Exhibit 10.1
EXECUTIVE
EMPLOYMENT AGREEMENT
This Agreement is made to be effective as of the 1st day of May 2008,
by and between Vitro Diagnostics, Inc., a Nevada corporation (the "Company") and
Xxxxx X. Xxxxxx ("Employee").
W I T N E S S E T H:
WHEREAS, the Company wishes to engage Employee's services upon the
terms and conditions hereinafter set forth; and
WHEREAS, Employee wishes to be employed by the Company upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual promises
set forth herein, the sufficiency of which is hereby acknowledged, the parties
agree as follows:
1. Employment; Duties. The Company hereby agrees to employ Employee
effective as of the Effective Date (defined below) as its President, CEO and
Chairman of the Board of Directors. Employee's principal area of responsibility,
subject to modification by the Company, shall be to serve as the Chairman of the
Board and Chief Executive Officer with all the duties and responsibilities
customarily associated with those positions. His job duties will also include
management of all technical aspects of the operations of the Company, including
research and development, manufacturing and marketing. He will also assume
management responsibility for maintenance and further development of the
intellectual property portfolio of the company and manage all issues related to
regulatory affairs.
2. Best Efforts. Employee agrees to use his best efforts to promote the
interests of the Company and shall, except for illness, reasonable vacation
periods and leaves of absence, devote his full business time and energies to the
business and affairs of the Company. Employee shall be permitted to perform
outside business endeavors only with the approval of the Board of Directors,
subject to non-competition agreements with the Company and provided that such
outside activities do not interfere with the performance of Employee's duties.
Employee may also engage in work for charitable, benevolent, civic or
educational purposes so long as such endeavors do not interfere with Employee's
duties hereunder.
3. Term of Agreement. The term of this Agreement shall commence on the
date first above written (the "Effective Date") and shall continue, unless
earlier terminated in accordance with the terms of Paragraph 5, for a period of
three years (the "Original Term"). The Original Term shall be extended
automatically for an additional three-year period (a "Renewal Term") unless
either party gives notice to the other that this Agreement will not be extended
at least 90 days prior to the expiration of the Original Term or any Renewal
Term. The period of employment of Employee by the Company, commencing with the
Effective Date and continuing until termination of the employment by notice
hereunder, in accordance with Paragraph 5 or otherwise shall be known as the
"Term of Employment."
4. Compensation.
4.1 Base Salary. The following table sets forth the compensation
payable to the Employee during the initial three years of the Term of
Employment:
Year Base Salary
---- -----------
1 $80,000
2 $85,000
3 $90,000
4.2 Bonuses and Stock Options.
In addition to the base salary described in section 4.1
(above), Employee shall be entitled to incentive compensation designed
to encourage accomplishment of specific corporate goals. Upon the
Company's achievement of gross annual product sales of $250,000,
$500,000 or $1,000,000 per annum (measured from November 1 to October
31 of each fiscal year as reported in the Statement of Operations
included in the Company's report in Form 10-K), the Employee will be
entitled to profit sharing bonuses as follows:
Minimum Annual Product Sales % of Net Income to Employee
---------------------------- ---------------------------
$250,000 80%
$500,000 60%
$1,000,000 40%
For purposes of this Paragraph 4.2, Net Income shall mean the
Net Income as provided on the Statement of Operations referenced above.
These bonuses, if earned, will be paid within 30 days of the Company's
filing of its Form 10-K. Such bonuses will not preclude the vesting of
stock options as described below.
A stock option shall be granted to the Employee upon execution
of this Agreement to purchase up to one million (1,000,000) shares of
the Company's common stock; at an exercise price of $0.19 per share
(the closing market price at July 29, 2008, the date this Agreement was
approved by the Company's Board of Directors). The options shall vest
according to the following schedule:
(a) 100,000 shares if the market capitalization of the Company
exceeds $5 million for a period of at least 5 consecutive trading days,
an additional 100,000 shares if the market capitalization of the
Company exceeds $6 million for a period of at least 5 consecutive
trading days, and an additional 100,000 shares if the market
capitalization of the Company exceeds $7 million for a period of at
least 5 consecutive trading days;
(b) An additional 100,000 shares if the Company licenses one
of its patents to a third party and an additional 100,000 shares if the
Company executes an in-license of a patent owned by a third party, that
expands the revenue generation capacity of the Company.
(c) An additional 100,000 shares if the Company raises at
least $1 million in equity financing, an additional 100,000 shares if
the Company raises $2 million in equity financing, and an additional
100,000 shares if the Company raises $5 million in equity capital;
(d) An additional 100,000 shares if the Company merges with,
acquires or spins off another company, with minimum annual revenues of
$500,000 and
(e) An additional 100,000 shares if a registration statement
filed with the SEC for the purpose of conducting a secondary offering
of not less than $2,000,000 of the Company's securities becomes
effective.
