Exhibit 10.39
APPLIED IMAGING CORP.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
effective as of October 19, 2001 (the "Effective Date"), by and between Xxxx
Xxxx (the "Employee") and Applied Imaging Corp., a Delaware corporation (the
"Company"). Certain capitalized terms used in this Agreement are defined in
Section 1 below.
R E C I T A L S
---------------
A. It is expected that the Company from time to time will consider the
possibility of a transaction involving the merger with or acquisition by another
company (a "Change of Control," as defined below). The Board of Directors of the
Company (the "Board") recognizes that such a transaction could be a distraction
to the Employee and could cause the Employee to consider alternative employment
opportunities.
B. The Board believes that it is in the best interests of the Company and
its stockholders to provide the Employee with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control for
the benefit of its stockholders.
C. In order to provide the Employee with enhanced financial security and
sufficient encouragement to remain with the Company notwithstanding the
possibility of a Change of Control, the Board believes that it is imperative to
provide the Employee with certain benefits upon the Employee's termination of
employment following a Change of Control.
AGREEMENT
---------
In consideration of the mutual covenants herein contained and the continued
employment of Employee by the Company, the parties agree as follows:
1. Definition of Terms. The following terms referred to in this Agreement
-------------------
shall have the following meanings:
(a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken
-----
by the Employee in connection with his responsibilities as an employee which is
intended to result in personal enrichment of the Employee, (ii) Employee's
conviction of a felony which the Board reasonably believes has had or will have
a material detrimental effect on the Company's reputation or business, (iii) a
willful act by the Employee which constitutes misconduct and is injurious to the
Company, or (iv) continued willful violations by the Employee of the Employee's
obligations to the Company after there has been delivered to the Employee a
written demand for performance from the Company which describes the basis for
the Company's belief that the Employee has not substantially performed his
duties.
(b) Change of Control. "Change of Control" shall mean the occurrence
-----------------
of any of the following events:
(i) the approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
(ii) the approval by the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets;
(iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities; or
(iv) a change in the composition of the Board, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with any transactions described in
subsections (i), (ii), or (iii) or in connection with an actual or threatened
proxy contest relating to the election of directors of the Company.
(c) Involuntary Termination. "Involuntary Termination" shall mean (i)
-----------------------
without the Employee's express written consent, a significant reduction of the
Employee's duties, position or responsibilities relative to the Employee's
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; provided, however, that a reduction in duties,
position or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Executive Officer
of the Company retains his or her responsibilities following a Change of Control
but is not made the Chief Executive Officer of the acquiring corporation) shall
not constitute an "Involuntary Termination;" (ii) without the Employee's express
written consent, a substantial reduction, without good business reasons, of the
facilities and perquisites (including office space and location) available to
the Employee immediately prior to such reduction; (iii) following a Change of
Control, without the Employee's express written consent, a reduction by the
Company of the Employee's base salary as in effect immediately prior to such
reduction; (iv) following a Change of Control, without the Employee's express
written consent, a material reduction by the Company in the kind or level of
employee benefits to which the Employee is entitled immediately prior to such
reduction with the result that the Employee's overall benefits package is
significantly reduced; (v) following a Change of
-2-
Control, without the Employee's express written consent, the relocation of the
Employee to a facility or a location more than thirty-five (35) miles from his
current location; (vi) any purported termination of the Employee by the Company
which is not effected for Cause or for which the grounds relied upon are not
valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors contemplated in Section 8 below.
(d) Termination Date. "Termination Date" shall mean the effective date
----------------
of any notice of termination delivered by one party to the other hereunder.
2. Appointment, Responsibilities and Remuneration. Employee is confirmed as
----------------------------------------------
President and Chief Executive Officer of the Company with an effective date of
January 1, 2001. Employee agrees to perform all services appropriate to that
position and such other services as may reasonably be assigned by the Company.
Employee shall devote his best efforts and full-time attention to the
performance of his duties and shall not accept any other employment or engage in
any other business, commercial or professional activity that is or may be
competitive with the Company, that might create a conflict of interest with the
Company, or that may otherwise interfere with the business of the Company or any
affiliate. Employee may serve as a director or as a member of the advisory board
of any other company provided that he complies with the restrictions contained
herein or in any relevant non-disclosure agreement.
