Employment Agreement
THIS
EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of October
31, 2005 and shall be effective as of July 18, 2005 (the “Effective Date”) by
and between SurgiCount
Medical, Inc. (the
“Company”), a
California corporation and wholly owned subsidiary of Patient
Safety Technologies, Inc.
(“Parent”), a Delaware corporation, both with offices located at 000 Xxxxxxxx
Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxxxx, 00000, and Xxxxxxx
Xxxxxxx, an
individual with an address 00000 Xxxxxxxxxx Xxx, Xxxxxxxx, Xxxxxxxxxx, 00000
(“Individual”). This Agreement replaces and supercedes that certain Employment
Agreement entered into as of July 15, 2005 by and between Parent and Individual,
in its entirety.
WHEREAS,
the Company is in the business of patient safety products and content; and
WHEREAS,
Individual has had experience in the sales and marketing of businesses in
the
surgical sponge and hospital supply sales; and
WHEREAS,
the Company desires to retain the services of Individual; and
WHEREAS,
Individual is willing to be employed by the Company.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
1.
Employment.
Individual is hereby employed and engaged to serve the Company as the Executive
Vice-President of Sales and Marketing of the Company, or such additional
titles
as the Company shall specify from time to time, and Individual does hereby
accept, and Individual hereby agrees to such engagement and employment.
2.
Duties.
Individual shall be responsible for the overall sales and marketing of the
Company. In addition, Individual’s duties shall be such duties and
responsibilities as the Company shall specify from time to time, and shall
entail those duties customarily performed by the Executive Vice-President
of
Sales and Marketing of a company with a sales volume and number of employees
commensurate with those of the Company. Individual shall have such authority,
discretion, power and responsibility, and shall be entitled to office,
secretarial and other facilities and conditions of employment, as are customary
or appropriate to his position. Individual shall diligently and faithfully
execute and perform such duties and responsibilities, subject to the general
supervision and control of the Company’s Chief Executive Officer and board of
directors. Individual shall be responsible and report only to the Company’s
Chief Executive Officer. The Company’s Chief Executive Officer and board of
directors, in its sole and absolute discretion, shall determine Individual’s
duties and responsibilities and may assign or reassign Individual to such
duties
and responsibilities as it deems in the Company's best interest. Individual
shall devote his full-time attention, energy, and skill during normal business
hours to the business and affairs of the Company and shall not, during the
Employment Term, as that term is defined below, be actively engaged in any
other
business activity, except with the prior written consent of the Company’s Chief
Executive Officer and board of directors.
Nothing
in this Agreement shall preclude Individual from devoting reasonable periods
required for:
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(a)
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serving
as a director or member of a committee of any organization or corporation
involving no conflict of interest with the interests of the
Company;
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(b)
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serving
as a consultant in his area of expertise (in areas other than in
connection with the business of the Company), to government, industrial,
and academic panels where it does not conflict with the interests
of the
Company; and
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(c)
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managing
his personal investments or engaging in any other non-competing
business;
provided
that such activities do not materially interfere with the regular
performance of his duties and responsibilities under this Agreement
as
determined by the Company.
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3.
Best Efforts of Individual.
During
his employment hereunder, Individual shall, subject to the direction and
supervision of the Company’s Chief Executive Officer and board of directors,
devote his full business time, best efforts, business judgment, skill, and
knowledge to the advancement of the Company's interests and to the discharge
of
his duties and responsibilities hereunder. Notwithstanding the foregoing,
nothing herein shall be construed as preventing Individual from investing
his
assets in any business.
4.
Employment Term.
Unless
terminated pursuant to Section 12 of this Agreement, the term of this Agreement
shall commence as of the Effective Date of this Agreement and shall continue
for
a term of thirty-six (36) months (the “Initial Term”), and shall be
automatically renewed for successive one (1) year terms (the “Renewal Term”)
unless a party hereto delivers to the other party written notice of at least
thirty (30) days.
5.
Compensation of Individual.
| (a) |
Base
Compensation.
As
compensation for the services provided by Individual under this
Agreement,
the Company shall pay Individual an annual salary of Two Hundred
Thousand
Dollars ($200,000) ("Base Compensation").
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| (b) |
Stock
and Stock Options.
Individual shall also be eligible to receive shares of Parent’s authorized
stock options to purchase shares of Parent’s authorized stock from time to
time as determined by the board of directors and detailed herein:
Individual will receive Two Hundred Thousand (200,000) stock options,
vesting equally per year over three (3) years (i.e.,
66,667
shares on July 18, 2006; 66,667 shares on July 18, 2007; and 66,666
on
July 18, 2008) at a strike price of $5.00. Further, Individual
will
receive Ten Thousand (10,000) shares in a restricted stock grant
as a
signing bonus, payable within thirty (30) days of the Effective
Date.
