EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement"),
is made and entered as of the day of 1997, by
and among XXXXXXXX XXXXX (hereinafter referred to as "Executive"), and
COLORADO MEDTECH, INC., a Colorado corporation (hereinafter referred to as
"Employer").
W I T N E S S E T H :
WHEREAS, Employer desires to employ the Executive in an executive
capacity with the Corporation on the terms hereinafter set forth, and the
Executive desires to be so employed on such basis; and
WHEREAS, the parties desire to establish the compensation and other
benefits to be paid to the EXECUTIVE while he shall be in the employ of the
Employer.
NOW, THEREFORE, in consideration of the mutual promises contained in
this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which hereby is acknowledged, it is agreed as follows:
EMPLOYMENT
1. TERM OF EMPLOYMENT. Employer hereby agrees to employ Executive, and
Executive hereby accepts such employment by Employer, as President of Novel
Biomedical, Inc., a subsidiary of Employer, for a term commencing on the date
hereof (hereinafter referred to as the "Term of Employment"), and ending on
December 31, 2001. The Term of Employment may be reduced by mutual agreement
of the parties, in writing.
2. DUTIES OF EMPLOYMENT.
a. Executive shall have such responsibilities and duties as shall be
determined by the Board of Directors and the Chief Executive Officer of the
Employer, consistent with this Agreement and with the position of President
of the Novel Biomedical subsidiary or division. The duties to be performed
by Executive shall be performed in Minnesota, subject to reasonable travel
requirements on behalf of Employer and subject to a maximum of 25% of each
month averaged over a twelve month period. During the Term of Employment,
Employer shall not make any substantial change in the duties and
responsibilities of the position held by Executive and shall not require
Executive to perform duties which are not commensurate with his position
without Executive's prior consent.
b. Executive shall render the services described herein diligently,
using his best efforts. Executive shall not hold other employment during the
Term of Employment.
3. COMPENSATION.
a. During the Term of Employment, Executive shall receive base
compensation ("Base Compensation") at a rate of not less than $85,000.00 per
annum, payable twice monthly in accordance with Employer's normal payroll
practices. Base Compensation shall be reviewed annually, and may be
increased depending on Executive's performance and Employer's financial
condition. Additionally, incentive stock options (the "ISOs") to purchase
100,000 shares of Employer's Common Stock shall be granted on the date hereof
at an exercise price equal to the fair market value of the Common Stock on
the date hereof. The ISOs shall be subject to vesting at the earlier of
completion of performance criteria provided on Exhibit A, attached hereto, or
at the end of five years from the date hereof.
2
b. During the Term of Employment Executive shall be entitled to
participate in benefits programs, including MBO-based bonuses, adopted by
Employer commensurate with other executives of Employer. Employer shall not
alter the bonus compensation program of Novel Biomedical through June 1997,
and Executive shall not be entitled to participate in such Novel Biomedical
program, provided that the financial performance of Novel Biomedical shall be
adjusted to reflect Executive's employment by Employer prior to the
calculation of any bonus due.
4. BENEFITS AND PERQUISITES. Executive shall during the Term of
Employment be eligible to receive all benefits and perquisites from time to
time available generally to senior management and key executives of Employer,
all of which shall be provided at the expense of Employer. This Agreement is
not intended to and shall not be deemed to be in lieu of any rights, benefits
and privileges to which Executive may be entitled as an employee of Employer
under any retirement, pension, profit sharing, insurance, hospital or other
plans which may now be in effect or which may hereafter be adopted, it being
understood that Executive shall have the same rights and privileges to
participate in such plans and benefits as any other employee during
Executive's period of employment with Employer.
5. RESTRICTIONS ON USE AND DISCLOSURE; NON-COMPETITION AGREEMENT.
a. Except as required by Executive's duties to Employer as an employee,
Executive shall not (during or after any period of employment) directly or
indirectly use, publish, disseminate or otherwise disclose any Confidential
Information without the express prior written consent of Employer. For
purposes of this Agreement, "Confidential Information" shall mean all written
and oral confidential or proprietary information of Employer and its
affiliates, whether or not discovered or developed by Employer, and of third
parties (such as suppliers, customers
3
and consultants) who may have imparted information in confidence to Employer
or its affiliates, known by Executive as a result of his employment with
Employer at any time (including prior to execution of this Agreement),
provided that Confidential Information shall not include any such information
which is now or hereafter becomes generally known in the industries in which
Employer is conducting business without the fault of Executive.
b. Upon termination of employment with Employer for any reason,
Executive shall forthwith deliver to Employer all Employer property,
including without limitation, all copies of all procedural manuals, guides,
customer lists, records and other documents and materials containing
Confidential Information then in Executive's possession or control, whether
prepared by Executive or others.
c. Upon the execution of this Agreement, Executive shall execute a
Non-Competition Agreement in the form of that attached hereto as Schedule B;
provided, however, that any obligations pursuant to such Non-Competition
Agreement shall automatically terminate upon the occurrence of a material
breach of this Agreement by Employer, provided that Executive has given
Employer notice in writing of such breach and Employer has failed to cure
such breach within sixty (60) days of such written notice.
