, however, any court shall hold that the duration of non-competition or any
other restriction contained in this Article VI is unenforceable, it the
intention of the parties hereto that this Article VI shall not thereby be
terminated but shall be deemed amended to delete therefrom or modify such
provision or portion adjudicated to be invalid or unenforceable or in the
alternative such judicially substituted term may be substituted therefor.
(D) The covenants and restrictions contained in this Article VI
shall survive termination of this Agreement.
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ARTICLE VII
TERM
This Agreement shall be for a term commencing on the date first set
forth above and terminating on the third anniversary hereof, unless earlier
terminated pursuant to the terms hereof.
ARTICLE VIII
TERMINATION
Employee's employment pursuant to this Agreement shall terminate on
the earliest to occur of the following:
(A) The expiration of the term hereof;
(B) The death of Employee;
(C) Upon written notice from the Company to the Employee, if
Employee becomes disabled and as a result of such disability, has been prevented
from and unable to perform all of his duties hereunder for a consecutive period
of four (4) months or for a total of one hundred and twenty (120) days in any
six (6) month period;
(D) Upon written notice from the Company to Employee, if (i)
Employee is convicted of a felony involving moral turpitude or has engaged in
embezzlement or other fraudulent or dishonest behavior, or (ii) the Employee, in
carrying out his duties under this Agreement, has performed in a manner as to
materially harm the Company and did so recklessly or wilfully or has refused to
follow reasonable and lawful directions from the Board of Directors;
(E) Upon written notice delivered by Employee to the Company not
less than ninety (90) days prior to the date of such termination;
(F) Upon written notice from the Company to Employee; or
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(G) In the event of a material diminution by the Company of
Employee's title and responsibilities or duties hereunder or a breach of the
Company's obligations pursuant to Article III hereof. In such event, Employee
shall deliver written notice to the Company not less than sixty (60) days prior
to the proposed date of termination stating with specificity the conditions
constituting the material diminution of title, responsibilities or duties or
breach by the Company; provided that Employee's employment hereunder shall not
terminate if the Company shall have remedied the breach specified in the notice
delivered by the Employee pursuant to this paragraph (G) prior to the date
specified as the proposed termination date in full notice.
In the event of a termination pursuant to paragraph (A), (D) or (E)
above, Employee shall be entitled only to (i) unpaid Base Salary accrued to the
date of such termination, (ii) compensation for unused vacation time accrued to
the date of termination for which payment has not been previously made and (iii)
unreimbursed expenses accrued to the date of such termination. In the event of a
termination pursuant to paragraph (B), (C) or (G) above, Employee shall receive
(i) his Base Salary for the period beginning on the termination date and ending
on the third anniversary of the date hereof, compensation for unused vacation
time accrued to the date of termination for which payment has not been
previously made, (ii) unreimbursed expenses accrued to the date of such
termination, and (iv) in the case of a termination pursuant to paragraph (C) or
(G) hereof, health insurance coverage or reimbursement for the reasonable cost
thereof. In the event of a termination pursuant to paragraph (F) above, Employee
shall receive (i) his Base Salary for the period beginning on the termination
date and ending on the fourth anniversary of the date hereof, (ii) compensation
for unused vacation time accrued to the date of termination for which payment
has not been previously made and (iii) health insurance coverage or
reimbursement for the reasonable cost thereof from the date of such termination
to the third anniversary of the date hereof.
ARTICLE IX
STOCK OPTIONS
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As an inducement to Employee to enter into this Agreement the
Company hereby grants to Employee two ten-year non-incentive stock options (the
"Options"), to purchase shares of the Company's Common Stock, $.01 par value,
upon and subject to the following conditions:
(A) Subject to the terms and conditions of the Company's Employee
Stock Option Plan (the "Plan"), Employee is hereby granted an option to purchase
100,000 shares of the Company's Common Stock, at an exercise price of $.25 per
share, which options shall vest and be immediately exercisable by Employee upon
and following execution of this Agreement by the parties hereto.