Employee's salary shall be $225,000 per year, payable on the Company's
normal payroll schedule. In addition to salary, Employee (i) will be eligible to
receive a cash bonus of up to 35% of annual salary, based on achievement of
mutually agreed objectives set by the Company's Board of Directors; and, (ii)
shall be entitled to receive all benefits provided by the Company to its
employees. Notwithstanding the foregoing, it is explicitly understood that the
Company reserves the right to make any reductions to the employee's salary at
any time prior to a change of control for any reason and that such salary
reduction will not constitute an involuntary termination for purposes of this
Agreement, provided that such reduction does not exceed 30%.
3. Term of Agreement. This Agreement shall terminate upon the date that all
-----------------
obligations of the parties hereto under this Agreement have been satisfied or,
if earlier, on the date, prior to a Change of Control, Employee is no longer
employed by the Company.
4. At-Will Employment. The Company and the Employee acknowledge that the
------------------
Employee's employment is and shall continue to be for no specified duration
("at-will," as defined under applicable law) and may be terminated at any time
by either party. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
established under the Company's then existing employee benefit plans or policies
at the time of termination.
5. Change of Control Benefits. Provided that Employee's status as a
--------------------------
full-time employee of the Company continues immediately prior to a Change of
Control, Employee shall, immediately upon such Change of Control, be entitled to
the following benefits:
-3-
(a) Accelerated Vesting. All stock options granted by the Company to the
-------------------
Employee prior to the Change of Control shall become fully vested and
exercisable to the extent such stock options are outstanding and unexercisable
at the time of such Change of Control;
(b) Loan Forgiveness. The principal and associated interest balance
----------------
remaining on Employee's 1997 loan with the Company shall be forgiven.
Notwithstanding this change of control provision, Employee's 1997 loan with the
Company shall be forgiven on December 31, 2001 so long as employee is a
full-time employee of the Company at that time.
6. Severance Benefits.
------------------
(a) Termination Following A Change of Control. If the Employee's
-----------------------------------------
employment with the Company terminates as a result of an Involuntary Termination
at any time within twelve (12) months after a Change of Control, Employee shall
be entitled to the following severance benefits:
(i) Twelve (12) months of Employee's base salary as in effect as of
the date of such termination, less applicable withholding, payable in a lump sum
within thirty (30) days of the Involuntary Termination;
(ii) all stock options granted by the Company to the Employee
following the Change of Control shall become fully vested and exercisable as of
the date of the termination to the extent such stock options are outstanding and
unexercisable at the time of such termination;
(iii) the same level of health (i.e., medical, vision and dental)
coverage and benefits as in effect for the Employee on the day immediately
preceding the day of the Employee's termination of employment; provided,
however, that (i) the Employee constitutes a qualified beneficiary, as defined
in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended; and
(ii) Employee elects continuation coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period
prescribed pursuant to COBRA. The Company shall continue to provide Employee
with health coverage until the earlier of (i) the date Employee is no longer
eligible to receive continuation coverage pursuant to COBRA, or (ii) twelve (12)
months from the termination date.
(iv) in the event that the Employee's employment with the Company
terminates other than as a result of an Involuntary Termination within the
twelve (12) months following a Change of Control, then the Employee shall not be
entitled to receive severance or other benefits hereunder, but may be eligible
for those benefits (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
termination which had been extended to Employee and are applicable as a result
of the nature of Employee's termination.
(b) Termination Apart from a Change of Control. In the event the Company
------------------------------------------
terminates Employee's employment, except for Cause, and no Change of Control
event has occurred, the Company will, at Company's election, either make a lump
sum payment to Employee equal to Employee's annual salary, less any ordinary
withholding, or, make severance payments to Employee
-4-
each payroll period for twelve months following the termination date in an
amount equal to employee's annual salary, less ordinary withholding. Employee
will also receive health benefits (i.e., medical, vision and dental) as defined
in Paragraph 6(a)(iii) above until the earlier of 12 months following the
termination date or the date on which Employee obtains health benefits from a
new employer. If the Employee's employment with the Company terminates other
than as a result of an Involuntary Termination then the Employee shall not be
entitled to receive severance or other benefits hereunder, but may be eligible
for those benefits (if any) as may then be established under the Company's then
existing severance and benefits plans and policies at the time of such
termination which had been extended to Employee and are applicable as a result
of the nature of Employee's termination.
