ZNOMICS, INC. EMPLOYMENT AGREEMENT
This
Agreement is made by and between Znomics, Inc., a Nevada corporation (the
“Company”), and Xxxx X. Xxxxxx, Ph.D. (“Executive”).
(a) Positions; CEO Employment
Commencement Date; Duties. Effective as of the date hereof,
the Company shall employ Executive as the President and Chief Executive Officer
of the Company reporting to the Board of Directors of the Company (the
“Board”). The period of Executive’s employment hereunder is referred
to herein as the “Employment Term.” During the Employment Term,
Executive shall render such business and professional services in the
performance of his duties, consistent with Executive’s position within the
Company as shall reasonably be assigned to him by the Board. So long as
Executive remains the President and Chief Executive Officer of the Company, the
Company shall nominate Executive to be a member of the Board at each applicable
meeting of the shareholders of the Company. If Executive’s employment as
President and Chief Executive Officer terminates, if requested by a majority of
the Board (excluding Executive), Executive agrees to resign as a member of the
Board effective upon such termination.
(b) Obligations. During
the Employment Term, Executive shall devote his full business efforts and time
to the Company. Executive agrees, during the Employment Term, not to
actively engage, without the prior approval of the Board, in any other
employment, occupation or consulting activity for any direct or indirect
remuneration which would give rise to a conflict of interest. In
connection with the execution of this Agreement, Executive has, or will
promptly, provide a summary of all outside employment, occupation and consulting
activities (whether or not such activities give rise, or would reasonably be
expected to give rise, to a conflict of interest) in which Executive is now, and
expects to be as of September 1, 2008, engaged. During the Employment
Term, Executive shall notify the Board prior to engaging in any other
employment, occupation and consulting activities (whether or not such activities
give rise, or would reasonably be expected to give rise, to a conflict of
interest).
(c) Employee
Benefits. During the Employment Term, Executive shall be
eligible to participate in the employee benefit plans maintained by the Company
that are applicable to other senior management to the full extent provided for
under those plans.
(d) Personal and Sick
Days. Executive will be entitled to paid personal or sick
days in accordance with the Company’s vacation policy and to take up
to 20 days of paid vacation per year. The timing and duration of
specific vacations will be mutually and reasonably agreed to by the parties
hereto.
2. At-Will
Employment. Executive and the Company understand and
acknowledge that Executive’s employment with the Company constitutes “at-will”
employment. Subject to the Company’s obligation to provide severance
benefits under certain circumstances as specified herein, Executive and the
Company acknowledge that this employment relationship may be terminated at any
time, upon written notice to the other party, with or without good cause or for
any or no cause, at the option either of the Company or Executive.
3. Compensation.
(a) Base
Salary. While employed by the Company, the Company shall pay
Executive as compensation for his services a base salary at the annualized rate
of Three Hundred Thousand Dollars ($300,000.00) (the “Base
Salary”). Such salary shall be paid periodically in accordance with
normal Company payroll practices and schedule and subject to the usual, required
withholding. Executive’s Base Salary shall be reviewed annually by
the Board or the compensation committee thereof for possible adjustments in
light of Executive’s performance and competitive data.
(b) Target
Bonus. Executive shall be eligible to earn an annual target
bonus equal to twenty-five hundred percent (25%) of his Base Salary for the
first year (or period defined in an incentive agreement) of the Employment Term
and at least thirty percent (30%) of his Base Salary for each year of the
Employment Term thereafter (“Target Bonus”). The actual bonus, if
any, Executive will receive may be greater or lesser and will depend upon the
extent to which the applicable performance goal(s) specified by the Board (based
upon recommendations from the compensation committee thereof and Executive) in
its sole discretion are achieved or exceeded. Any Target Bonus earned
pursuant hereto will be paid to Executive not later than six weeks following the
end of the year of the Employment Term to which the Target Bonus relates. If the
Company adopts a policy to base annual bonuses based on the Company’s fiscal
year for all senior management, (i) references in the first three sentences of
this Section 3(b) and in Section 4(a)(i) to “year of the Employment Term” shall
be deemed to be references to the Company’s fiscal year and (ii) the Target
Bonus for the fiscal year in which the Company adopts such policy shall be
proportionally increased to account for that portion of the year of the
Employment Term for which Executive has not received an actual bonus.
Executive’s Target Bonus shall be reviewed annually by the Board or the
compensation committee thereof for possible adjustments in light of Executive’s
performance and competitive data.