(B) Subject to the terms and conditions of the Plan, Employee is
hereby granted an option (the "Performance Based Option") to purchase 100,000
shares of the Company's Common Stock at an exercise price of $5.00 per share
that shall vest and become exercisable by Employee based on the Company's
performance measured with reference to earnings before interest, taxes,
depreciation and amortization ("EBITDA") for the years ended December 31, 1997,
1998, and 1999 (each, a "Performance Period"). One-third of the Performance
Based Option shall vest and become exercisable by Employee as of the April 1st
immediately following the end of a Performance Period (each, a "Vesting Date")
if the Company achieves the EBITDA target for such Performance Period. In no
event shall such EBITDA targets be less than $1,000,000 for the period from
October 1, 1997 through December 31, 1997, and $8,400,000 and $8,400,000 for the
years 1998 and 1999, respectively. For purposes of determining whether the
Performance Based Options shall vest and become exercisable, EBITDA shall be
derived from the Company's audited financial statements for the applicable
Performance Period. If the Company's EBITDA for either or both of the first two
Performance Periods is less than the EBITDA target established for such
Performance Period (any such shortfall referred to as the "Shortfall Amount"),
the portion of the Performance Based Option that otherwise would have vested and
become exercisable as of the Vesting Date immediately following the end of such
Performance Period (the "Scheduled Vesting Date") shall nonetheless vest and
become exercisable as of the next succeeding Vesting Date if the Company's
performance for the next succeeding Performance Period exceeds the EBITDA target
for such succeeding Performance Period
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by an amount that is greater than or equal to the Shortfall Amount.
(C) Notwithstanding the provisions of this Article IX above, if (i)
a "Change of Control" of the Company occurs during the term hereof, and (ii) as
of the date of such Change of Control the annual internal rate of return on an
equity investment in the Company (determined with reference to the price per
share paid in the Change of Control transaction versus an assumed valuation of
$5.00 per share (as adjusted to reflect stock splits, stock dividends and
reverse stock splits occurring after the date hereof and prior to such Change of
Control transaction) as of the date of this Agreement) is at least 25% per
annum, the Performance Based Option shall immediately vest and become
exercisable in full. A "Change in Control" of the Company means the occurrence
of any of the following events: (i) except for any transaction not constituting
a Change of Control pursuant to clause (iii) below, any sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation or
for security purposes), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole to any "person" (as defined in Section 13(d) of the Exchange Act of 1934,
as amended (the "Exchange Act")) or "group" (as defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act), (ii) the adoption by the Company of a plan for
the liquidation or dissolution of the Company, (iii) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any person or "group" (as defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act) in a transaction or series of related transactions in which
the voting stock of the Company is converted into or exchanged for cash,
securities or other property, other than any transaction where (A) the
outstanding voting stock of the Company is converted into or exchanged for
voting stock of the surviving or transferee corporation and (B) the "beneficial
owners" (as defined in Rule 13d-3 under the Exchange Act) of the voting stock of
the Company immediately prior to such transaction own, directly or indirectly,
not less than a majority of the total voting stock of the surviving or
transferee corporation immediately after such transaction, or (iv) the
consummation of an initial public offering of Common Stock of the Company in
which the Company receives greater than $20,000,000 in aggregate gross proceeds.
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(D) Except as expressly provided in this paragraph (D), upon the
termination of Employee's employment with the Company under any circumstances,
the Options that have not vested as of the date of Employee's termination (the
"Termination Date") shall immediately terminate; provided, that if Employee's
employment is terminated pursuant to paragraph (B) or (C) of Article VIII prior
to the third anniversary of the date hereof because of death or disability of
Employee during any Performance Period and the Company achieves the EBITDA
target for such Performance Period, one-third of the Performance Based Option
shall vest on the Vesting Date applicable to such Performances Period. Any
vested Options that have not been exercised prior to the Termination Date or
Performance Based Options that vest following the Termination Date shall
terminate in full on the date that is one year following the Termination Date;
provided that in the event that the Company has not registered the shares of
Common Stock issuable upon exercise of the Options, as contemplated by paragraph
(E) below, prior to such date, the expiration date for such Options shall toll
until such time as the Company has caused the shares of Common Stock issuable
upon such exercise to be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to paragraph (E) below.