These Stock Options shall be exercisable beginning with the date of
vesting and for a period of 10 years from the date of grant.
The option granted to the Employees shall be represented by an option
agreement in form and substance satisfactory to the Company, and shall be
granted under the Company's Equity Incentive Plan ("Plan"). To the extent
permitted by the terms of the Plan, the options shall be incentive options
within applicable provisions of the Internal Revenue Code. All options would be
granted with a provision for cashless exercise whereby a portion of the option
shares could be redeemed at market price at the time of exercise (closing bid)
to satisfy the cost of exercising the option. The Company also agrees that all
stock options as provided herein shall immediately vest to the employee upon the
acquisition of the Company or substantially all of its assets by a third party.
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4.3 Benefits. Employee shall be entitled to participate in all benefit
programs established by the Company and generally applicable to the Company's
executive employees. Employee shall also be reimbursed for reasonable and
necessary business expenses incurred in the course of his employment with the
Company pursuant to Company policies as established from time to time.
5. Termination of Employment Relationship.
5.1 Death or Incapacity. This Agreement shall terminate immediately
upon the death or Total Disability of Employee, and in such event, the Employee
shall have no further claim against the Company for compensation or benefits
hereunder. The Board of Directors shall make a determination of the Total
Disability of the Employee based upon the definition of disability and terms
contained in the Company's disability insurance policy, or if none, based upon
the inability of the Employee to perform the material functions of his job. Any
such determination by the Board shall be evidenced by its written opinion
delivered to the Employee. Such written opinion shall specify with particularity
the reasons supporting such opinion and be manually signed by at least a
majority of the Board.
5.2 Termination by the Company. This Agreement may be terminated by the
Company for "Cause" and, in such event, the term of employment shall terminate
at the termination date designated by the Company. For the purpose of this
paragraph, "Termination for Cause" or "Cause" shall include the following:
(a) Breach of fiduciary duty or criminal conduct by the
Employee having the effect of materially adversely affecting the
Company and/or its reputation;
(b) Willful failure by the Employee to substantially perform
his duties hereunder;
(c) Engagement by the Employee in the use of narcotics or
alcohol to the extent that the performance of his duties is materially
impaired;
(d) Material breach of the terms of this Agreement by the
Employee or failure to substantially comply with proper instructions of
the Company's Board of Directors;
(e) Misconduct by the Employee which is materially injurious
to the Company; or
(f) Any act or omission on the part of the Employee not
described above, but which constitutes material and willful
misfeasance, malfeasance, or gross negligence in the performance of his
duties to the Company.
Determination of any event or events and circumstances constituting
"Cause" shall be at the sole discretion of the Board of Directors.
5.3 Termination by Employee. Employee may terminate this Agreement for
"Good Reason"; provided, however, that Employee's obligations under Paragraph 6
shall survive any termination of this Agreement by Employee, by the Company or
otherwise. For purposes of this paragraph, Good Reason shall mean:
(a) Any assignment to the Employee of any duties
materially inconsistent with the position described in Section 1
hereof,
(b) Any material diminution of the duties of the Employee
then-existing without the written consent of the Employee,
(c) Any removal of the Employee from or failure to re-elect
the Employee to the positions described in Section 1 hereof, except in
connection with termination of the Employee pursuant to Section 5.1 or
5.2 hereof,
(d) A reduction in the Employee's rate of compensation, or a
reduction in the Employee's fringe benefits or any other failure of the
Company to comply with Section 4 hereof,
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(e) Other material breach of this Agreement by the Company, or
(f) Following a "Change in Control," defined below.
A "Change of Control" shall be deemed to have occurred if (i) a tender
offer shall be made and consummated for the ownership of 50% or more of the
outstanding voting securities of the Company, (ii) the Company shall be merged
or consolidated with another corporation and as a result of such merger or
consolidation less than 50% of the outstanding securities of the surviving or
resulting corporation shall be owned in the aggregate by the former stockholders
of the Company, as the same shall have existed immediately prior to such merger
or consolidation, (iii) the Company shall sell more than 75% of its assets to
another corporation which is not a wholly owned subsidiary, or (iv) within any
period of six consecutive months, individuals who at the beginning of the period
constituted the Board of the Company cease for any reason to constitute a
majority of the Board of the Company then in office.
Any termination by the Board of Directors pursuant to Section 5.2 or by
the Employee pursuant to section 5.3 shall be communicated by written Notice of
Termination to the other party hereto. Notice of Termination shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's employment under
the provision so indicated.
