AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.31
AMENDED AND RESTATED
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”), dated as of January 1, 2009
(the “Effective Date”), between NANOSPHERE, INC., a Delaware corporation having an office at 0000
Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the “Company’), and XXXXXXX X. XXXXXXX, an
individual residing at 000 Xxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000 (“Executive”).
PREAMBLE
The Company and Executive are parties to that certain Employment Agreement (the “Initial
Employment Agreement”) dated as of July 19, 2004, as amended by First Amendment to Xxxxxxx
Employment Agreement dated as of March 16, 2006, providing for Executive to be employed as the
Company’s President and Chief Executive Officer. The “Employment Term” under the Initial Employment
Agreement expired on July 19, 2008 but, pursuant to its terms, was automatically extended through
July 19, 2009. Executive and the Company wish to replace the Initial Employment Agreement with this
Agreement from and after the Effective Date hereof.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good
and valuable consideration, the sufficiency and receipt whereof is hereby acknowledged, the parties
agree as follows:
1. Definitions. Unless otherwise defined herein, the following terms shall have the
following respective meanings:
“Benefits” means those benefits set forth in Section 3.3 herein.
“Board” means the Board of Directors of the Company.
“Bonus” means payments earned by Executive to the date of determination provided for in
Section 3.2 herein.
“Cause” means (i) any felony conviction or admission of guilt, (ii) any breach or
nonobservance by Executive of any material covenant set forth herein, provided that the Board has
given Executive written notice of such breach or nonobservance and Executive has failed to cure
such breach or nonobservance within a period reasonable under the circumstances, (iii) any willful,
intentional or deliberate disobedience or neglect by Executive of the lawful and reasonable orders
or directions of the Board, provided that the Board has given Executive written notice of such
disobedience or neglect and Executive has failed to cure such disobedience or neglect within a
period reasonable under the circumstances, or (iv) any willful or deliberate misconduct by
Executive that is materially injurious to the Company.
“Change in Control” means (i) the purchase or other acquisition by any person, entity or group
of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 or
any comparable successor provisions (other than stockholders (or affiliates thereof) of the Company
as of the date of the Initial Employment Agreement), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the outstanding shares of
Common Stock of the Company (on a fully-diluted basis) or the combined voting power of the
Company’s then outstanding voting securities entitled to vote generally in the election of
directors of the Company; (ii) the consummation of a reorganization, merger or consolidation of the
Company, in each case, with respect to which persons who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company; or (iii) the sale of all or
substantially all of the Company’s assets.
“Diminution in Responsibility” means any of (i) a material diminution in Executive’s duties or
responsibilities or the assignment to Executive of duties that are materially inconsistent with his
duties as President and Chief Executive Officer of the Company or that materially impair
Executive’s ability to function in his position; (ii) the Company’s failure, during the Employment
Term, to cause the election of Executive to the Board; (iii) a relocation of the Company’s
principal offices, without Executive’s acquiescence or consent, to a location that is more than a
50 mile radius from its current location; (iv) any material reduction in the compensation and
benefit opportunities of the Executive (measured in the aggregate); or (v) any breach by the
Company of any material provision of this Agreement, provided that Executive has given the Company
written notice of such breach and the Company has failed to cure such breach within a period that
is reasonable under the circumstances.
“Employment Term” is as defined in Section 4.
“Good Reason” means either a Change in Control or a Diminution in Responsibility.
“Permanent Disability” means Executive’s inability to substantially perform his duties and
responsibilities hereunder by reason of any physical or mental incapacity for a period of 180
consecutive days, or two or more periods of 90 consecutive days each in any 360-day period.
“Plan” means the Company’s 2007 Equity Incentive Plan.
2. Employment.
2.1 Employment Duties. Subject to the terms and conditions of this Agreement,
Executive is hereby employed by the Company to continue to serve as its President and Chief
Executive Officer. Executive accepts such employment, and agrees to discharge all of the duties
normally associated with said positions, and to faithfully and to the best of his abilities perform
such other services consistent with his position as a senior executive officer as may from time to
time be assigned to him by the Board. Notwithstanding the foregoing, however, Executive may serve
on the boards of directors of other companies, and in civic, cultural, philanthropic and
professional organizations, so long as such service does not detract from the performance of
Executive’s duties hereunder. At all times during which Executive remains President and Chief Executive Officer of the Company, Executive shall, as and when duly elected or appointed,
serve as a member of the Board and, at the request of the Board, as an officer or director of any
Company affiliate, in each case without additional remuneration therefor. Employee will perform
his duties hereunder at the Company’s offices.
