Exhibit 10.1
March 28, 2005
CONFIDENTIAL
Xx. Xxxxxxx X. Xxxxxxx
c/o Psychemedics Corporation
000 Xxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Dear Xxxx:
This letter sets forth the agreements we have made regarding your
employment with Psychemedics Corporation (the "Company").
1. If after the effective date hereof, your employment is terminated by
the Company without "Cause" (as defined in paragraph 13 below), or
you voluntarily terminate your employment for "Good Reason" (as
defined in paragraph 13 below), in either case at the time of, or
within twelve (12) months following, a "Change of Control of the
Company" (as defined in paragraph 13 below), then you will continue
to be paid monthly an amount equal to your average monthly
compensation for the twelve full months preceding the date of such
termination ("Termination Pay") for a period of twelve (12) months
from the date of such termination. For purposes of the foregoing
sentence, average monthly compensation shall be determined with
reference to the aggregate base salary and bonus compensation earned
by you during such period, including any bonus compensation accrued
for such period or any portion of such period but not paid as of the
date of such termination). Your Termination Pay will be subject to
normal deductions for taxes, benefit plan contributions, other
payroll deductions and any amount due the Company as a result of
cash advances. The Company agrees to continue to make health
insurance available to you under such health insurance plan as the
Company has in effect for so long as you are receiving Termination
Pay and so long as you contribute such portion of the premiums for
such insurance as is required of employees under such plan. You
agree, however, that if you obtain health insurance coverage through
another employer while you are eligible to receive health insurance
under this Agreement, the Company shall no longer be required to
make health insurance available to you under this Agreement. You
agree to give the Company at least fourteen (14) days prior written
notice of the termination of your employment in the event of your
voluntary termination without Good Reason. You shall not
be entitled to Termination Pay as a result of termination by reason
of your death or "Disability" (as defined in paragraph 13 below)
following a Change of Control of the Company.
2. Notwithstanding any other provision of this Agreement, the
Termination Pay contemplated to be paid to you under certain
circumstances set forth in this Agreement shall only be paid in
consideration of the execution and delivery by you of a release
reasonably satisfactory to the Company waiving all claims you, your
heirs, or legal representatives have or may have against the Company
or any of its shareholders, officers, directors, employees or agents
with respect to your employment or the termination thereof, or any
other claim.
3. You acknowledge that, as the Company's Senior Vice President and
General Counsel, you are in possession of specialized information
concerning the total operations, conduct, management, and strategy
of the Company, as well as proprietary information concerning the
Company's products and services and that the applicability of your
knowledge of these matters is applicable to all geographic areas in
which the Company does business. You further acknowledge that the
Company has a legitimate business interest in protecting its hair
testing business from unfair competition.
4. You shall not, without the prior and express written approval of the
Company, either during or subsequent to the term of your employment,
disclose or use or enable another to disclose or use any secret,
private or confidential information, trade secret or other
proprietary knowledge of the Company, or its subsidiaries,
divisions, employees or agents. Upon termination of your employment
with the Company, you shall deliver to the Company all equipment,
records and copies of records, notes, data, memoranda, prototypes,
designs, customer lists and other information which is embodied in
physical media and documents belonging to the Company which are then
in your possession. You agree that all such information and
documents shall be the property of the Company and that the
obligations set forth in this paragraph shall survive termination of
your employment.
5. You agree that, if you or the Company shall terminate your
employment in such a manner as to entitle you to Termination Pay
under paragraph 1, above, you shall not, for so long as you are
entitled to receive such Termination Pay:
(a) directly or indirectly own, manage, operate or control, or
participate in the ownership, management, operation or control of,
or become associated in any capacity with any business enterprise,
firm, corporation or company related to the field of testing for the
detection of drug use,
which is in competition with the business of the Company, or
directly or indirectly accept employment with or render services on
behalf of a competitor of the Company, or any other third party, in
any capacity which may reasonably be considered to be useful to the
competitor or such other third party to become a competitor, without
receiving the Company's prior written approval; or
(b) induce or attempt to induce any employee, officer, consultant,
or agent of the Company to leave the employ thereof or in any way
interfere with the relationship between the Company and any
employee, officer, consultant, or agent thereof; hire directly or
through another entity any person who was an employee of the Company
at any time during the six (6) months prior to the date such person
is to be so hired; or induce or attempt to induce any customer,
client, supplier, licensee, or other business relation of the
Company to cease doing business with the Company or in any way
interfere with the relationship between any such customer, client,
supplier, licensee, or business relation and the Company (including,
without limitation, making any negative statements or communications
concerning the Company).