(c) Equity
Grants. Executive will be eligible to participate in the
Company’s 2002 Stock Incentive Plan (the “Plan”). Subject to Board
approval, Executive will be granted (i) an option (the “Service Option”) to
purchase 500,000 shares of the Company’s Common Stock, and one fifth (1/5th ) of
the total number shares subject to the option shall vest on each anniversary of
the first day of the Employment Term, subject to Executive being a service
provider to the Company on each such date; provided that effective immediately
prior to a Change of Control (as defined below), 100% of the Service Option will
become fully vested and (ii) an option to purchase 100,000 shares of the
Company’s Common Stock, which option shall vest upon satisfactory completion of
objectives determined by Executive and the Board prior to the date of grant,
subject to Executive continuing to be a service provider to the Company on the
date(s) such objectives are met. In each case, the option will (i) be
subject to the terms and conditions of the Plan and (ii) have an exercise price
equal to the fair market value of the Company’s Common Stock as of the date of
grant, as determined by the Board (it being understood that the date of grant
for purposes of these equity incentive grants is currently expected to be
September 30, 2008).
(a) Involuntary Termination
other than for Cause; Voluntary Termination for Good
Reason. If Executive’s employment is terminated
(i) involuntarily by the Company other than for Cause or (ii) due to a
Voluntary Termination for Good Reason, then, subject to Executive’s entering
into and not revoking a standard form of release of claims with the Company and
further subject to Executive’s complying with the provisions of Section 7
hereof, the Company shall provide Executive with the following
benefits:
(i) Severance
Payment. If such termination occurs (A) prior to the first
anniversary of the Employment Term, $300,000 and (B) thereafter, one hundred
percent (100%) of the sum of Executive’s Base Salary and the actual bonus paid
or payable to Executive in respect of the most recently completed year of the
Employment Term, in either case payable in a lump-sum within thirty (30) days
following Executive’s termination of employment (subject to delayed payment to
avoid additional taxation under Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”)).
(ii) Equity Compensation
Accelerated Vesting. Unless the Service Option is otherwise
fully vested, one fifth (1/5) of the Service Option shall automatically be
accelerated in full so as to become completely vested.
(iii)
Continued
Benefits. The Company will reimburse the health care premiums
for Executive and his dependents incurred pursuant to the Consolidated Budget
Reconciliation Act of 1985 (“COBRA”) for a period of twelve (12) months from the
date of such termination, to the extent that Executive is eligible for and
timely elects continuation coverage under COBRA (provided that such
reimbursement shall terminate upon commencement of new employment by an employer
that offers health care coverage to its employees).
(iv) Outplacement
Services. Reimbursement for the reasonable, documented fees
and expenses of one mutually-agreed upon outplacement firm which payment shall
continue until the earlier of (i) the one year anniversary of the date of
termination and (ii) the date upon which Executive accepts employment with
another employer.
(b) Voluntary Resignation other
than for Good Reason; Termination For Cause. If Executive’s
employment terminates by reason of Executive’s voluntary resignation (and is not
a Voluntary Termination for Good Reason), or if Executive is terminated for
Cause, then Executive shall not be entitled to receive severance or other
benefits except for those (if any) as may then be established under the
Company’s then existing severance and benefits plans or pursuant to other
written agreements with the Company.
(c) Code Section
409A. Notwithstanding any other provision of this Agreement,
if Executive is a “key employee” under Code Section 409A and a delay in making
any payment or providing any benefit under this Plan is required to avoid
additional taxation under Code Section 409A, such payments or benefits shall not
be made or provided until the end of six (6) months following the date of the
Employee’s separation from service as required by Code Section
409A.
5. Golden Parachute Excise
Taxes. In the event that the benefits provided for in this
Agreement or otherwise constitute “parachute payments” within the meaning of
Section 280G of the Code would be subject to the excise tax imposed by Section
4999 of the Code (the “Excise Tax”), and the aggregate value of such parachute
payments, as determined in accordance with Section 280G of the Code and the
Treasury Regulations thereunder is less than the product obtained by multiplying
3.59 by Executive’s “base amount” within the meaning of Code Section 280G(b)(3),
then such benefits shall be reduced to the extent necessary (but only to that
extent) so that no portion of such benefits will be subject to the Excise
Tax. Alternatively, in the event that the benefits provided for in
this Agreement or otherwise constitute “parachute payments” within the meaning
of Section 280G of the Code, would be subject to the Excise Tax, and the
aggregate value of such parachute payments, as determined in accordance with
Section 280G of the Code and the Treasury Regulations thereunder is equal to or
greater than the product obtained by multiplying 3.59 by Executive’s “base
amount” within the meaning of Code Section 280G(b)(3), then Executive
shall receive (i) a payment from the Company sufficient to pay such Excise Tax,
plus (ii) an additional payment from the Company sufficient to pay the Excise
Tax and federal and state income and employment taxes arising from the payments
made by the Company to Executive pursuant to this sentence (together, the
“Excise Tax Gross-Up Payment”); provided, however, that the
Excise Tax Gross-Up Payment shall be capped at a maximum of one million dollars
($1,000,000). Executive shall receive such payments no later than the
end of Executive’s taxable year following the taxable year in which Executive
remitted the applicable taxes. Unless the Company and Executive
otherwise agree in writing, the determination of Executive’s excise tax
liability and the amount required to be paid under this section shall be made in
writing by a “Big Four” national accounting firm (the
“Accountants”). For purposes of making the calculations required by
this section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this section. The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this section.