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2.2 No Conflicting Agreements. Executive represents and warrants that neither
Executive’s entry into this Agreement nor Executive’s performance of Executive’s obligations
hereunder, will conflict with or result in a breach of the terms, conditions or provisions of any
other agreement, understanding or obligation of any nature to which Executive is a party or by
which Executive is bound, including, without limitation, any development agreement, noncompetition
agreement or confidentiality or nondisclosure agreement previously entered into by Executive.
3. Compensation and Benefits.
3.1 Base Salary. During the term of Executive’s employment hereunder, the Company
shall pay Executive a salary at the annual rate of $427,450 or such greater amount as the Board may
from time to time establish pursuant to the terms hereof (the “Base Salary”). Such Base Salary
shall be reviewed annually and may be increased, but not decreased, by the Board in its sole
discretion. The Base Salary shall be payable in accordance with the Company’s customary payroll
practices for its senior management personnel.
3.2 Bonus.
(a) Performance Bonus Opportunity. For calendar year 2009, Executive will be eligible
to earn and receive a performance bonus, to a target of $256,470, which bonus amount will be
discretionary and awarded by the Board, based upon the recommendations of the Compensation
Committee of the Board. For calendar year 2010, the target amount of this bonus opportunity will be
not less than $150,000. For calendar years after 2010, Executive will be entitled to participate
in a senior management bonus plan at a bonus percentage or target amount appropriate to the then
stage of the Company’s development and commensurate with the compensation of other chief executive
officers of comparable companies, but in no event less than $150,000 per calendar year.
(b) Transaction Bonus Opportunity. In addition, Executive shall have the right to
earn and receive a transaction bonus in an amount equal to 1% of the net proceeds of any
transaction constituting a Change in Control of the Company, accomplished during the Employment
Term, or within six months thereafter (unless Executive’s termination was voluntary other than for
Good Reason, or was for Cause), with the consent, approval or direction of the Board, which bonus
will be paid to Executive in the same form and at the same times and subject to the same conditions
as proceeds of the transaction are payable to the Company or shareholders of the Company upon and
following the consummation of such Change in Control transaction.
3.3 Benefits.
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(a) Benefit Plans. During the Employment Term, Executive may participate, on the same
basis and subject to the same qualifications as other senior management personnel of the Company,
in any benefit plans and policies in effect with respect to senior management personnel of the
Company.
(b) Reimbursement of Expenses. During the Employment Term, Company shall pay or
promptly reimburse Executive, upon submission of proper invoices in accordance with the Company’s
normal procedures, for all reasonable out-of-pocket business, entertainment and travel expenses
incurred by Executive in the performance of his duties hereunder.
(c) Vacation. During the Employment Term, Executive shall be entitled to vacations in
accordance with the policies of the Company applicable to senior management personnel from time to
time.
(d) Withholding. The Company shall be entitled to withhold from amounts payable or
benefits accorded to Executive under this Agreement all federal, state and local income, employment
and other taxes, as and in such amounts as may be required by applicable law.
(e) Reimbursement of Legal Fees. The Company will reimburse Executive, upon
presentation of an invoice therefor, in an amount not to exceed Five Thousand Dollars ($5,000), for
attorneys’ fees and costs incurred by Executive in connection with the review, negotiation and
documentation of this Agreement and related agreements on Executive’s behalf.
4. Employment Term.
The term of this Agreement (the “Employment Term”) shall commence as of the Effective Date and
shall end on the close of business on the day immediately preceding the third anniversary of the
Effective Date. The Employment Term shall be automatically extended for additional one-year
periods (each a “Renewal Period”) unless Executive notifies the Board or the Board notifies
Executive at least 90 days prior to the expiration of the Employment Term that the notifying party
does not wish to extend such Employment Term. Executive’s employment hereunder shall be
coterminous with the Employment Term, unless sooner terminated as provided in Section 5.