6. You agree that your obligations under paragraphs 4 and 5 are
special, unique, and extraordinary and that any breach by you of
such obligations shall be deemed material, and shall be deemed to
cause irreparable injury not properly compensable by damages in an
action at law, and the rights and remedies of the Company under
paragraphs 4 and 5 may, therefore, be enforced both at law and in
equity, by injunction or otherwise. For purposes of paragraphs 4 and
5, the term "Company" shall include any and all subsidiaries or
divisions of the Company.
7. The Company's obligations under paragraph 1 of this Agreement shall
expire five (5) years from the date hereof, unless the parties agree
in writing to the renewal of the provisions of such paragraph. All
of the remaining provisions of this Agreement shall remain in full
force and effect during the term of your employment and thereafter
in accordance with their terms.
8. If at any time a controversy between you and the Company arises as
to the meaning or operation of this Agreement, such controversy
shall be submitted to arbitration by either party in Boston,
Massachusetts, before an arbitrator to be named by the President of
the Boston Branch of the American Arbitration Association, provided
however, that the Company shall also have the rights set forth in
paragraph 6 above. Such arbitration proceedings shall be conducted
in accordance with the rules and procedures then in effect of the
American Arbitration Association. The decision of the arbitrator
shall be binding upon the parties and judgment on any award made by
the arbitrator may be entered in any court having
jurisdiction thereof. The costs of the arbitrator shall be borne
equally by you and the Company. Each party will bear his or its own
legal costs.
9. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts without reference
to principles of conflict of laws.
10. This Agreement contains the entire agreement of the parties in
respect of this transaction and supersedes any prior agreement or
understanding relating to your employment by the Company. No
amendment or modification of any provision of this Agreement will be
valid unless in writing signed by both parties. Any waiver must be
in writing and signed by you or an authorized officer of the
Company, as the case may be.
11. This Agreement shall be binding upon and inure to the benefit of:
(a) the Company, and any successors or assigns of the Company,
whether by way of a merger or consolidation, or liquidation of the
Company, or by way of the Company selling all or substantially all
of the assets and business of the Company to a successor entity;
and, subject to the Company's right to terminate your employment at
any time, the Company agrees to require any successor entity to
expressly assume or unconditionally guarantee the Company's
obligations under this Agreement (unless such obligations are
assumed by operation of law); and (b) you and your heirs, executors
and administrators.
12. Any notice or other communication required hereunder shall be in
writing, shall be deemed to have been given and received when
delivered in person, or, if mailed, shall be deemed to have been
given when deposited in the United States mail, first class,
registered or certified, return receipt requested, with proper
postage prepaid, and shall be deemed to have been received on the
third business day thereafter, and shall be addressed as follows:
If to the Company, addressed to:
Psychemedics Corporation
000 Xxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attn: President
If to you, addressed to:
Xxxxxxx X. Xxxxxxx
Psychemedics Corporation
000 Xxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
or such other address as to which any party hereto may have notified
the other in writing.