5.4 Payment Upon Termination.
(a) If this Agreement is terminated by the Company for Cause
Employee shall not be entitled to severance pay of any kind but shall
be entitled to all reasonable reimbursable business expenses incurred
by Employee and the Base Salary earned by Employee prior to the date of
termination, and all obligations of the Company under Paragraph 4
hereof shall terminate upon the termination date designated by the
Company, except to the extent otherwise required by law.
(b) In the event that Employee is terminated without Cause or
the Employee resigns with Good Reason, the Company shall pay Employee
one (1) year's Base Salary at the rate prevailing for Employee
immediately prior to such termination as severance pay, payable in
accordance with Company's policy. Employee shall also be entitled to
receive benefits to which he was entitled immediately preceding the
date of termination for a period of twelve (12) months from date of
termination.
6. Non-Competition Agreement.
6.1 Competition; Confidential Information. The Employee and the Company
recognize that due to the nature of his engagements hereunder, and the
relationship of the Employee to the Company, the Employee has had access to and
has acquired, will have access to and will acquire, and has assisted in and may
assist in developing, confidential and proprietary information relating to the
business and operations of the Company and its affiliates, including, without
limiting the generality of the foregoing, information with respect to their
present and prospective products, systems, customers, agents, processes, and
sales and marketing methods. The Employee acknowledges that such information has
been and will continue to be of central importance to the business of the
Company and its affiliates and that disclosure of it to or its use by others
could cause substantial loss to the Company. The Employee and the Company also
recognize that an important part of the Employee's duties will be to develop
good will for the Company and its affiliates through his personal contact with
customers, agents and others having business relationships with the Company and
its affiliates, and that there is a danger that this good will, a proprietary
asset of the Company and its affiliates, may follow the Employee if and when his
relationship with the Company is terminated. Employee acknowledges that his
services to be rendered hereunder have a unique value to the Company, for the
loss of which the Company cannot be adequately compensated by damages in an
action at law. In view of the unique value to the Company of the services of
Employee, and because of the Confidential Information to be obtained by or
disclosed to Employee, and as a material inducement to the Company to enter into
this Employment Agreement and to pay to Employee the compensation referred to in
Paragraph 4 hereof, Employee covenants and agrees that:
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6.2 Non-Competition.
(a) While Employee is employed by the Company, Employee will
not, either personally, as an officer, director, owner, manager,
member, principal, partner, employee, agent, distributor,
representative, stockholder, consultant or otherwise, or with or
through any other person or entity operate or participate in any stem
cell business (for purposes of Paragraph 6 hereof, the Company shall be
deemed to include all subsidiaries and joint ventures of the Company
whether now or hereafter affiliated with the Company) nor will
Employee, while Employee is employed by the Company, and for a period
of one (1) year thereafter, directly or indirectly solicit any person
who has been an employee, supplier or customer of the Company during
the period of one (1) year prior to the termination of employment. This
non-competition clause shall apply in the geographic territory
comprised of the entire United States and any other geographic area in
which the Company is engaged in business. Employee acknowledges that
this non-competition/non-solicitation agreement is reasonable in terms
of its scope and duration.
(b) Nothing in this Section 6.2 shall be construed to prevent
the Employee from owning, as an investment, not more than 1% of a class
of equity securities issued by any competitor of the Company or its
affiliates and publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934.
6.3 Trade Secrets. The Employee will keep confidential any trade
secrets or confidential or proprietary information of the Company and its
affiliates which are now known to him or which hereafter may become known to him
as a result of his employment or association with the Company and shall not at
any time directly or indirectly disclose any such information to any person,
firm or corporation, or use the same in any way other than in connection with
the business of the Company or its affiliates during and at all times after the
expiration of the Term of Employment. For purposes of this Agreement, "trade
secrets or confidential or proprietary information" means information unique to
the Company or any of its affiliates which has a significant business purpose
and is not known or generally available from sources outside the Company or any
of its affiliates or typical of industry practice. Trade secrets or confidential
or proprietary information may include information with respect to the Company's
personnel records, present and prospective products, systems, customers, agents,
processes, and sales and marketing methods.
6.4 Patents. The Employee will assign permanently to the Company
exclusive rights to any patents awarded to him on the basis of ideas developed
by the Employee for the Company or its affiliates during or prior to the Term of
Employment and for one year following the termination of his employment from the
Company for patents that are related to such employment and/or the business of
the Company.
6.5 Injunctive Relief. It is agreed that Employee's services are
unique, and that any breach or threatened breach by Employee of any provisions
of this Paragraph 6 may not be remedied solely by damages. Accordingly, in the
event of a breach or threatened breach by Employee of any of the provisions of
this Paragraph 6, the Company shall be entitled to injunctive relief,
restraining Employee and any business, firm, partnership, individual,
corporation, or entity participating in such breach or attempted breach, from
engaging in any activity which would constitute a breach of this Paragraph 6.
