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EXHIBIT 10.30
MEDSTONE INTERNATIONAL, INC.
EMPLOYMENT AGREEMENT
CHIEF EXECUTIVE OFFICER
(Xxxxx X. Xxxxxxxxx)
This Employment Agreement is entered, effective August 13, 1998 (the
"Commencement Date"), by and between Medstone International, Inc., a Delaware
Corporation ("Medstone"), and Xxxxx X. Xxxxxxxxx ("Employee") in order to secure
his services in the future and in recognition of his past services.
1. EMPLOYMENT
Employee shall be employed as Medstone's Chief Executive Officer. If
his title or responsibilities are materially diminished without Employee's
consent, such act shall be considered a termination of this Agreement by
Medstone.
2. DEVOTION OF TIME
Employee shall devote his full working time and energy to his
responsibilities as Chief Executive Officer and shall fulfill those
responsibilities in good faith and in accordance with the terms of this
Agreement.
3. TERM
Unless earlier terminated in accordance with Section 9, the term of
Employee's employment by Medstone under this Agreement shall commence on the
date set forth in the first paragraph and shall continue for five (5) full years
thereafter.
4. BASE SALARY
The Employee's base salary shall be a minimum of $250,000 per year
unless increased from time to time during the term of this Agreement by
Medstone's Board of Directors.
5. STOCK OPTIONS
Effective the Commencement Date, the exercise prices of the Employee's
existing stock options to purchase up to 350,000 shares of Medstone's Common
Stock at from $7.13 to $10.63 per share are reduced to equal $6.37 per share,
the closing price per share of Medstone's Common Stock on the Commencement Date
as reported on the NASDAQ National Market System. In addition, such options are
amended to provide that they shall become fully exercisable, regardless of any
otherwise applicable vesting requirements, (a) concurrently with any termination
of Employee's employment by the Company without Good Cause (as defined in
Section 9) or (b) if there is an Asset Acquisition (as defined in Section 9)
while Employee continues to be employed by Medstone and Employee does not
immediately enter into an employment agreement with a buying or surviving party
in the Asset Acquisition. In all other respects, the options shall remain
unchanged.
6. BONUS
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Employee shall receive a one-time bonus according to the schedule below
if the NASDAQ closing stock price of Medstone's Common Stock remains at or above
the price (for all business days) in accordance with the following schedule for
90 consecutive days. The stock price must be reached to begin such a consecutive
90-day period during the first number of months of this Agreement as indicated
below and before the termination of Employee's employment, but the entire 90
days do not have to be in such first number of months.
STOCK PRICE BONUS THE FIRST ( ) MONTHS OF THIS AGREEMENT
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$ 11 $ 50,000 18 months
$ 13 $ 75,000 24 months
$ 15 $100,000 30 months
$ 17 $125,000 36 months
$ 18 $150,000 42 months
$ 21 $175,000 48 months
For example, if the Common Stock price remained at $13 per share for 90
consecutive days, both the $11 and $13 bonus shall be awarded to Employee. Once
the bonus is awarded at a particular stock price level, it cannot be awarded a
second time at that stock price level. For example, if the bonus is awarded at
the $13 level, the $13 level cannot be awarded a second time but the $15 level
shall be awarded when earned.
7. OTHER BENEFITS
Employee shall receive such other employee benefits as are generally
available to other employees of Medstone such as group health and dental
insurance, extended long-term disability insurance, etc. Employee shall be
reimbursed for reasonable business related expenses.
8. ADDITIONAL COVENANTS OF EMPLOYEE
(a) Employee agrees that, during the term of his retention as an
employee or consultant under this Agreement and thereafter, except as otherwise
authorized by Medstone's Board of Directors, he shall continue to abide by the
terms of the Employee Confidentiality and Invention Agreement dated as of July
29, 1994 between Employee and Medstone.
