EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of June 28, 1995, by and between XXXXXXX LABORATORIES, INC., a
California corporation ("Company"), and XXXXXX X. XXXXXX, an individual
("Employee").
RECITALS
A. Employee has been employed by the Company in various
capacities for in excess of 25 years and has served as the Company's President
and Chief Executive Officer since April 1985.
B. The Company desires to continue to employ Employee upon
the terms and subject to the conditions contained in this Agreement.
C. Employee desires to continue to be employed by the
Company upon the terms and subject to the conditions contained in this
Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby agrees to continue to
employ Employee, and Employee hereby agrees to continue to be employed by the
Company, upon the terms and subject to the conditions set forth herein. During
the initial term of this Agreement and any extension thereof, Employee shall
continue to serve the Company as its President and Chief Executive Officer with
the same authority regarding the management and supervision of the Company's
operations as Employee presently enjoys, subject at all times to the Bylaws of
the Company and the direction and control of the Board of Directors of the
Company. Employee agrees to continue to perform his duties hereunder as a
full-time employee of the Company in an efficient, faithful and businesslike
manner and shall continue to conduct himself at all times during the initial
term of this Agreement and any extension thereof in a
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manner which does not damage or otherwise adversely reflect upon the Company's
business reputation and integrity.
2. BASE SALARY. During the Company's fiscal year ending December
24, 1995, the Company agrees to pay Employee an annual gross base salary equal
to $112,500 for the services rendered and to be rendered by Employee hereunder,
payable in accordance with the Company's established payroll policy, subject to
customary withholding and employment taxes. During the remainder of the initial
term of this Agreement and any extension thereof, Employee shall be entitled to
receive such annual gross base salary as is approved from time to time by the
Company's Board of Directors; provided, however, that such annual gross base
salary shall not be less than the annual gross base salary paid to Employee by
the Company during its fiscal year ending December 24, 1995.
3. TERM AND TERMINATION.
3.1 TERM Subject to the provisions of Section 3.2 hereof,
the initial term of this Agreement shall be for a period of approximately three
(3) years commencing as of the date hereof and continuing through and including
June 30, 1998. The initial term of this Agreement shall be automatically
extended for additional one (1) year periods unless either party gives notice to
the other, not less than ninety (90) days prior to the expiration of the initial
term of this Agreement or any extension thereof, of his or its intention not to
extend, or further extend, this Agreement.
3.2 TERMINATION OF EMPLOYMENT. The Company may terminate
the employment of Employee at any time for Cause (as hereinafter defined),
effective upon delivery of written notice of such termination to Employee.
Termination for "Cause" shall mean termination because:
(i) Employee shall have been repeatedly or
habitually intoxicated or under the influence of
drugs while on the premises of the Company or
while performing any of his duties or
obligations hereunder;
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(ii) Employee shall have been convicted of a
violation of law involving moral turpitude or a
felony;
(iii) Employee shall have embezzled any property
belonging to the Company or shall have willfully
injured the Company or any of the Company's
tangible or intangible property;
(iv) Employee shall have engaged in other willful
misconduct or shall have been grossly negligent
in the performance of his duties or obligations
hereunder, which other willful misconduct or
gross negligence shall have materially adversely
affected the business or reputation of the
Company; or
(v) Employee shall have materially breached any of
the provisions of this Agreement, which breach
has continued for a period of thirty (30) days
after delivery to Employee of written notice
from the Company's Board of Directors setting
forth in detail the nature and extent of his
breach of this Agreement and the actions
required to be taken by Employee to cure such
breach within such thirty (30) day period.