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| (c) |
Milestones
Options. In
addition to the Base Compensation, Individual shall be eligible
to receive
a milestone bonus determined by the Chief Executive Officer and
board of
directors, based on the performance of the Company, as detailed
herein:
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| (i) |
Individual
will be granted Fifty Thousand (50,000) stock options of Parent
when
Individual reaches Five Million Dollars ($5,000,000) in sales for
SurgiCount Medical, Inc, vested at grant
date.
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| (ii) |
Individual
will be granted Fifty Thousand (50,000) stock options of Parent
when
Individual obtains a certain mutually agreed milestone as set by
Chief
Executive Officer, Individual and Health West Marketing, together,
vested
at grant date.
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6.
Benefits. Individual
shall also be entitled to participate in any and all Company benefit plans,
from
time to time in effect for employees of the Company. Such participation shall
be
subject to the terms of the applicable plan documents and generally applicable
Company policies. Individual shall also receive an automobile allowance of
$10,000 per year (given that Individual adheres to Company policy on auto
allowance) and use of a Company cellular telephone, paid for by
Company.
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7.
Vacation, Sick Leave and Holidays.
Individual shall be entitled to two (2) weeks of paid vacation annually,
with
such vacation to be scheduled and taken in accordance with the Company's
standard vacation policies. In addition, Individual shall be entitled to
such
sick leave and holidays at full pay in accordance with the Company's policies
established and in effect from time to time.
8.
Business Expenses.
The
Company shall promptly reimburse Individual for all reasonable out-of-pocket
business expenses incurred in performing Individual’s duties and
responsibilities hereunder in accordance with the Company's policies, provided
Individual promptly furnishes to the Company adequate records of each such
business expense.
9.
Location of Individual's Activities. Individual’s
principal place of business in the performance of his duties and obligations
under this Agreement shall be at a place to be determined by the Chief Executive
Officer. Notwithstanding the preceding sentence, Individual will engage in
such
travel and spend such time in other places as may be necessary or appropriate
in
furtherance of his duties hereunder.
10.
Confidentiality.
Individual recognizes that the Company has and will have business affairs,
products, future plans, trade secrets, customer lists, and other vital
information (collectively "Confidential Information") that are valuable assets
of the Company. Individual agrees that he shall not at any time or in any
manner, either directly or indirectly, divulge, disclose, or communicate
in any
manner any Confidential Information to any third party without the prior
written
consent of the Company’s board of directors. Individual will use his best
efforts to protect the Confidential Information and treat it as strictly
confidential.
11.
Non-Competition.
Individual acknowledges that he has gained, and will gain extensive knowledge
in
the business conducted by the Company, and has had, and will have, extensive
contacts with customers and vendors of the Company. Accordingly, Individual
agrees that he shall not compete directly or indirectly with the Company,
set
forth specifically as surgical dressings that are machine identified, during
the
Employment Term and shall not, during such period, make public statements
in
derogation of the Company. For the purposes of this Section 11, competing
directly or indirectly with the Company shall mean engaging, directly or
indirectly, as principle owner, officer, partner, consultant, advisor, investor,
or otherwise, either alone or in association with others, in the operation
of
any entity engaged in a business similar to that of the Company’s. Individual
further agrees that following termination of his employment with the Company,
he
shall not use the Company's Confidential Information, contacts, and vendors
to
compete, directly or indirectly, with the Company or against the interests
of
the Company.
12.
Termination.
Notwithstanding any other provisions hereof to the contrary, Individual’s
employment hereunder shall terminate under the following
circumstances:
| (a) |
Voluntary
Termination by Individual.
Individual shall have the right to voluntarily terminate this Agreement
and his employment hereunder at any time during the Employment
Term.
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| (b) |
Voluntary
Termination by the Company. The
Company shall have the right to voluntarily terminate this Agreement
and
Individual’s employment hereunder at any time during the Employment Term.
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| (c) |
Termination
for Cause.
The Company shall have the right to terminate this Agreement and
Individual’s employment hereunder at any time for cause. As used in this
Agreement, "cause" shall mean (i) refusal by Individual
to implement
or adhere to a written directive of the Company’s Chief Executive Officer
or board of directors other than a directive that would result
in illegal
or unethical conduct; (ii) material breach of a material
term or
representation of this Agreement, (iii) Individual’s conviction of a
felony, (iv) dishonesty, gross negligence, or other act
by Individual
materially detrimental to the Company or its good will, or materially
damaging to its relationships with its customers, suppliers, or
employees;
(v) breach of fiduciary duty, or (vi) misappropriation
by
Individual of funds from or resources of the Company. Cause shall
not be
deemed to exist unless the Company shall have first given Individual
a
written notice thereof specifying in reasonable detail the facts
and
circumstances alleged to constitute "cause" and ten (10) days after
such
notice such conduct has, or such circumstances have, as the case
may be,
not entirely ceased and not been entirely
remedied.
