EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into this 22nd day
of September 1998, by and between Xxxxxx X. Xxxxxx, Xx., Ph.D. (the "Executive")
and ReGen Biologics, Inc. (the "Company").
WHEREAS, the Company wishes to retain the services of Executive, and
WHEREAS, the Executive desires to be employed by the Company,
NOW, THEREFORE, in consideration of the promises and mutual agreements
made herein, and intending to be legally bound hereby, the Company and Executive
agree as follows:
1. Employment Term. The Company shall employ the Executive for
consecutive one-year terms beginning on September 14, 1998. Either party shall
have the right to terminate this Agreement by providing the other Party ninety
(90) days written notice.
2. Employment Duties. Executive will serve as Chief Executive
Officer and Chairman of the Board of Directors of the Company subject to the
direction and control of the Board of Directors. Executive shall be fully
responsible for all facets of the Company's operations, with all of the
Company's employees reporting to Executive, either directly or indirectly.
3. Compensation.
(a) Base Annual Salary. The Company will pay Executive a
base salary of $275,000 per annum, in equal bi-weekly installments. The
Compensation Committee of the Board of Directors shall review Executive's base
salary on January 1, 1999, and annually thereafter during its year-end
compensation review.
(b) Performance Bonus. Beginning January 1, 1999,
Executive may be eligible to receive a performance bonus of up to twenty-give
(25) percent of his annual base salary based on his achievement of performance
objectives agreed to by the Executive and Company
4. Benefits.
(a) Executive will be entitled during the term of this
Agreement to three (3) weeks paid vacation, ten (10) paid Company holidays, and
sick leave benefits as provided by the Company's standard policies.
Additionally, Executive shall be entitled during the term of this Agreement to
(i) health and disability benefits, (ii) participation in the Company-sponsored
401(k) program, and (iii) any other benefits that may be provided from time to
time by the Company to its employees.
(b) The Company shall reimburse Executive for all
reasonable expenses incurred in connection with the performance of his duties
under the Agreement pursuant to the Company's standard business expense
reimbursement policies.
(c) The Company shall provide Executive during the term
of this Agreement the same level of coverage of directors and officers liability
insurance that the Company extends to its other officers and directors.
(d) The Company shall reimburse Executive for the
reasonable legal expenses that he incurred in connection with the drafting and
execution of this Agreement. Additionally, the Company shall reimburse Executive
for reasonable legal expenses up to $5,000 that he may incur in connection with
the termination of this Agreement.
5. Stock Options. By entering into this Agreement with Executive,
the Company is granting Executive as of the date his employment commences
options to purchase that number of shares of the Company's common stock
equivalent to eight percent (8%) of the sum total (the "Total") of (i) all of
the Company's issued and outstanding shares of common stock on the date hereof,
plus (ii) the total number of shares of the Company's common stock issuable upon
the exercise or conversion of any options, warrants, preferred stock or other
securities convertible into or exchangeable for shares of the Company's common
stock and which are outstanding on the date hereof, plus (iii) the total number
of shares of the Company's common stock reserved for issuance as of the date
hereof under any stock option plan, other employee benefit plan, contract or
other agreement (such 8% of such sum Total, the "Aggregate Option Shares"). Such
options shall have the following terms and conditions:
(a) All such options shall be granted upon employment
with an exercise price of $1.45. All options may be exercised by Executive using
cash or common stock of the Company as consideration for the exercise price. Any
common stock tendered to the Company in the exercise of such options shall be
valued at its fair market value on the date of exercise. At the request of
Executive, the Company shall assist Executive in obtaining financing (which may
be provided by the Company or from other sources) the proceeds of which shall be
used in the exercise of such options.