(b) Employee agrees that, during the term of his retention as an
employee or consultant under this Agreement by Medstone or a Purchasing Party
(as defined in Section 9) (the "Company"), he will not, unless consented to by
the Board of Directors of the Company: (i) engage or have an interest, directly
or indirectly, in any other business or venture which would interfere with the
performance of his duties under this Agreement or which then competes with any
part of the lithotripter-related or lithotripsy-related business, comparable or
similar to that now engaged in by Medstone (the "Business"), that is then
conducted by the Company in any state or country outside the United States in
which Medstone during the term of this Agreement conducts such business; (ii)
induce or influence, or seek to induce or influence, any individual who is then
employed by Medstone or the Purchasing Party to terminate such employment; or
(iii) for himself or for any other person, firm or entity, divert or take away,
or solicit or attempt to divert or take away, as such customers of Medstone or
the Purchasing Party any persons or entities which were lithotripter-related or
lithotripsy-related customers of Medstone during the term of Employee's
employment by Medstone. This paragraph shall not prevent Employee from passively
owning or investing in any shares or other assets which he owns on the date of
this Agreement and are listed on an exhibit or supplement to this
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Agreement, any real property or interest in a partnership or other entity which
engages solely in the ownership or operation of real property or less than one
percent (1%) of the outstanding shares of an entity which are publicly traded.
In addition, if Employee during the term of his consulting agreement is employed
by an entity that is not controlled by him and that entity subsequently acquires
an ownership interest in an entity that is engaged in the Business or assets for
the conduct of the Business from an unaffiliated entity, such acquisition and
continued engagement of the acquired entity in the Business or continued conduct
of the Business using such acquired assets shall not be a breach of item (i) of
this paragraph, provided that Employee has no personal role or involvement,
directly or indirectly, in such acquisition or continued conduct or engagement.
(c) Employee agrees that the breach by him of his agreements set forth
in this Section 8 could not reasonably or adequately be compensated in damages
in an action at law and that Medstone shall be entitled to injunctive relief for
such a breach. Such relief may include, but shall not be limited to, an
injunction restraining Employee from rendering any service or engaging in any
activity which breaches or would violate these agreements. However, no remedy
conferred by any of the provisions of this Agreement is intended to be exclusive
of any other remedy, and each and every remedy shall be cumulative and shall be
in addition to every other remedy existing at law or in equity. The election of
any one or more remedies by Medstone shall not constitute a waiver of its rights
to pursue other available remedies. Employee agrees that the covenants contained
in this Section 8 shall be regarded as divisible and shall be operative to the
extent, both as to time and area covered, that they may be applicable. If any of
the covenants or any part thereof shall be declared invalid or unenforceable, or
the applicability thereof to any person, area or circumstances is held to be
invalid, the validity and enforceability of the remainder of such covenants and
the applicability of such covenants to other persons, areas or circumstances
shall not be affected thereby and such covenants shall be enforced to the
fullest extent permitted under applicable laws.
9. TERMINATION
(a) Employee's employment under this Agreement shall automatically
terminate upon Employee's death, which shall not be deemed to be a termination
without Good Cause.
(b) Medstone may at any time terminate Employee's employment by
Medstone under this Agreement by giving notice of such termination to the other
party. If such termination is without Good Cause, Employee shall be entitled to
the remedies and benefits set forth in this Section 9 and in Section 5 of this
Agreement. Such remedies and benefits shall be in lieu of any other damages or
payments, and shall be deemed to be agreed liquidated damages, for such a
termination. "Good Cause" for Medstone to terminate Employee's employment shall
mean (i) willful and habitual breach of Employee's duties or obligations under
the terms of this Agreement, (ii) habitual gross neglect of his duties or
obligations, (iii) his commission of fraud, embezzlement or misappropriation, or
other willful acts of dishonesty or willful misconduct, or commission of a crime
of moral turpitude whether or not a criminal or civil charge is filed in
connection therewith, (iv) his willful unauthorized disclosure of Medstone's
confidential information, (v) his material breach of his covenants set forth in
Section 8, or (vi) his failure, due to physical or mental disability, to
effectively perform his duties for a period of ninety (90) days during any
consecutive period of twelve (12) months.