Nothing herein, however, shall be construed as prohibiting the Company from
pursuing any other remedies available at law or in equity for such breach or
threatened breach, including the recovery of damages.
6.6 Survival. The provisions of this Paragraph 6 shall survive the
termination of this Agreement and the termination of Employee's employment.
7. Miscellaneous.
7.1 Assignability. Employee may not assign his rights and obligations
under this Agreement without the prior written consent of the Company, which
consent may be withheld for any reason or for no reason.
7.2 Severability. In the event that any of the provisions of this
Agreement shall be held to be invalid or unenforceable, the remaining provisions
shall nevertheless continue to be valid and enforceable as though the invalid or
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unenforceable parts had not been included therein. Without limiting the
generality of the foregoing, in the event that any provision of Paragraph 6
relating to time period and/or areas of restriction shall be declared by a court
of competent jurisdiction to exceed the maximum time period or areas(s) such
court deems enforceable, said time period and/or area(s) of restriction shall be
deemed to become, and thereafter be, the maximum time period and/or area for
which such are enforceable.
7.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes all
prior agreements or understandings among the parties hereto with respect to the
subject matter hereof.
7.4 Amendments. This Agreement shall not be amended or modified except
by a writing signed by both parties hereto.
7.5 Waiver. The failure of either party at any time to require
performance of the other party of any provision of this Agreement shall in no
way affect the right of such party thereafter to enforce the same provision, nor
shall the waiver by either party of any breach of any provision hereof be taken
or held to be a waiver of any other or subsequent breach, or as a waiver of the
provision itself. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Colorado without regard to the conflict
of laws of such State. The benefits of this Agreement may not be assigned nor
any duties under this Agreement be delegated by Employee without the prior
written consent of the Company, except as contemplated in this Agreement. This
Agreement and all of its rights, privileges, and obligations will be binding
upon the parties and all successors and agreed to assigns thereof.
7.6 Binding Agreement. This Agreement shall be effective as of the date
hereof and shall be binding upon and inure to the benefit of the Employee, his
heirs, personal and legal representatives, guardians and permitted assigns. The
rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon any successor or assignee of the Company.
7.7 Headings. The headings or titles in this Agreement are for the
purpose of reference only and shall not in any way affect the interpretation or
construction of this Agreement.
7.8 Arbitration. Any dispute between the Company and the Employee with
respect to this Agreement shall be submitted to binding arbitration in Jefferson
County, Colorado pursuant to the rules of the American Arbitration Association
then in effect and before an arbitrator fully licensed and authorized by any and
all applicable rules, statutes, regulations or the like to hear such cases in
the State of Colorado. The arbitrators shall have the power to award any legal
or equitable remedies that would be available in proceedings conducted before a
state or federal court of competent jurisdiction in Colorado. Judgment on the
award of the arbitrators may be entered in any court of competent jurisdiction.
All arbitration proceedings and the results thereof shall be confidential,
except to the extent that any party is required to make disclosure concerning
such proceedings under applicable law.
7.9 No Conflict. The Employee represents and warrants that he is not
subject to any agreement, order, judgment or decree of any kind which would
prevent him from entering into this Agreement or performing fully his
obligations hereunder.
7.10 Survival. The rights and obligations of the parties shall survive
the Term of Employment to the extent that any performance is required under this
Agreement after the expiration or termination of such Term of Employment.
7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
7.12 Notices. Any notice to be given hereunder by either party to the
other may be effected in writing by personal delivery, or by mail, certified
with postage prepaid, or by overnight delivery service. Notices sent by mail or
by an overnight delivery service shall be addressed to the parties at the
addresses appearing following their signatures below, or upon the employment
records of the Company but either party may change its or his address by written
notice in accordance with this paragraph.
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7.13 Opportunity to Consult Counsel. The Parties hereto represent and
agree that, prior to executing this Agreement, each has had the opportunity to
consult with independent counsel concerning the terms of this Agreement.
7.14 Attorney Fees. In the event of any dispute, arbitration,
litigation between the Parties or proceeding before any court of competent
jurisdiction, the prevailing party shall be entitled to reasonable attorney fee,
costs and expenses.
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IN WITNESS WHEREOF, the parties hereto have properly and duly executed
this Agreement as of the date first written above.
THE COMPANY:
VITRO DIAGNOSTICS, INC.
By:
------------------------------------
Xxxx Xxx Xxxx, Vice President
EMPLOYEE:
-----------------------------------------
Xxxxx X. Xxxxxx
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