(c) Accrued Wages and Vacation; Expenses. Without regard to the
------------------------------------
reason for, or the timing of, Employee's termination of employment: (i) the
Company shall pay the Employee any unpaid base salary due for periods prior to
the Termination Date; (ii) the Company shall pay the Employee all of the
Employee's accrued and unused vacation through the Termination Date; and (iii)
following submission of proper expense reports by the Employee, the Company
shall reimburse the Employee for all expenses reasonably and necessarily
incurred by the Employee in connection with the business of the Company prior to
the Termination Date. These payments shall be made promptly upon termination and
within the period of time mandated by law.
7. Limitation on Payments. In the event that the severance and other
----------------------
benefits provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the Code,
and (ii) would be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), then Employee's benefits under this Agreement shall be
either
(a) delivered in full, or
(b) delivered as to such lesser extent which would result in no
portion of such benefits being subject to the Excise Tax, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Employee on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all or
some portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and the Employee otherwise agree in writing, any
determination required under this Section shall be made in writing by the
Company's independent public accountants (the "Accountants"), whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes. For purposes of making the calculations required by this
Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the Code.
The Company and the Employee shall furnish to the Accountants such information
and documents as the Accountants may reasonably request in order to make a
determination under
-5-
this Section. The Company shall bear all costs the Accountants may reasonably
incur in connection with any calculations contemplated by this Section.
8. Successors.
----------
(a) Company's Successor. Any successor to the Company (whether
-------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the Company's obligations under this Agreement and
agrees expressly to perform the Company's obligations under this Agreement in
the same manner and to the same extent as the Company would be required to
perform such obligations in the absence of a succession. For all purposes under
this Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.
(b) Employee's Successors. Without the written consent of the
---------------------
Company, Employee shall not assign or transfer this Agreement or any right or
obligation under this Agreement to any other person or entity. Notwithstanding
the foregoing, the terms of this Agreement and all rights of Employee hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
9. Notices.
-------
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
(i) when personally delivered, (ii) five (5) days after mailing by U.S.
registered or certified mail, return receipt requested and postage prepaid, or
(iii) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. In the case
of the Employee, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Board of Directors,
Chairman.
(b) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section 9. Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 30 days after the giving of such notice). The
failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right of
the Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.
10. Arbitration.
-----------
-6-
(a) Any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination hereof, shall be settled by binding
arbitration to be held in Santa Xxxxx County, California, in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
(b) The arbitrator shall apply California law to the merits of any
dispute or claim, without reference to conflicts of law rules. The arbitration
proceedings shall be governed by federal arbitration law and by the Rules,
without reference to state arbitration law. Employee hereby consents to the
personal jurisdiction of the state and federal courts located in California for
any action or proceeding arising from or relating to this Agreement or relating
to any arbitration in which the parties are participants.
(c) Employee understands that nothing in this Section modifies
Employee's at-will employment status. Either Employee or the Company can
terminate the employment relationship at any time, with or without Cause.
(d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION HEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION;
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION.
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS
ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR
STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE
SECTION 201, et seq;
-7-
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
11. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Employee shall not be required to mitigate
-------------------
the amount of any payment contemplated by this Agreement, nor shall any such
payment be reduced by any earnings that the Employee may receive from any other
source.
(b) Waiver. No provision of this Agreement may be modified, waived or
------
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by the Chairman of the Compensation Committee of
the Company's Board of Directors. No waiver by either party of any breach of, or
of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Integration. This Agreement and any outstanding stock option or
-----------
stock purchase agreements along with the Employment Confidential Information and
Invention Assignment Agreement represent the entire agreement and understanding
between the parties as to the subject matter herein and supersede all prior or
contemporaneous agreements, whether written or oral, with respect to this
Agreement and any stock option or stock purchase agreement. It is understand
that the terms of the Employment Confidential Information and Invention
Assignment Agreement shall survive any termination of Employee's employment,
either voluntary or involuntary.
(d) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of California.
(e) Severability. The invalidity or unenforceability of any provision
------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
(f) Employment Taxes. All payments made pursuant to this Agreement
----------------
shall be subject to withholding of applicable income and employment taxes.
(g) Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together will constitute
one and the same instrument.
-8-
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY: APPLIED IMAGING CORP.
By: /s/ Xxxx Xxxx
--------------------------------
Title: Chair - Comp. Com.
-----------------------------
EMPLOYEE: /s/ Xxxx Xxxx
-----------------------------------
Signature
Xxxx Xxxx
-----------------------------------
Printed Name