(c) If during the term of Employee's employment hereunder either (i)
Employee's employment is terminated by Medstone without Good Cause or (ii) there
is an Asset Acquisition while Employee continues to be employed by Medstone and
Employee does not immediately enter into an employment agreement with a buying
or surviving party in the Asset Acquisition, in addition to his other rights
under this Section 9 and Section 5, Employee shall receive the severance payment
specified in this paragraph. If the termination or Asset Acquisition occurs
during the first three (3) years of the term of this Agreement, the severance
payment shall equal five (5) times the amount
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of Employee's then current annual base salary. If the termination or Asset
Acquisition occurs during the fourth (4th) year of the term of this Agreement,
the severance payment shall equal four (4) times the amount of Employee's then
current annual base salary. If the termination or Asset Acquisition occurs
during the fifth (5th) year of the term of this Agreement, the severance payment
shall equal three (3) times the amount of Employee's then current annual base
salary. Any such severance payment shall be paid fully in cash to Employee on
the date of the termination or closing of the Asset Acquisition, as the case may
be. As used in this paragraph, an "Asset Acquisition" means the sale, transfer
or other disposition in one or in a series of transactions, including (without
limitation) a merger or consolidation of Medstone in which it is not the
surviving party, of all or substantially all of the assets or business of
Medstone to another person or entity or to persons or entities which are
affiliated or acting in concert with respect to such sale, transfer or other
disposition, other than the sale of Medstone's products in the ordinary course
of its business or a contribution of its assets to a partnership, limited
liability company or other entity which is controlled by Medstone.
(d) In the event that Employee's employment by Medstone is terminated
without Good Cause, unless otherwise mutually agreed upon by Employee and
Medstone in writing, Employee shall continue after such termination to serve and
be retained as a consultant to Medstone. If the termination occurs during the
first three (3) years of the term of this Agreement, Employee shall be a
consultant for five (5) years after the termination. If the termination occurs
during the fourth (4th) year of the term of this Agreement, Employee shall be a
consultant for four (4) years after the termination. If the termination occurs
during the fifth (5th) year of the term of this Agreement, Employee shall be a
consultant for three (3) years after the termination. As such consultant,
Employee shall provide up to thirty (30) hours per month of advice and
information to Medstone regarding Medstone's operations, affairs and history as
Medstone shall reasonably request and shall continue to be subject to the
covenants set forth in Section 8. In consideration of his agreeing to provide
such consulting services, Medstone shall pay Employee a monthly fee of $16,500,
shall continue to reimburse him for expenses in accordance with Section 7 and
shall continue during such term insurance coverage and other benefits reasonably
comparable to those provided for in Section 7. Employee's retention as a
consultant to Medstone shall automatically terminate upon his death. In
connection with any such termination without Good Cause, Medstone shall purchase
term life insurance on Employee's life, with employee's designated beneficiary,
in declining amounts of coverage at least equal at any time to the total amount
of fees remaining to be paid under Employee's consulting arrangement; provided,
however, that such coverage is reasonably available at an annual premium not
exceeding $100 per $1,000 of coverage.