6. Definition of
Terms. The following terms referred to in this Agreement shall
have the following meanings:
(a) Cause. “Cause”
shall mean (i) an act of personal dishonesty taken by Executive in
connection with his responsibilities as an employee and intended to result in
substantial personal enrichment of Executive; (ii) Executive being
convicted of, or plea of nolo contendere to, a
felony; (iii) breach of Executive’s obligations under the first sentence of
Section 1(b) hereof or of the Employee Confidential Information and Invention
and Assignment Agreement, in form and substance substantially similar to that
executed by each of the officers of the Company, to be entered into by and
between the Company and Executive (the “Confidential Information Agreement”);
(iv) willful material breach of the Company’s written policies; or (v) a
willful act by Executive which constitutes gross misconduct and which is, or
could reasonably be expected to be, injurious to the Company.
(b) Change of
Control. “Change of Control” means the occurrence of any of
the following events:
(i) Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting
securities;
(ii) the
consummation of the sale or disposition by the Company of all or substantially
all the Company’s assets; or
(iii) the
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.
(c) Voluntary Termination for
Good Reason. “Voluntary Termination for Good Reason” shall
mean Executive voluntarily resigns after the occurrence of any of the
following: (i) without Executive’s express written consent, a
material reduction of Executive’s duties, title, authority or responsibilities,
relative to Executive’s duties, title, authority or responsibilities as in
effect immediately prior to such reduction, or the assignment to Executive of
such reduced duties, title, authority or responsibilities; provided, however, that a
reduction in duties, title, authority or responsibilities solely by virtue of
the Company’s being acquired and made part of a larger entity (as, for example,
when the president of the Company remains a senior executive of a business unit
of the combined entity following a Change of Control) shall not by itself
constitute grounds for a “Voluntary Termination for Good Reason;”
(ii) without Executive’s express written consent, a material reduction,
without good business reasons, of the facilities or perquisites (including
office space and location) available to Executive immediately prior to such
reduction; (iii) a material reduction by the Company in the base salary of
Executive as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the aggregate level of employee benefits, including
bonuses, to which Executive was entitled immediately prior to such reduction
with the result that Executive’s aggregate benefits package is materially
reduced (other than a reduction that generally applies to Company employees);
(v) the relocation, without Executive’s written consent, of Executive to a
facility or a location outside of a 75 mile radius of Portland, Oregon;
(vi) the failure of the Company to obtain the assumption of this agreement
by any successors contemplated in Section 8 below; or (vii) any act or
set of facts or circumstances which would, under Oregon case law or statute
constitute a constructive termination of Executive; or (viii) by mutual
agreement of the Board and Executive. In addition, upon any such
voluntary termination Executive must provide notice to the Company of the
existence of the one or more of the above conditions within ninety (90) days of
its initial existence and the Company must be provided at least thirty (30) days
to remedy the condition.
(a) Non-Solicitation. Executive
agrees and acknowledges that Executive’s right to receive and retain the
severance payments and benefits set forth in Section 4 (to the extent
Executive is otherwise entitled to such payments) shall be conditioned upon
Executive’s neither directly nor indirectly soliciting, inducing, recruiting or
encouraging an employee of the Company to leave his or her employment either for
Executive or for any other entity or person with which or whom Executive has a
business relationship for one year after the termination of Executive’s
employment with the Company for any reason.
(b) Understanding of
Covenant. Executive represents that he (i) is familiar
with the foregoing covenant not to solicit, and (ii) is fully aware of his
obligations hereunder, including, without limitation, the reasonableness of the
length of time, scope and geographic coverage of the covenant.
(c) Remedy for
Breach. Upon any breach of this section by Executive, all
severance payments and benefits pursuant to this Agreement shall immediately
cease and any stock options, stock appreciation rights or other similar rights
then held by Executive shall immediately terminate and be without further force
and effect, and Executive shall be required to reimburse the Company any
lump-sum severance payment previously paid under Section 4 and the value of any
COBRA reimbursements previously paid under Section 4 hereunder. The
Company may also seek to enjoin Executive from any continued
breach.