TERMINATION
6. TERMINATION ON DEATH OR DISABILITY.
a. Employer shall have the right to terminate this Agreement on the
death or Disability of Executive. For purposes of this Agreement,
"Disability" shall mean the failure of Executive, due to illness, accident,
or any other physical or mental incapacity, to perform his duties
substantially as required hereunder for a period of any one hundred and
eighty (180)
4
consecutive days as evidenced by a certificate from a physician acceptable to
Executive. If following any such termination for Disability, but prior to
the expiration of the Term of Employment, Executive shall offer his services
to Employer on the original terms hereof if such Disability no longer exists
(as evidenced by a physician's certificate), or on terms which reasonably
reflect his still existing Disability, as the case may be, and Employer fails
to employ Executive on such terms, then, as of the time of any such failure,
Employer shall be deemed to have terminated Executive without Cause.
b. In the event of termination upon the death or Disability of
Executive, Employer shall pay to Executive, or to his estate or personal
representative, as the case may be, all arrearages of salary and expenses to
the Date of Termination and a pro rata portion (based on the number of days
in such fiscal year through the Date of Termination) of any incentive bonus
which would have been payable to Executive for such year pursuant to Section
3(b) hereof. In the event of the termination of this Agreement by Employer
for Disability, Employer shall continue to provide (at no cost to Executive
except to the extent, if any, to which Executive is then paying for the same)
for the balance of the Term of Employment, all health, disability and life
insurance benefits that Executive was receiving at the Date of Termination.
7. TERMINATION FOR CAUSE.
a. Employer shall have the right to terminate Executive's employment
hereunder at any time and with immediate effect for Cause. For all purposes
of this Agreement, Executive's employment shall be deemed terminated for
"Cause" only if it is terminated by Employer for:
i. misappropriation of corporate funds by Executive or with
Executive's knowledge or direct involvement;
5
ii. conviction of, or plea of guilty or NOLO CONTENDERE to, a
felony involving fraud, embezzlement, theft or dishonesty or other criminal
conduct by Executive; or
iii. gross and willful misconduct by Executive, PROVIDED, however,
that no discharge shall be deemed for Cause under this clause (iii) unless
Executive shall have first received written notice from the Board of
Directors of Employer advising Executive of the specific acts or omissions
alleged to constitute such gross and willful misconduct, and such misconduct
continues uncured by Executive for a period of sixty (60) days.
iv. a material breach by Executive of the terms of this Agreement
and a failure by Executive to cure such breach within sixty (60) days after
receiving written notice from the Board of Directors of Employer advising
Executive of the action allegedly resulting in the material breach.
b. Notwithstanding any of the foregoing, "Cause" shall not include the
breach of any representation or warranty by Executive under the Agreement and
Plan of Reorganization between Executive and Employer, dated December 10,
1996, or an innocent ommission or error made by Executive thereunder.
c. If Executive's employment hereunder is terminated for Cause: (i)
Executive shall be entitled to payment of all arrearages of salary and
expenses to the Date of Termination, but (ii) Executive shall not be eligible
to receive, and Employer shall have no further obligation to make, from and
after the Date of Termination, any further payments or benefits pursuant to
this Agreement arising out of or in connection with Executive's employment
hereunder.
8. TERMINATION WITHOUT CAUSE. Employer shall have the right to
terminate Executive's employment hereunder for any reason other than Cause,
provided that Employer shall pay to
6
Executive: (i) an amount (payable in equal semi-monthly installments) equal
to the monthly amount of Base Compensation received by Executive over one
year, and (ii) the amount of any benefits accrued to the date of termination.