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| (d) |
Termination
Upon Death or for Disability.
This Agreement and Individual’s employment hereunder, shall automatically
terminate upon Individual’s death or upon written notice to Individual and
certification of Individual’s disability by a qualified physician or a
panel of qualified physicians if Individual becomes disabled beyond
a
period of twelve (12) months and is unable to perform the duties
contain
in this Agreement.
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| (e) |
Effect
of Termination.
In
the event that this Agreement and Individual’s employment is voluntarily
terminated by Individual pursuant to Section 12(a), or in the event
the
Company terminates this Agreement for cause pursuant to Section
12(c), all
obligations of the Company and all duties, responsibilities and
obligations of Individual under this Agreement, except for those
obligations set forth in Sections 8, 10, 11 and 17 hereof, shall
cease and
all unvested stock options and/or unearned milestone bonuses, will
be
forfeited.
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Upon
termination pursuant to Section 12(b), where the Company voluntarily terminates
this Agreement, the Company shall (i) pay Individual as severance compensation
a
cash sum equal to fifteen (15) months' of the Base Compensation, plus award
the
milestone option grants under Section 5(c) hereof, to the extent such milestones
are met within the Employment Term, and (ii) automatically vest all unvested
stock options granted pursuant to Section 5(b) had the Agreement not been
terminated. However, if termination pursuant to Section 12(b) occurs within
the
final fifteen (15) months of the Employment Term, then Individual will receive
whatever Base Compensation as would have been payable for the remaining
Employment Term of this Agreement, or through July 18, 2008.
In
addition, if Individual voluntarily terminates, all unvested stock options
and/or unearned milestone bonuses, will be forfeited. In the event of a sale
of
the Company, to the extent not already vested, all 200,000 of Individual’s stock
options shall automatically vest. In the event of a merger, consolidation,
sale,
or change of control, the Company's rights hereunder shall be assigned to
the
surviving or resulting company, which company shall then honor this Agreement
with Individual.
The
obligations set forth in Sections 8, 10, 11, 12 and 17 of this Agreement
are
intended to survive the termination of Individual's employment with Company.
13.
Resignation as Officer.
In the
event that Individual’s employment with the Company is terminated for any reason
whatsoever, Individual agrees to immediately resign as an Officer and/or
Director of the Company, if applicable, and any related entities. For the
purposes of this Section 13, the term the "Company" shall be deemed to include
subsidiaries, parents, and affiliates of the Company.
14.
Governing Law, Jurisdiction and Venue.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of California without giving effect to any applicable conflicts of
law
provisions.
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15.
Business Opportunities.
During
the Employment Term, Individual agrees to bring to the attention of the
Company’s board of directors all written business proposals that come to
Individual’s attention and all business or investment opportunities of whatever
nature that are created or devised by Individual and that relate to areas
in
which the Company conducts business and might reasonably be expected to be
of
interest to the Company or any of its subsidiaries.
16.
Employee’s Representations and Warranties.
Individual hereby represents and warrants that he is not under any contractual
obligation to any other company, entity or individual that would prohibit
or
impede Individual from performing his duties and responsibilities under this
Agreement and that he is free to enter into and perform the duties and
responsibilities required by this Agreement. Individual hereby agrees to
indemnify and hold the Company and its officers, directors, employees,
shareholders and agents harmless in connection with the representations and
warranties made by Individual in this Section 16.
17.
Indemnification.
| (a) |
The
Company agrees that if Individual is made a party, or is threatened
to be
made a party, to any action, suit or proceeding, whether civil,
criminal,
administrative or investigative (a "Proceeding"), by reason of
the fact
that he is or was a director, officer or employee of the Company
or is or
was serving at the request of the Company as a director, officer,
member,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is Individual’s
alleged action in an official capacity while serving as a director,
officer, member, employee or agent, Individual shall be indemnified
and
held harmless by the Company to the fullest extent permitted or
authorized
by the Company's certificate of incorporation or bylaws or, if
greater, by
the laws of the State of California, against all cost, expense,
liability
and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be
paid in
settlement) reasonably incurred or suffered by Individual in connection
therewith, and such indemnification shall continue as to Individual
even
if he has ceased to be a director, member, employee or agent of
the
Company or other entity and shall inure to the benefit of Individual’s
heirs, executors and administrators. The Company shall advance
to
Individual to the extent permitted by law all reasonable costs
and
expenses incurred by him in connection with a Proceeding within
20 days
after receipt by the Company of a written request, with appropriate
documentation, for such advance. Such request shall include an
undertaking
by Individual to repay the amount of such advance if it shall ultimately
be determined that he is not entitled to be indemnified against
such costs
and expenses.