(b) All options shall be subject to vesting prior to
exercise. Except as otherwise provided herein in respect of the acceleration of
vesting of any options, ten percent (10%) of the Aggregate Option Shares shall
vest on the date six months from the date of this Agreement; an additional ten
percent (10%) of the Aggregate Option Shares shall vest on the first anniversary
date of this Agreement; and an additional twenty percent (20%) of the Aggregate
Option Shares shall vest on each of the second, third, fourth and fifth
anniversaries of the date of this Agreement, such that all options shall have
vested by no later than the fifth anniversary hereof.
(c) All of the options that have not previously vested
shall vest upon a change of control of the Company as defined in Section 8.
(d) The Company shall promptly enter into a written stock
option agreement with Executive reasonably acceptable to both containing
customary terms and conditions contained in option agreements for senior
executives of development stage companies. Such agreement shall contain all
requirements necessary for Executive's options to qualify as Incentive Stock
Options for federal income tax purposes to the maximum extent permitted by law.
The options contemplated by this Section 5 shall be issued under the company's
current 1991 and/or 1993 stock option plans. If for any reason these options
cannot be granted under those plans, the Company and its Board of Directors
shall immediately adopt a new stock option plan that will permit the timely
grant to the Executive of the options.
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(e) The options shall expire on the date that is ten (10)
years after the date of grant.
6. Commuting and Relocation Expenses.
(a) The Company shall reimburse Executive for the cost of
his commuting to its offices in California up to $50,000 following the execution
of this Agreement for up to twelve (12) months. For purposes of this Section,
the Executive's reimbursable commuting expenses shall include the cost of
transportation, lodging and meals.
(b) Should the Executive decide to relocate to
California, where the Company is presently located, the Company shall pay all of
the relocation expenses he actually incurs up to $100,000.
7. Termination.
(a) For Cause. Notwithstanding any other provision of
this Agreement, the Company may terminate Executive's employment for cause at
any time without notice. For purposes of this Agreement, "cause" shall mean the
Executive's (i) commission of an action against or in derogation of the
interests of the Company which constitutes an act of fraud, dishonesty, or moral
turpitude, or which, if proven in a court of law, would constitute a violation
of a criminal code or other law; (ii) divulging the Company's Confidential
Information (as defined in Section 10); or (iii) material breach of any material
duty or obligation imposed upon the Executive by the Company. Should the Company
reasonably determine that such "cause" exists, it shall inform Executive of such
"cause" and afford him thirty (30) days following his receipt of written notice
of the Company's "cause" finding and the facts underlying it, to cure the
"cause." Executive's cure of such "cause" shall not be unreasonably rejected by
the Company. Should Executive fail to cure the "cause," and the Company
terminate him pursuant to this Section 7(a), the Company's obligations under
this Agreement shall cease, and except as required by applicable law, Executive
shall forfeit all rights to receive any other compensation or benefits under
this Agreement, except that he shall be entitled to his base salary for services
rendered through the effective date of termination. Additionally, Executive
shall be entitled to any vested stock options.
(b) Without Cause. Notwithstanding any other provision of
this Agreement, the Company may terminate Executive's employment and this
Agreement without cause by providing Executive ninety (90) days written notice,
provided that in the event of such termination, Executive shall be entitled to
all vested stock options to the date of notice, which may be exercised as
defined in this Agreement, and continuation of his salary and Company-paid
health and other welfare benefits for nine (9) months. Additionally, any stock
option that would have vested in the nine (9) months after the effective date of
Executive's termination will be accelerated to, and vest on, the effective
termination date. Executive's vested stock options may be exercised ninety (90)
days after the effective date of his termination. In the event that the Company
decides to keep its principal place of business within California, such decision
shall not be deemed a termination "without cause" within the meaning of this
Paragraph.
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(c) Material Change in Responsibilities. Notwithstanding
any other provision of this Agreement, should the Company materially change
Executive's responsibilities, Executive may provide the Company thirty (30) days
written notice of his objection to such change. The Company shall be afforded
thirty (30) days from receipt of such notice to respond to and cure Executive's
objection(s). Should the Company fail to restore Executive's responsibilities in
full during this thirty (30) day period, Executive shall be entitled to resign
and such resignation for purposes of salary and benefit continuation and
vesting, shall be treated as a termination without cause as defined in Section
7(b). For purposes of this Section, a "material change in responsibility" shall
mean a material change in Executive's duties or authority.