The employment of Employee and this Agreement shall also terminate automatically
upon: (i) the death or permanent disability of Employee; or (ii) Employee
retiring, resigning or otherwise voluntarily terminating his employment with the
Company. Employee shall endeavor to give the Company at least ninety (90) days'
prior written notice of his intent to retire, resign or otherwise voluntarily
terminate his employment. For purposes of this Agreement, "permanent
disability" shall mean the inability of Employee to perform his duties and
obligations under this Agreement due to mental or physical disability for at
least twenty (20) hours per week for twelve (12) consecutive months or three
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hundred sixty-five (365) days within any two (2) year period, as certified by a
practicing medical doctor satisfactory to the Company. If the employment of
Employee is terminated for Cause, if the Employee dies or becomes permanently
disabled, or if Employee retires, resigns or otherwise voluntarily terminates
his employment, Employer shall not be obligated to make any further payments to
Employee, whether base salary, bonus or otherwise, except accrued base salary
and accrued vacation pay, if any, and except as specifically set forth in
Sections 4 through 6 hereof.
4. PAYMENT OF BONUSES TO EMPLOYEE. In recognition of Employee's
many years of valuable service to and on behalf of the Company and as a further
incentive for Employee to continue to exert his best efforts on behalf of the
Company, the Company agrees to pay Employee, or Employee's designated
beneficiary or beneficiaries in the event of Employee's death prior to the
payment of any amounts due hereunder, the following cash bonuses:
4.1 ANNUAL BONUSES FOR THREE YEARS BASED UPON COMPANY'S
STOCK PRICE OR COMPANY'S EPS MULTIPLE.
4.1.1 BONUS FOR FIRST YEAR. Subject to the provisions
of Section 4.1.4 and 4.2 hereof, the Company agrees to pay Employee, or
Employee's designated beneficiary or beneficiaries in the event of Employee's
death prior to the payment of such bonus, a bonus equal to 12,500 multiplied by
the greater of: (i) the amount, if any, by which the Company's Stock Price (as
defined in Section 4.1.5.4 hereof) as of June 30, 1996 exceeds $7.00; or (ii)
the amount, if any, by which the Company's EPS Multiple (as defined in Section
4.1.5.3 hereof) for the Company's 12-month fiscal period ending in June 1996
exceeds $4.80. Such bonus, if any, shall be paid on or prior to August 15,
1996.
4.1.2 BONUS FOR SECOND YEAR. Subject to the
provisions of Section 4.1.4 and 4.2 hereof, the Company further agrees to pay
Employee, or Employee's designated beneficiary or beneficiaries in the event of
Employee's death prior to the payment of such bonus, a bonus equal to 12,500
multiplied by the greater of: (i) the amount, if any, by which the Company's
Stock Price as of June 30, 1997 exceeds the higher of the Company's Stock Price
as of June 30, 1996 or $7.00; or (ii) the amount, if any, by which the Company's
EPS Multiple for the
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Company's 12-month fiscal period ending in June 1997 exceeds the higher of the
Company's EPS Multiple for the Company's 12-month fiscal period ended in June
1996 or $4.80. Such bonus, if any, shall be paid on or prior to August 15,
1997.
4.1.3 BONUS FOR THIRD YEAR. Subject to the provisions
of Section 4.1.4 and 4.2 hereof, the Company further agrees to pay Employee, or
Employee's designated beneficiary or beneficiaries in the event of Employee's
death prior to the payment of such bonus, a bonus equal to 12,500 multiplied by
the greater of: (i) the amount, if any, by which the Company's Stock Price as
of June 30, 1998 exceeds the highest of the Company's Stock Price as of June 30,
1997, the Company's Stock Price as of June 30, 1996 or $7.00; or (ii) the
amount, if any, by which the Company's EPS Multiple for the Company's 12-month
fiscal period ending in June 1998 exceeds the highest of the Company's EPS
Multiple for the Company's 12-month fiscal period ended in June 1997, the
Company's EPS Multiple for the Company's 12-month fiscal period ended in June
1996 or $4.80. Such bonus, if any, shall be paid on or prior to August 15,
1998.
4.1.4 PRORATED BONUS FOR PARTIAL YEAR. In the event
that Employee's employment terminates for any reason other than the Company's
termination of Employee for Cause at any time prior to the earlier of June 30,
1998 or the date of closing of the Company's Acquisition (as defined in Section
4.1.5.1 hereof), Employee shall be entitled to receive the annual bonus
otherwise provided for in Sections 4.1.1, 4.1.2 or 4.1.3 hereof for the year
ending June 30 in question multiplied by a fraction, the numerator of which is
the number of full months during such year ending June 30 that Employee remains
in the Company's employ pursuant to this Agreement and the denominator of which
is twelve (12).