5. Termination; Severance Benefits.
5.1 Generally. Either the Board or Executive may terminate Executive’s employment
hereunder, for any reason, at any time prior to the expiration of the Employment Term, upon sixty
(60) days prior written notice to the other party. Upon termination of Executive’s employment
hereunder for any reason, Executive shall be deemed simultaneously to have resigned as a member of
the Board and from any other position or office he may at the time hold with the Company or any of
its affiliates.
5.2 Termination by Executive.
(a) No Reason. If, prior to the expiration of the Employment Term, Executive
voluntarily resigns from his employment, other than for Good Reason, (i) Executive shall receive no
further Base Salary or Bonus hereunder (except to the extent accrued to the date of termination), and (ii) Executive shall cease to be covered under or be permitted to
participate in or receive any of the Benefits (except to the extent of accrued vacation or as
permitted under the terms of any applicable benefit plans (but at no further expense to the
Company)).
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(b) Good Reason. If, prior to the expiration of the Employment Term, Executive
terminates his employment hereunder for Good Reason, Executive shall be entitled, in addition to
all other items of Base Salary, Bonus, unreimbursed expenses and other entitlements to the date of
termination:
(i) to receive payment at the rate of his Base Salary in effect on the termination date for a
period of eighteen (18) months following the date of termination if termination was based on
Diminution in Responsibility, but for thirty (30) months following the date of termination if
termination was based on Change in Control, in each case payable in accordance with the Company’s
customary payroll practices but subject to Section 7 hereof;
(ii) to receive (to the extent then remaining unpaid) payment of the full target amount of his
performance bonus opportunity under Section 3.2 for the calendar year in which the termination
occurs, with payment to occur within two and one-half months thereafter, subject to Section 7
hereof; and
(iii) to immediate and full vesting, on the date of termination, of all outstanding options
and restricted stock awards granted to him under the Plan, which options shall remain exercisable
for a period of one (1) year following the date of termination (or the expiration of the option’s
term if earlier).
In order to receive his payments and other benefits under this subsection, however, Executive must
voluntarily terminate his employment with the Company within one (1) year of such Change in Control
or Diminution in Responsibility, as the case may be.
5.3 Termination by the Company.
(a) Without Cause. If, prior to the expiration of the Employment Term, the Company
terminates Executive’s employment hereunder without Cause, Executive shall be entitled to receive,
in addition to all other items of Base Salary, Bonus, unreimbursed expenses and other entitlements
to the date of termination, the payments, rights and benefits provided for in Section 5.2(b) above
as if termination had been based on a Diminution in Responsibility, subject to Section 7 below.
(b) For Cause. If, prior to the expiration of the Employment Term, the Company
terminates Executive’s employment hereunder for Cause, Executive shall (i) receive no further Base
Salary or Bonus hereunder (except to the extent accrued or earned to the date of termination), and
(ii) cease to be covered under or be permitted to participate in or receive any of the Benefits
(except for accrued vacation or as permitted under the terms of any applicable benefit plans (but
at no further expense to the Company)).
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(c) Upon Permanent Disability. If, prior to the expiration of the Employment Term,
thc Company terminates Executive’s employment hereunder upon Executive’s Permanent Disability,
Executive shall be entitled to (i) receive all items of Base Salary, Bonus, unreimbursed expenses and other entitlements to the date of termination and (ii) the immediate
and full vesting of all outstanding options and restricted stock awards granted to him under the
Plan, and to the exercise of such options by Executive or Executive’s personal representative
within one (1) year of the date of termination of employment due to Executive’s Permanent
Disability.
(d) Upon Death. If, prior to the expiration of the Employment Term, Executive dies,
Executive (or his estate) shall be entitled to the payments, rights and benefits provided for in
Section 5.3(c) above as if Executive had been terminated upon his Permanent Disability.
5.4 Termination Due to Non-Renewal of Agreement by the Company. In the event the
Company notifies Executive under Section 4 that it will not renew this Agreement for any Renewal
Period, Executive shall be entitled to the payments, rights and benefits provided for in Section
5.2(b) above, as if termination had been based on a Diminution in Responsibility.