(e) In the event that there is an Asset Acquisition while Employee
continues to be employed by Medstone and Employee does not immediately enter
into an employment agreement with a buying party in the Asset Acquisition,
Employee shall continue after such Asset Acquisition to serve and be retained as
a consultant to the principal buying party in the Asset Acquisition (the
"Purchasing Party"). If the Asset Acquisition occurs during the first three (3)
years of the term of this Agreement, Employee shall be a consultant for five (5)
years after the Asset Acquisition. If the Asset Acquisition occurs during the
fourth (4th) year of the term of this Agreement, Employee shall be a consultant
for four (4) years after the Asset Acquisition. If the Asset Acquisition occurs
during the fifth (5th) year of the term of this Agreement, Employee shall be a
consultant for three (3) years after the Asset Acquisition. In connection with
the Asset Acquisition, Medstone shall cause the Purchasing Party to so retain
Employee as a consultant in accordance with this paragraph. As such consultant,
Employee shall provide up to thirty (30) hours per month of advice and
information to the Purchasing Party regarding the business and assets acquired
from Medstone, as the Purchasing Party shall reasonably request, and shall
continue to be subject to the covenants set forth in Section 8. In consideration
of his agreeing to provide such consulting services, the Purchasing Party shall
pay Employee a monthly fee of $16,500, shall continue to reimburse him for
expenses in accordance with Section 7 and shall continue during such term to
provide Employee with benefits that are reasonably comparable to those
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provided for in Section 7. Employee's retention as a consultant to Medstone
shall automatically terminate upon his death. In connection with any such Asset
Acquisition, Medstone or the purchasing party shall purchase term life insurance
on Employee's life, with employee's designated beneficiary, in declining amounts
of coverage at least equal at any time to the total amount of fees remaining to
be paid under Employee=s consulting arrangement; provided, however, that such
coverage is reasonably available at an annual premium not exceeding $100 per
$1,000 of coverage.
(f) The termination of Employee's employment pursuant to this Section 9
shall not release either party from any accrued obligation to pay any sum to the
other party (whether then or thereafter payable) or operate to discharge any
liability incurred prior to the termination date. In addition, the obligations
under Sections 5-17 shall survive the termination of Employee's employment under
this Agreement.
(g) If (i) Medstone terminates Employee=s employment and claims that
such termination is for Good Cause, and (ii) an arbitrator or court determines
that such termination was without Good Cause, upon such determination Medstone
shall pay to Employee, in addition to amounts otherwise payable under this
Agreement, a special additional payment equal to the severance payment otherwise
payable to Employee on account of such termination under Section 9(c).
10. WAIVER
No waiver by either of the parties of any failure by the other party to
keep or perform any provision, covenant or condition of this Agreement shall be
deemed to be a waiver of any preceding or succeeding breach of the same, or of
any provision, covenant or condition. All rights and remedies herein granted or
referred to are cumulative; resort to one shall not preclude resort to any other
or any other right or remedy provided by the law.
11. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement
or the breach hereof shall be settled by arbitration before a single arbitrator
in Orange County, California. The arbitration shall be administered by and held
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof. The costs of the arbitration,
including any AAA administration fee, the arbitrator's fee, and costs for the
use of facilities during the hearings, shall initially be borne equally by the
parties to the arbitration. However, reimbursement for such fees and costs and
such party's attorneys' fees shall be awarded to the prevailing or most
prevailing party by the arbitrator.
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12. ENFORCEABILITY
The invalidity or enforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision.
13. ATTORNEYS FEES
In any arbitration or other legal proceeding to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs in addition to any other relief to which it
or he may be entitled.
14. CHOICE OF LAW
This Agreement shall be construed and governed by the laws of the State
of California.
15. ENTIRE AGREEMENT
This Agreement may be executed in counterparts and the counterparts
read together, together with the agreements referred to in Sections 5 and 8(a),
shall constitute the complete and entire agreement between the parties regarding
the subject matter hereof, superseding all prior agreements, representations,
proposals and negotiations, either oral or in writing, between the parties with
respect to the subject matter hereof.
16. MODIFICATIONS
This Agreement shall not be modified or amended except by a written
document executed by both parties to this Agreement.
17. SUCCESSORS
This Agreement will be binding upon the heirs, executors,
administrators, successors, assignees, and other legal representatives of the
parties to this Agreement.
18. DRAFTING
This Agreement has been negotiated at arm's length and between persons
sophisticated and knowledgeable in the matters dealt with and represented by
their own counsel. Accordingly, any rule of law (including California Code of
Civil Procedure Section 1654) or legal decision that would require
interpretation against the drafter of this Agreement is not applicable and is
waived.
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The parties have entered into this Agreement as of the date set forth
in the first paragraph above.
Medstone International, Inc., Employee
a Delaware corporation
By:
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Signature Xxxxx X. Xxxxxxxxx
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Printed Name
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