4.1.5 DEFINITIONS. For purposes of this Section 4.1,
the following words and phrases shall have the following meanings unless the
context clearly indicates to the contrary:
4.1.5.1 ACQUISITION. The term
"Acquisition" means the acquisition of the Company's Business or a controlling
interest in the Company's Business by a person or persons by means of: (i) a
merger or consolidation; (ii) the sale of all, or substantially all, of the
operating assets of the
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Company and any Subsidiaries; or (iii) the issuance by the Company and/or
transfer by any of the Company's shareholders of any voting securities of the
Company or any Subsidiary in any one transaction or series of similar or related
transactions.
4.1.5.2 COMPANY'S BUSINESS. The term
"Company's Business" means the business heretofore or hereafter conducted by the
Company and any Subsidiaries.
4.1.5.3 COMPANY'S EPS MULTIPLE. The
term "Company's EPS Multiple" means an amount equal to eight (8) times the
Company's reported earnings per share for the Company's 12-month fiscal period
ending in June of each year in question as determined by the Company's
independent certified public accountants in accordance with generally accepted
accounting principles and in accordance with all applicable regulations
heretofore or hereafter promulgated by the Securities and Exchange Commission.
4.1.5.4 COMPANY'S STOCK PRICE. The term
"Company's Stock Price" means the average of the closing bid prices for shares
of the Company's common stock (as presently constituted) in the over-the-counter
market, as reported by NASDAQ, for the ten trading days immediately preceding
June 30 of each year in question.
4.1.5.5 SUBSIDIARY. The term
"Subsidiary" means any corporation or other entity in which the Company and/or
any Subsidiary of the Company owns a majority of the outstanding voting
securities or outstanding voting interests.
4.2 CHANGES IN COMPANY'S CAPITAL STRUCTURE. In the event
that shares of the Company's common stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of one or more stock dividends, stock splits, reverse stock splits, combinations
of shares, reclassifications, recapitalizations or other reorganizations, the
rights of Employee to receive bonuses pursuant to Sections 4.1 and 4.2 hereof
shall be appropriately adjusted such that Employee is entitled to receive the
same amount of bonuses as Employee would be entitled to receive in the absence
of any of such changes in the Company's capital structure.
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5. DEFERRED COMPENSATION BENEFITS. In further recognition of
Employee's many years of valuable service to and on behalf of the Company and as
a further incentive for Employee to continue to exert his best efforts on behalf
of the Company, the Company agrees to pay Employee, or Employee's designated
beneficiary or beneficiaries in the event of Employee's death prior to the
payment of all amounts due hereunder, an aggregate of $500,000 in deferred
compensation benefits, payable in one hundred twenty installments of $4,166.67
each, commencing on the first day of the calendar month following the calendar
month within which Employee's employment with the Company ceases for any reason
and continuing on the same day of each succeeding calendar month thereafter for
the next one hundred nineteen (119) months or until all amounts due hereunder
have been paid. The Company's payment of deferred compensation benefits
hereunder shall be subject to all required withholding and other taxes.
6. OTHER BENEFITS. During the initial term of this Agreement and
any extension thereof, Employee shall also be entitled to participate in any and
all benefits from time to time generally afforded senior executive employees of
the Company in the sole discretion of the Board of Directors of the Company
including, by way of example and not by way of limitation, health, accident,
hospitalization, disability and life insurance programs, profit sharing and
other similar employee fringe benefit plans. Upon the expiration or other
termination of Employee's employment hereunder for any reason other than the
Company's termination of Employee for Cause, the Company agrees to continue to
provide, at its expense, Employee and/or his spouse with such health, accident,
hospitalization, disability and life insurance benefits afforded Employee and/or
his spouse at the time Employee's employment is terminated for a period of
eighteen (18) months after Employee's employment with the Company first ceases.