5.5 Additional Benefits upon Termination. In addition to other payments or benefits
to which Executive may then be entitled under other provisions of this Agreement, upon Executive’s
termination for Good Reason, without Cause or by reason of Permanent Disability or non-renewal of
this Agreement by the Company, Executive shall be entitled to (i) at the Company’s expense and
during the 18-month period following termination based on Diminution in Responsibility, termination
by the Company without Cause or by reason of Executive’s Permanent Disability or non-renewal of
this Agreement by the Company, but the 30-month period following termination based on a Change in
Control, the equivalent of the Benefits set forth in Section 3.3(a) on the same terms and
conditions as would have applied had Executive continued to be employed for such periods. To the
extent provision by the Company of any such Benefits is not permitted either pursuant to Section 7
below or by the terms of any applicable Company benefit plan, the Company shall take whatever steps
may be appropriate or necessary to ensure, at the Company’s expense, the enjoyment by Executive
(or, as applicable, his legal representative), of substantially similar benefits upon substantially
similar terms and conditions. It is understood that, in connection with post-termination of
participation in Benefits hereunder, Executive shall not be entitled to participate in any Benefits
instituted or adopted by the Company after Executive’s termination, but only those in which
Executive was a participant prior to termination.
5.6 Release for Post-Termination Benefits. In order to be eligible to receive any
benefits provided for in this Agreement that become due on or following termination of employment
hereunder, Executive shall be required to execute and deliver to the Company a full release of any
claims or causes of action that the Executive might otherwise have or claim to have or assert
against the Company, other than a claim for any of the post-termination benefits provided for
hereunder, in such form as the Company may reasonably require.
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6. Golden Parachute Excise Tax.
The Company shall reimburse Executive for (i) any excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”) on any portion of the compensation or
benefits payable by the Company or its Affiliates to Executive under this Agreement, all other
contracts, arrangements or programs, and (ii) any such excise tax and any other taxes imposed by the Code or under state or local law on the payments provided for in
this Section 6. Executive and the Company agree to reasonably cooperate to mitigate the amount of
any such tax that might become payable. The Company shall pay to Executive the payments, or
portions thereof, provided for in this Section 6 not later than fifteen (15) days prior to the date
on which such taxes, or portions thereof, are due as determined by the tax counsel referred to
below. Tax counsel selected by the Company and reasonably acceptable to Executive shall determine
the amounts (if any) due Executive under this Section 6, based on the actual tax rates to which
Executive is subject at the time. Executive shall provide such counsel with such information as
such counsel reasonably requests in connection with such determination. All determinations of tax
counsel shall be binding on Executive and the Company. Tax counsel shall determine that payments
shall be due hereunder only if, and to the extent that, it is more likely than not that the
payments or benefits are subject to a tax. In making the determinations required by this Section
6, tax counsel may rely on benefit consultants, accountants or other experts. The Company agrees
to pay all reasonable fees and expenses of such tax counsel, benefits consultants, accountants or
other experts. If, subsequent to the payment to Executive of payments pursuant to this Section 6,
the tax counsel referred to in this Section 6 reasonably determines that the amount of the payments
paid pursuant to this Section 6 are greater than, or less than, the amount required to have been
paid, Executive shall reimburse the Company an amount, or the Company shall pay to Executive an
additional amount, respectively, based upon such determination. In the event that tax counsel
referred to in this Section 6 reasonably determines that Executive is required to pay excise tax,
interest or penalties to a governmental taxing authority as a result of his non-payment of taxes
where such tax counsel had determined that such taxes need not be paid or as a result of a
miscalculation of such taxes, the Company shall pay to Executive an additional amount equal to (A)
the amount of such interest and/or penalties, (B) the excise tax which was not paid and (C) any
excise tax and any other taxes imposed by the Code or under state or local law on the payments
provided for in this sentence.
7. 409 A Tax Liability.