(E) The Company hereby agrees that it shall register the shares of
the Company's Common Stock issuable upon exercise of the Options granted
hereunder under the Securities Act of 1933, as amended (the "Securities Act"),
upon Form X-0, Xxxx X-0 or any comparable form, at the same time as the Plan is
registered.
(F) The Options provided for herein are not transferable by
Employee, except to members of Employee's immediate family, a trust established
by Employee for the exclusive benefit of Employee and his immediate family or
charitable foundation established by Employee, and shall be exercised only by
Employee, by a trustee of a trust or charitable foundation established by
Employee or by Employee's legal representative or executor. The Options may be
exercised by delivery by any such person of the exercise price therefore to the
Company in cash, pursuant to a "cashless" exercise, by notice from any such
person, authorizing the Company to withhold from the issuance a number of shares
of Common Stock issuable upon exercise which, when multiplied by the then
current "fair market
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value" of the Common Stock, is equal to the aggregate exercise price of the
Options then being exercised by such person, or as provided in the Plan. For
purposes of this paragraph (F), fair market value shall be determined with
reference to the average closing price for the ten (10) trading days immediately
preceding the delivery of such notice, if the Common Stock is then so listed on
a national securities exchange or quoted on an automated quotation system, and
if the Common Stock is not then so listed or quoted, by the good faith
determination by action of a majority of the members of the Company's board of
directors, with Employee abstaining from any such action of the board of
directors. The Options are not qualified as incentive stock options.
(G) The Options shall be subject to the same anti-dilution
protections as are set forth in Section 8 of that certain Warrant Agreement by
and between the Company and U.S. Trust Company of California, N.A. dated as of
September 30, 1997.
ARTICLE X
TERMINATION OF PRIOR AGREEMENTS
This Agreement sets forth the entire agreement between the parties
and supersedes all prior agreements between the parties, whether oral or
written, without prejudice to Employee's right to all accrued compensation prior
to the effective date of this Agreement.
ARTICLE XI
SEVERABILITY
If any provision of this Agreement shall be held invalid and
unenforceable, the remainder of this Agreement shall remain in full force and
effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall remain in full force and effect in all other
circumstances.
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ARTICLE XII
NOTICE
All notices required to be given under the terms of this Agreement
shall be in writing and shall be deemed to have been duly given only if
delivered to the addressee in person or mailed by certified mail, return receipt
requested, as follows:
IF TO THE COMPANY: Physicians Clinical Laboratory, Inc.
0000 X Xxxxxx, Xxxxx 000X
Xxxxxxxxxx, Xxxxxxxxxx 00000
(with a copy to each of the members of the Board of Directors of the Company)
IF TO THE EMPLOYEE: J. XXXXXX XXXXXXXXXX
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph. Any such written notice
shall be effective upon receipt, but not later than four (4) days after the
deposit with the U.S. Postal Service.
ARTICLE XIII
BENEFIT
This Agreement shall inure to, and shall be binding upon, the
parties hereto, and the heirs of Employee and successors and assigns of the
Company.
ARTICLE XIV
WAIVER
The waiver by either party of any breach or violation of any
condition or provision of this Agreement shall not operate or be construed as a
waiver of any similar or dissimilar
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condition or provision at the same or any prior or subsequent time.
ARTICLE XV
GOVERNING LAW
This Agreement has been negotiated and executed in the State of New
York, and New York law shall govern its construction and validity.
ARTICLE XVI
JURISDICTION
Any or all actions or proceedings which may be brought by the
Company or Employee under this Agreement shall be brought in courts having a
situs within the State of New York and each of the Company and Employee hereby
consent to the jurisdiction of any local, state or federal court located within
the State of New York.
ARTICLE XVII
ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties
hereto. No change, addition or amendment shall be made hereto, except by written
agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
affixed their hands and seals the day and year first above written.
PHYSICIANS CLINICAL LABORATORY, INC.
By: ______________________________
Its: _____________________________
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J. XXXXXX XXXXXXXXXX (Employee)
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Schedule I
California
Washington
Oregon
Idaho
Utah
Wyoming
Colorado
New Mexico
Arizona
Texas
Montana
Nevada
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