Subject to the Company's rules, practices and procedures, Employee shall also be
entitled to the use of an automobile owned or leased by the Company and
reasonable related automobile gasoline and oil, maintenance and insurance
expenses while employed by the Company pursuant to this Agreement.
7. REIMBURSEMENT OF EXPENSES. During the initial term of this
Agreement and any extension thereof, Employee shall be reimbursed by the Company
for Employee's reasonable travel, entertainment and other incidental expenses
incurred on business for the Company upon the submission by Employee of such
vouchers
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or other proof and when approved in accordance with the practices now
existing at the Company or in accordance with such practices as they may
hereafter be changed.
8. VACATIONS AND HOLIDAYS. During the initial term of this
Agreement and any extension thereof, Employee shall be entitled to such vacation
periods and holidays generally afforded senior executive employees of the
Company in the sole discretion of the Company, during which such vacation
periods and holidays the then annual base salary of Employee shall be paid in
full.
9. CONFIDENTIALITY.
9.1 CONFIDENTIAL INFORMATION. For the purposes of
this Agreement, "confidential information" means any information not generally
known outside of the Company or information entrusted to the Company by third
parties, and includes information known to Employee as confidential or secret or
which Employee shall have reason to know or reasonably should know is
confidential or secret. This information may relate, for example, to business
or marketing plans, computer programming, research, development, purchasing,
accounting, selling, marketing, costs, profits, sales, products, personnel,
pricing policies and other business affairs and methods and other information
not readily available to the public, and plans for future development. This
information may be contained in material such as data reports, agreements,
correspondence, customer lists, specifications or computer programs, or may be
in the nature of, or consist of, unknown knowledge, techniques, processes,
practices or know-how.
9.2 NONDISCLOSURE. Employee acknowledges that,
during Employee's employment with the Company, Employee has been and will
continue to be given access to or become acquainted with confidential
information. Employee agrees that such confidential information is of great
value to the Company and agrees not to use or disclose any confidential
information in any manner during Employee's employment with the Company and for
a period of one (1) year thereafter, other than as expressly required by the
Company in Employee's work for the Company or as a Director thereof, as the case
may be, without the Company's prior written consent. Employee agrees that all
confidential information, documents or other materials relating to the Company's
business, whether prepared or conceived by Employee during Employee's employment
with the Company or otherwise, or which may be in Employee's
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possession or control, are the Company's sole and exclusive property, and may be
removed from the Company's premises only if permitted by the Company in
accordance with its then rules and regulations. Employee agrees to immediately
return all confidential materials to the Company when no longer required in
order for Employee to perform Employee's services for the Company, when
Employee's employment is terminated for any reason, or whenever the Company may
otherwise require.
9.3 NO COMPETITIVE EMPLOYMENT. Without the
Company's express prior written approval, Employee shall not: (i) plan for,
acquire any substantial financial interest in or perform any services for any
other entity while employed by the Company; (ii) employ, attempt to employ or
solicit for employment by others, any of the Company's employees while employed
by the Company and for a period of one (1) year thereafter; (iii) solicit, or
cause to be solicited, any of the Company's customers with respect to the sale
of products or services which are competitive with those of the Company while
employed by the Company and for a period of one (1) years thereafter; or (iv)
solicit, cause to be solicited or accept the disclosure of any confidential
information for any purpose whatsoever not expressly authorized by the Company.
9.4 INJUNCTIVE RELIEF. Employee acknowledges that a
breach by Employee of any provision of this Section 11 will cause the Company
great and irreparable harm and that the Company shall be entitled to injunctive
and other equitable relief to prevent a breach or threatened breach of any
provision hereof, in addition to any other remedies the Company may have, and
that the provisions of this Section 11 shall be specifically enforceable against
Employee in accordance with its terms. Nothing contained herein shall, however,
prohibit Employee from becoming employed by a competitor of the Company
subsequent to the termination of his employment by the Company so long as
Employee has not violated the provisions of this Section 9.