Any provision of this Agreement to the contrary notwithstanding, the Company will suspend
paying Executive any cash amounts that Executive is entitled to receive pursuant to Section 5 and
Section 6 thereof during the six (6) month period following termination of Executive’s employment
(the “409A Suspension Period”), unless the Company reasonably determines that paying such amounts
in accordance with Section 5 and Section 6 thereof will not result in Executive’s liability for
additional tax under Section 409A of the Code. As soon as reasonably practicable after the end of
the 409A Suspension Period, Executive will receive a lump sum payment in cash for an amount equal
to any cash payments that the Company does not make during the 409A Suspension Period. Thereafter,
Executive will receive any remaining payments pursuant to Section 5 and Section 6 thereof, in
accordance with the terms of such Sections (as if there had not been any suspension of payments).
8. General.
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8.1 Governing Law. This Agreement shall be construed, interpreted and governed by the
laws of the State of Illinois, without regard to the conflicts of law rules thereof.
8.2 Binding Effect. This Agreement shall extend to and be binding upon Executive, his
legal representatives, heirs and distributees and upon the Company, its successors and assigns
regardless of any change in the business structure of the Company.
8.3 Assignment. Neither this Agreement nor any of the rights or obligations hereunder
shall be assigned or delegated by any party without the prior written consent of the other party.
8.4 Entire Agreement; Termination of Initial Employment Agreement; Amendment. Except
for any stock option or stock award agreement between the parties, this Agreement contains the
entire agreement of the parties with respect to the subject matter hereof. Without limitation of
the foregoing, the Initial Employment Agreement is hereby terminated in its entirety and shall be
of no further force or effect from and after the Effective Date, and from and after the Effective
Date neither party shall have any surviving rights or obligations thereunder. No waiver,
modification or change of any provision of this Agreement shall be valid unless in writing and
signed by both parties.
8.5 Waiver. The waiver of any breach of any duty, term or condition of this Agreement
shall not be deemed to constitute a waiver of any preceding or succeeding breach of the same or any
other duty, term or condition of this Agreement.
8.6 Severability. If any provision of this Agreement shall be unenforceable in any
jurisdiction in accordance with its terms, the provision shall be enforceable to the fullest extent
permitted in that jurisdiction and shall continue to be enforceable in accordance with its terms in
any other jurisdiction and the validity, legality and enforceability of the remaining provisions
contained herein shall not be affected thereby.
8.7 Resolution of Disputes. Any disputes arising under or in connection with this
Agreement between Executive and the Company (or any officer, director, Executive or agent of the
Company) shall, at the election of Executive or the Company, be resolved by confidential binding
arbitration, to be held in Chicago, Illinois (or in such other location as the Company may at the
time be headquartered) in accordance with the rules and procedures of the Model Employment Rules of
the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
8.8 Notices. All notices pursuant to this Agreement shall be in writing and shall be
sent by prepaid certified mail, return receipt requested or by recognized air courier service
addressed as follows:
| (i) | If to the Company to: Xx. Xxxx Xxxxxx Chairman of the Board Nanosphere, Inc. c/o Lurie Investments, Inc. 000 X. Xxxxxxx Xxxxxx Xxxxxxx, XX 00000 |
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| copy to: Paul, Hastings, Xxxxxxxx & Xxxxxx LLP 00 Xxxx 00xx Xxxxxx Xxx Xxxx, XX 00000 Attention: Xxxxxxx X. Xxxxxx, Esq. |
| (ii) | If to Executive to: Xx. Xxxxxxx X. Xxxxxxx 000 Xxxx Xxxx Xxxx Xxxxxxxx, XX 00000 copy to: |
||
| [Executive’s counsel] |
or to such other addresses as may hereafter be specified by notice in writing by either of the
parties, and shall be deemed given three business days after the date so mailed or sent.
Notwithstanding any other provision of this Agreement, neither party shall have the benefit of, or
be entitled to, any notice or cure period for any breach of a material provision hereof that is not
reasonably susceptible of cure.
8.9 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original but all of which shall together constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| /s/ Xxxxxxx X. Xxxxxxx | ||||
| Xxxxxxx X. Xxxxxxx | ||||
| Nanosphere, Inc. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Xxxx Xxxxxx, Chairman of the Board | ||||