8. Termination Due to Change in Control.
(a) Defined. For purposes of this Agreement, a "change in
control" is: (1) the purchase or other acquisition by any person, entity or
syndicate group of persons and/or entities within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended, or any comparable
successor provisions, of beneficial ownership (within the meaning of Rule 13D-3
promulgated under such Act) of forty percent (40%) or more of either the
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally; (2) the approval
by the stockholders of the Company of a reorganization, merger or consolidation,
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 fifty percent (50%) of the combined voting
power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated Company's then outstanding securities; (3) a
liquidation or dissolution of the Company; (4) the sale of all or substantially
all of the Company's assets; or (5) a change in three (3) or more members of the
Board of Directors of the Company (excluding Executive) within a twelve (12)
month period, which change results from a single (or related series of)
shareholder vote(s).
(b) In the event that a change in control results in an
involuntary termination of Executive through elimination of his position,
Executive shall be entitled to all options which have vested or are otherwise
due to vest pursuant to Section 5 of this Agreement, and continuation of his
salary and Company provided health and other welfare benefits for nine (9)
months as provided in Section 7(b).
(c) In the event of Executive's termination pursuant to
Section 8(b), Executive may, at his sole option, elect to receive payment of his
nine (9) months salary in the form of a lump sum distribution, less applicable
withholdings, which shall be payable within twenty (20) days of the effective
date of his termination.
9. Disability. The Company may terminate the Executive in the
event that he becomes disabled during the term of this Agreement. Executive
shall be considered "disabled" within the meaning of this Section if he is
unable because of accident or illness (physical or mental) to perform the
material duties of his position for a period of six (6) consecutive months.
Executive's termination pursuant to this Section shall be treated as a
termination without cause as defined in Section 7(b).
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10. Confidentiality. In the course of performing his duties under
this Agreement, Executive will have access to "Confidential Information."
Executive agrees and acknowledges that this Confidential Information constitutes
a valuable and unique asset of the Company and that its protection is of
critical importance to the Company. To ensure that such Confidential Information
is not disclosed or divulged to third persons, Executive agrees:
(a) that Confidential Information is owned by the Company
and is to be held by Executive in trust and solely for the benefit of the
Company;
(b) that he shall not in any way utilize such
Confidential Information for the gain or advantage of Executive or others to the
detriment of the Company; and
(c) that upon termination of this Agreement, he shall
promptly return any and all such Confidential Information to the Company and
shall continue to abide by the confidentiality provisions of this Section.
For purposes of this Agreement, "Confidential Information" shall
include, but not be limited to, information that has been created, discovered,
developed or otherwise become known to the Company and/or in which property
rights have been assigned or otherwise conveyed to the Company, which
information has commercial value in the business in which the Company is or may
become engaged. By way of illustration, but not limitation, Confidential
Information includes trade secrets, processes, structures, formulas, data and
know-how, improvements, inventions, product concepts, techniques, marketing
plans, strategies, forecasts, customer lists and information about the Company's
employees, and/or consultants.
Executive further agrees that he will execute a mutually agreeable
proprietary information and invention agreement as a condition of his
employment.
11. Non-Solicitation.
(a) Executive agrees that during the term of this
Agreement and for a nine (9) month period following his receipt of notice of his
termination under this Agreement, he will not, directly or indirectly, without
the prior written consent of the Company, solicit or attempt to solicit business
from any individual or entity that was a customer of the Company at any time
during the six (6) month period immediately prior to Executive's termination of
employment with the Company.
(b) Executive agrees that during the term of this
Agreement and for a nine (9) month period following his receipt of notice of
termination under this Agreement, he will not, directly or indirectly, without
the prior written consent of the Company, solicit or induce any employee of the
Company to leave the employ of the Company or hire for any purpose any employee
of the Company.