10. GENERAL PROVISIONS.
10.1 NOTICES. All notices or other written
communications required or permitted to be given by this Agreement shall be
deemed given if personally delivered or three (3) days after it has been sent
(the date of posting shall be considered as the first day and there shall be
excluded any Sundays, legal
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holidays or other days upon which the United States mail generally is not
delivered) by United States registered or certified mail, postage prepaid,
properly addressed to the party to receive the notice at the following address
or at any other address given to the other party in the manner provided by this
Section 11.1:
If to the Company: Xxxxxxx Laboratories, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
If to Employee: Xx. Xxxxxx X. Xxxxxx
Xxx Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
10.2 SEVERABILITY. If any provision or any part of
any provision of this Agreement is determined to be invalid or unenforceable,
such provision or part shall be deemed to be severable from the remainder of
this Agreement, and shall not cause the invalidity or unenforceability of the
remainder of this Agreement, and the remainder of the Agreement shall be
interpreted as if such provision or part were so excluded and shall be
enforceable in accordance with its terms.
10.3 ASSIGNMENT. The parties acknowledge that this
Agreement constitutes a personal contract with Employee. Except as expressly
provided for herein, Employee may not transfer, assign or delegate any of his
rights, duties or obligations hereunder without the prior written consent of the
Company. Subject to the foregoing, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and assigns.
10.4 NO IMPLIED WAIVERS. The failure of either party
at any time to require performance by the other party of any provision hereof
shall not affect in any way the right to require such performance at any later
time nor shall the waiver by either party of a breach of any provision hereof be
taken or held to be a waiver of such provision.
10.5 GOVERNING LAW. This Agreement has been entered
into in the State of California and all questions with respect to the
construction of this Agreement and the rights and liabilities of the parties
shall be governed by and construed and
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interpreted in accordance with the laws of the State of California.
10.6 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.7 CAPTIONS. The captions of the sections and
subsections of this Agreement are included for reference purposes only and are
not intended to be a part of the Agreement or in any way to define, limit or
describe the scope or intent of the particular provision to which they refer.
10.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement
contains the entire understanding between the parties hereto with respect to the
subject matter hereof and supersedes any and all prior and contemporaneous
written or oral negotiations and agreements between them regarding the subject
matter hereof. This Agreement may be amended only in a writing signed by both
of the parties.
10.9 ATTORNEYS' FEES AND LITIGATION COSTS. If any
legal action or arbitration is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover his or its reasonable attorneys'
fees and other costs incurred in such legal action, in addition to any other
relief to which he or it may be entitled.
10.10 ARBITRATION. Except as provided in Section 9.4
hereof, any controversy or claim arising out of or relating to this Agreement
shall be settled by arbitration in Contra Costa County, California, in
accordance with the then rules of the Judicial Arbitration & Mediation Services,
Inc., and judgment upon an award rendered in such arbitration may be entered in
any court having jurisdiction thereof.
10.11 DESIGNATED BENEFICIARY OR BENEFICIARIES. For
purposes of this Agreement, Employee's designated beneficiary or beneficiaries
shall mean the person or persons designated by Employee herein or in a writing
hereafter delivered to the Company to receive payments otherwise due Employee
under this Agreement in
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the event of Employee's death before all payments otherwise due Employee under
this Agreement shall have been paid. Employee's designated beneficiary as of
the date hereof is his spouse, Xxxxx X. Xxxxxx. If Employee's spouse
predeceases Employee, Employee's designated beneficiary shall be his son,
Xxxx X. Xxxxxx. Employee shall be entitled to change his designated beneficiary
or beneficiaries from time to time from the persons set forth herein or from the
persons set forth in any subsequent writing delivered by Employee to the Company
hereunder; provided, however, that any such change shall not become effective
until actually received by the Company in writing from Employee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the date first above mentioned.
"Company" "Employee"
XXXXXXX LABORATORIES, INC.
By:
--------------------------- ------------------------------
Its: Xxxxxx X. Xxxxxx
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