8. Assignment. This
Agreement shall be binding upon and inure to the benefit of (a) the heirs,
beneficiaries, executors and legal representatives of Executive upon Executive’s
death and (b) any successor of the Company. Any such successor
of the Company shall be deemed substituted for the Company under the terms of
this Agreement for all purposes. As used herein, “successor” shall
include any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly acquires
all or substantially all of the assets or business of the
Company. None of the rights of Executive to receive any form of
compensation payable pursuant to this Agreement shall be assignable or
transferable except through a testamentary disposition or by the laws of descent
and distribution upon the death of Executive. Any attempted
assignment, transfer, conveyance or other disposition (other than as aforesaid)
of any interest in the rights of Executive to receive any form of compensation
hereunder shall be null and void.
9. Notices. All
notices, requests, demands and other communications called for hereunder shall
be in writing and shall be deemed given if (i) delivered personally or by
facsimile, (ii) one (1) day after being sent by Federal Express or a
similar commercial overnight service, or (iii) three (3) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors in interest at the following
addresses, or at such other addresses as the parties may designate by written
notice in the manner aforesaid:
If
to the Company:
|
0000
XX 0xx
Xxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000
Attn:
Chairman of the Board
|
If
to Executive:
|
Xxxx
X. Xxxxxx
at
the last residential address known by the Company.
|
10. Severability. In
the event that any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision.
11. Entire
Agreement. This Agreement, the indemnification agreement in
form and substance substantially similar to that executed by each of the
executive officers and directors of the Company to be entered into by Executive
and the Company, Executive’s equity compensation agreements and the Confidential
Information Agreement represent the entire agreement and understanding between
the Company and Executive concerning Executive’s employment relationship with
the Company. This Agreement supersedes and replaces in its
entirety any prior understanding between the parties hereto. To the extent that
the arbitration provisions set forth in this Agreement and the Confidential
Information Agreement are in conflict, the arbitration provisions of this
Agreement shall govern.
12. Dispute
Resolution.
(a) The
parties shall first meet to settle any dispute through good faith negotiation or
non-binding mediation. If not settled by good faith negotiation or
non-binding mediation between the parties within 30 days from the date one party
requests in writing to meet the other party, then to the extent permitted by
law, any dispute or controversy arising out of, relating to, or in connection
with this Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof shall be finally settled by binding arbitration
to be held in Multnomah County, Oregon, in accordance with the National Rules
for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the “Rules”). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The
decision of the arbitrator shall be confidential, final, conclusive and binding
on the parties to the arbitration. Judgment may be entered under a
protective order on the arbitrator’s decision in any court having
jurisdiction. The Company shall pay all costs of any mediation or
arbitration; provided, however, that each party shall pay its own attorney and
advisor fees.
(b) The
arbitrator shall apply Oregon law to the merits of any dispute or claim, without
reference to rules of conflict of law. The arbitration proceedings
shall be governed by federal arbitration law and by the Rules, without reference
to state arbitration law. Executive hereby expressly consents to the
personal jurisdiction of the state and federal courts located in Oregon for any
action or proceeding arising from or relating to this Agreement and/or relating
to any arbitration in which the parties are participants.
(c) Executive
understands that nothing in Section 12 modifies Executive’s at-will
status. Either the Company or Executive can terminate the employment
relationship at any time, with or without cause.
(d) EXECUTIVE
HAS READ AND UNDERSTANDS SECTION 12, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES, TO THE EXTENT PERMITTED BY LAW, TO SUBMIT ANY FUTURE CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR TERMINATION
THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE
RELATIONSHIP.
13. No Oral Modification,
Cancellation or Discharge. This Agreement may only be amended,
canceled or discharged in writing signed by Executive and a majority of the
Board.
14. Withholding. The
Company shall be entitled to withhold, or cause to be withheld, from payment any
amount of withholding taxes required by law with respect to payments made to
Executive in connection with his employment hereunder.
15. Expenses. The
Company will reimburse Executive for reasonable, documented, out-of-pocket legal
expenses incurred in connection with the preparation and execution of this
Agreement, not to exceed $3,000.
16. Governing
Law. This Agreement shall be governed by the laws of the State
of Oregon, without reference to the conflicts of law provisions
thereof.
17. Effective
Date. This Agreement is effective upon the date it has been
executed by both parties.
18. Acknowledgment. Executive
acknowledges that he has had the opportunity to discuss this matter with and
obtain advice from his private attorney, has had sufficient time to, and has
carefully read and fully understands all the provisions of this Agreement, and
is knowingly and voluntarily entering into this Agreement.
[Remainder
of Page Intentionally Left Blank]
/s/ Xxxxxx X.
Xxxxxxx
Xxxxxx X.
Xxxxxxx, P.E., Ph.D.
Chairman
of the Board
EXECUTIVE
/s/ Xxxx X.
Xxxxxx
Xxxx X.
Xxxxxx, Ph.D.
Date:
August 14, 2008