13. Definitions.
(a) "Cause" shall mean: (i) theft or embezzlement, or attempted
theft or embezzlement, by you of money or property of the Company,
your perpetration or attempted perpetration of fraud, or your
participation in a fraud or attempted fraud upon the Company; (ii)
your unauthorized appropriation of, or attempt to misappropriate,
any tangible or intangible assets or property of the Company, or
your appropriation of, or attempt to appropriate, a business
opportunity of the Company, including but not limited to attempting
to secure or securing any profit for yourself or any of your family
members or personal associates in connection with any transaction
entered into on behalf of the Company; (iii) any act or acts of
disloyalty, misconduct, or moral turpitude by you, including but not
limited to violation of the Company's sexual harassment or
non-harassment policy, any of which the Board of Directors of the
Company determines in good faith has been or is likely to be
materially injurious to the interest, property, operations,
business, or reputation of the Company, or its directors, employees
or shareholders; (iv) any act or omission constituting gross
negligence in connection with the performance of your duties on
behalf of the Company which is materially injurious to the interest,
property, operations, business, or reputation of the Company; (v)
your conviction of a crime other than minor traffic violations or
other similar minor offenses (including pleading guilty or entering
a plea of no contest), or your indictment for a felony or its
equivalent, or your being charged with a violent crime, a crime
involving moral turpitude, or any other crime for which imprisonment
is a possible punishment; (vi) your willful refusal or material
failure (other than by reason of Disability) to carry out reasonable
and lawful instructions and directives from the Board of Directors
and your failure to cure or correct such refusal or failure within
ten (10) days after receiving written notice from the Board of
Directors describing such refusal or failure; or (vii) the material
breach by you of your obligations under paragraphs 4 or 5 hereof or
under any other confidentiality, non-compete, non-solicitation,
non-disparagement or similar agreement with the Company.
(b) "Change in Control of the Company" shall mean
(i) the number of shares of Common Stock directly or
indirectly beneficially owned, as defined in Rule 13d-3 under
the Securities Exchange Act of 1934 (the "Exchange Act"), by
the Buyers and Permitted Assignees (as defined in the
Securities Purchase Agreement dated May 15, 1989, as amended
from time to time, by
and among the Company, X. Xxxxxxx Xxxxx, X. Xxxxx Xxxxxxxx,
Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx, Xxxxxxxx X. Xxxxx as
Trustee, MW Partners and Psychemedics Investments, Inc. as
nominee), and the spouses or children of any of the foregoing,
and trusts for the benefit of any of the foregoing or for the
benefit of any partner or former partner in MW Partners
(collectively the "Principal 1989 Shareholders"), in the
aggregate, is less than the aggregate number of shares of
Common Stock directly or indirectly beneficially owned (as
defined above) at any time by any other person or group (as
defined in Section 13(d) of the Exchange Act); or
(ii) the consummation of a reorganization, merger or
consolidation or sale or disposition of all or substantially
all of the assets of the Company (a "Business Combination"),
unless, in each case following such Business Combination, (A)
all or substantially all of the individuals and entities who
were the beneficial owners of the Common Stock of the Company
immediately before the consummation of such Business
Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result
of the transaction owns the Company or all or substantially
all of the assets of the Company either directly or indirectly
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination, of the Common Stock of the Company; and
(B) no person or group (as defined in Section 13(d) of the
Exchange Act) of the Company or the corporation resulting from
the Business Combination) beneficially owns, directly or
indirectly, a number of the then outstanding shares of the
common stock of the corporation resulting from the Business
Combination or the combined voting power of the then
outstanding voting securities of the corporation greater than
the number of such shares owned by the Principal 1989
Shareholders; or
(iii) Individuals who, as of the date of this Agreement,
constitute the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Board of Directors of the Company, provided,
however, that any individual's becoming a director after the
date of this Agreement whose election, or nomination for
election by the stockholders of the Company, was approved by a
vote of at least a majority of
the directors then comprising the Incumbent Board will be
considered as though the individual were a member of the
Incumbent Board, but excluding, for this purpose, any
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board.
(c) "Disability" shall mean your inability because of physical or
mental incapacity to perform your usual duties at the Company for a
period of one hundred eighty (180) days in any consecutive twelve
(12) month period.
(d) "Good Reason" shall mean: (i) reduction in your base salary
below $222,500 or such higher base salary as is in effect
immediately prior to such reduction; or (ii) a material decrease in
your duties or responsibilities.
If this letter correctly sets forth our understanding and agreement,
please indicate your acceptance by signing both copies of this letter and
returning one copy.
Very truly yours,
PSYCHEMEDICS CORPORATION
By:/s/ Xxxxxxx X. Xxxxxxx, Xx.
-----------------------------------
Xxxxxxx X. Xxxxxxx, Xx., President
Agreed to: March 28, 2005
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