12. Notices. Any notice or communication under this Agreement will
be in writing and sent by registered or certified mail addressed to the
respective parties as follows:
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If to the Company: General Counsel
ReGen Biologics, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
If to the Executive: Xxxxxx X. Xxxxxx, Xx., Ph.D.
000 Xxxxxxxxx Xxxxx
Xxx Xxxxxx, XX 00000
Executive shall notify the Company by certified mail of any change in
his address, and thereafter, the Company shall forward any notices under this
Agreement to Executive at such new address.
13. Entire Agreement. This Agreement embodies the entire agreement
of the Parties relating to Executive's employment and supersedes all prior
agreements, oral or written. No amendment or modification of this Agreement
shall be valid or enforceable unless made in writing and signed by the Parties.
14. Government Law. This Agreement shall be governed and construed
in accordance with the laws of California.
15. Severability. Should one or more of the provisions of this
Agreement be held invalid or unenforceable by a court of competent jurisdiction,
such provisions or portions thereof shall be ineffective only to the extent of
such invalidity or unenforceability, and the remaining provisions of this
Agreement or portions thereof shall nevertheless be valid, enforceable and
remain in full force and effect.
/s/ Xxxxxx X. Xxxxxx, Xx. /s/ J. Xxxxxxx Xxxxxxxx
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XXXXXX X. XXXXXX, XX. REGEN BIOLOGICS, INC.
By: J. Xxxxxxx Xxxxxxxx, Co-Chairman
-----------------------------------
9/22/98 September 22, 1998
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Date Date
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AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement ("Agreement") is effective as of
September 12, 2000, by and between Xxxxxx X. Xxxxxx, Xx., Ph.D. (the
"Executive") and ReGen Biologics, Inc. (the "Company").
WHEREAS, the Company and the Executive are parties to an Employment
Agreement dated as of September 22, 1998 (the "Employment Agreement"); and
WHEREAS, at a meeting of the Board of Directors of the Company on
September 12, 2000, the Board of Directors unanimously approved amending the
Employment Agreement to extend the term of the Executive's severance benefits.
NOW, THEREFORE, in consideration of the promises and mutual agreements
made herein, and intending to be legally bound hereby, the Company and Executive
agree as follows:
1. Section 7(b) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
(b) Without Cause. Notwithstanding any other provision of this
Agreement, the Company may terminate Executive's employment and this Agreement
without cause by providing Executive ninety (90) days written notice, provided
that in the event of such termination, Executive shall be entitled to all vested
stock options to the date of notice, which may be exercised as defined in this
Agreement, and continuation of his salary and Company-paid health and other
welfare benefits for twelve (12) months. Additionally, any stock option that
would have vested in the twelve (12) months after the effective date of
Executive's termination will be accelerated to, and vest on, the effective
termination date. Executive's vested stock options may be exercised ninety (90)
days after the effective date of his termination. In the event that the Company
decides to keep its principal place of business within California, such decision
shall not be deemed a termination "without cause" within the meaning of this
Paragraph.
2. Section 8(b) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
(b) In the event that a change in control results in an involuntary
termination of Executive through elimination of his position, Executive shall be
entitled to all options which have vested or are otherwise due to vest pursuant
to Section 5 of this Agreement, and continuation of his salary and Company
provided health and other welfare benefits for twelve (12) months as provided in
Section 7(b).
3. Section 8(c) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
(c) In the event of Executive's termination pursuant to Section 8(b),
Executive may, at his sole option, elect to receive payment of his twelve (12)
months salary in the form of a lump sum distribution, less applicable
withholdings, which shall be payable within twenty (20) days of the effective
date of his termination.
/s/ Xxxxxx X. Xxxxxx, Xx. /s/ Xxxxx Xxxxx
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XXXXXX X. XXXXXX, XX. REGEN BIOLOGICS, INC.
By: Xxxxx Xxxxx, Chief Financial Officer
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