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| (b) |
Neither
the failure of the Company (including its board of directors, independent
legal counsel or stockholders) to have made a determination prior
to the
commencement of any Proceeding concerning payment of amounts claimed
by
Individual that indemnification of Individual is proper because
he has met
the applicable standard of conduct, nor a determination by the
Company
(including its board of directors, independent legal counsel or
stockholders) that Individual has not met such applicable standard
of
conduct, shall create a presumption that Individual has not met
the
applicable standard of conduct.
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| (c) |
The
Company agrees to continue and maintain a directors' and officers'
liability insurance policy covering Individual to the extent the
Company
provides such coverage for its other executive
officers.
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| (d) |
Promptly
after receipt by Individual of notice of any claim or the commencement
of
any action or proceeding with respect to which Individual is entitled
to
indemnity hereunder, Individual shall notify the Company in writing
of
such claim or the commencement of such action or proceeding, and
the
Company shall (i) assume the defense of such action or proceeding,
(ii)
employ counsel reasonably satisfactory to Individual, and (iii)
pay the
reasonable fees and expenses of such counsel. Notwithstanding the
preceding sentence, Individual shall be entitled to employ counsel
separate from counsel for the Company and from any other party
in such
action if Individual reasonably determines that a conflict of interest
exists which makes representation by counsel chosen by the Company
not
advisable. In such event, the reasonable fees and disbursements
of such
separate counsel for Individual shall be paid by the Company to
the extent
permitted by law.
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| (e) |
After
the termination of this Agreement and upon the request of Individual,
the
Company agrees to reimburse Individual for all reasonable travel,
legal
and other out-of-pocket expenses related to assisting the Company
to
prepare for or defend against any action, suit, proceeding or claim
brought or threatened to be brought against the Company or to prepare
for
or institute any action, suit, proceeding or claim to be brought
or
threatened to be brought against a third party arising out of or
based
upon the transactions contemplated herein and in providing evidence,
producing documents or otherwise participating in any such action,
suit,
proceeding or claim. In the event Individual is required to appear
after
termination of this Agreement at a judicial or regulatory hearing
in
connection with Individual's employment hereunder, or Individual's
role in
connection therewith, the Company agrees to pay Individual a sum,
to be
mutually agreed upon by Individual and the Company, per diem for
each day
of his appearance and each day of preparation
therefor.
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18.
Notices.
All
demands, notices, and other communications to be given hereunder, if any,
shall
be in writing and shall be sufficient for all purposes if personally delivered,
sent by facsimile or sent by United States mail to the address below or such
other address or addresses as such party may hereafter designate in writing
to
the other party as herein provided.
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Company
or Parent:
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000 Xxxxxxxx Xxxx., Xxxxx 0000 |
Individual:
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Xxxxxxx Xxxxxxx |
| Santa Monica, CA 90401 | 00000 Xxxxxxxxxx Xxx | ||
| Fax: (000) 000-0000 | Xxxxxxxx, XX 00000 | ||
| Phone: (000) 000-0000 | Phone: (000) 000-0000 | ||
| Cell: (000) 000-0000 |
19.
Entire Agreement.
This
Agreement contains the entire agreement of the parties and there are no other
promises or conditions in any other agreement, whether oral or written. This
Agreement supersedes any prior written or oral agreements between the parties.
This Agreement may be modified or amended, if the amendment is made in writing
and is signed by both parties. This Agreement is for the unique personal
services of Individual and is not assignable or delegable, in whole or in
part,
by Individual. This Agreement may be assigned or delegated, in whole or in
part,
by the Company and, in such case, shall be assumed by and become binding
upon
the person, firm, company, corporation or business organization or entity
to
which this Agreement is assigned. The headings contained in this Agreement
are
for reference only and shall not in any way affect the meaning or interpretation
of this Agreement. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation
of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement. This Agreement may be executed in two
or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and, in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one of such counterparts.
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
| Company: | Individual: | |
| SurgiCount Medical, Inc. | ||
| By: /s/ Xxxxxx Xxxx | /s/ Xxxxxxx Xxxxxxx | |
| Name: Xxxxxx X. Xxxx, III | Xxxxxxx Xxxxxxx | |
| Title: Chairman and CEO | ||
| Parent: | ||
| Patient Safety Technologies, Inc. | ||
| By: /s/ Xxxxxx Xxxx | ||
| Name: Xxxxxx X. Xxxx, III | ||
| Title: Chairman and CEO | ||
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