9. NOTICE OF TERMINATION. Any purported termination of Executive's
employment hereunder, either by Employer or by Executive, shall be
communicated by a written Notice of Termination to the other party hereto
(except in the case of termination upon the death of Executive in which event
the Date of Termination shall be the date of death). Such notice shall
indicate the specific termination provision in this Agreement which is relied
upon, recite the facts and circumstances claimed to provide the basis for
such termination and specify the effective date of such termination (the
"Date of Termination"). If within thirty (30) days from the date of the
Notice of Termination the party receiving such notice notifies the other
party that a dispute exists concerning such termination, the Date of
Termination shall be the date on which the dispute is finally resolved. The
Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute by entering immediately into binding arbitration
under the terms attached hereto as Schedule C. Notwithstanding the pendency
of any such dispute, and provided that Executive stands ready to provide the
services hereunder, Employer will continue to pay the Employee his full Base
Compensation in effect as of the date of the Notice of Termination and
continue the Employee as a participant in all compensation, benefit and
insurance plans in which he was participating at such date, until the dispute
is finally resolved.
MISCELLANEOUS
7
10. INDEMNITY. Employer shall indemnify Executive and hold him
harmless from and against any liability, cost or expense which he may incur
as an employee or officer of Employer in a manner at least as beneficial to
Executive as is now provided in accordance with the provisions of the
Articles of Incorporation and Bylaws of Employer in effect on the date prior
to the date hereof.
11. BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon Employer, its successors and assigns, and any person,
partnership, company or corporation which may acquire substantially all of
Employer's assets or business or with or into which Employer may be
liquidated, consolidated, merged or otherwise combined, and shall inure to
the benefit of and be binding upon Executive, his heirs, executors,
administrators, and personal representatives.
12. INJUNCTIVE RELIEF. Executive acknowledges that any breach of
Section 5 hereof would entail irreparable injury to Employer and that in
addition to Employer's other remedies Employer shall be entitled to
injunctive and other equitable relief to prevent any such breach, actual,
intended or likely.
13. SEVERABILITY. If any one or more of the terms, provisions
covenants or restrictions of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
14. NOTICES. Any notice, demand or other communication given by the
parties under this Agreement shall be in writing (i) delivered personally,
(ii) delivered by a reputable overnight delivery service, or (iii) sent by
certified mail, return receipt requested to the address of the parties set
forth beneath their signatures to this Agreement. Notices so sent by mail
shall be
8
deemed delivered on the date and at the time indicated on the duly completed
Postal Service return receipt.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof, and the parties have made no
agreement, representations or warranties relating to the subject matter of
this Agreement which are not set forth herein.
17. AMENDMENT. No waiver or modification of this Agreement or of any
covenant, condition or limitation herein contained shall be valid unless in
writing and duly executed by the party to be charged therewith, and no
evidence of any waiver or modification shall be offered or received in
evidence of any proceeding, arbitration or litigation between the parties
hereto arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or modification is
in writing, duly executed as aforesaid.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be considered an original.
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the day first above written.
COLORADO MEDTECH, INC.
By:
-----------------------------------
Xxxx X. Xxxxxxxxx XX, President
Address: 0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
9
-----------------------------------
Xxxxxxxx Xxxxx
Address: 000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
10
SCHEDULE A
ISO PERFORMANCE CRITERIA
XXXXXXXX XXXXX 100,000 SHARE INCENTIVE STOCK OPTION VESTING SCHEDULE
Options will vest at the earlier of:
A.) 5 years from February 21, 1997, or
B.) The % of annual MBO achievement times the options listed in the
following table:
OPTIONS MBO PERIOD ENDED
------- ----------------
10,000 6/30/97
30,000 6/30/98
30,000 6/30/99
30,000 6/30/2000
* 6/30/2001
* Balance of options not previously vested.
SCHEDULE B
NON-COMPETITION AGREEMENT
THIS AGREEMENT is made as of this 21st day of February, 1997 between
Colorado MEDtech, Inc., a Colorado corporation (the "Company") and Xxxxxxxx
Xxxxx ("Employee").
WHEREAS, Employee has sold his interest in Novel Biomedical, Inc. to the
Company and has agreed to become an employee of the Company, and will be a
key, valued executive employee of the Company, and, as such, will be in a
position to damage the business of the Company by engaging in competing
activiies; and
WHEREAS, the Company wishes to protect itself from competitive
activities of Employee which would injure its business;
NOW, THEREFORE, in consideration of the employment offered to Employee,
the promises and mutual covenants and agreements herein set forth, and for
other good and valuable consideration, including future compensation, the
parties hereby agree as follows:
1. (a) Employee agrees that he possesses the knowledge, skills and
reputation in the industry in which the Company's subsidiary, Novel
Biomedical, Inc., operates which are of material importance to the Company,
and which are special and unique. Employee acknowledges that his services
cannot readily be replaced and that the loss of his services, or the use of
his services by a competitor, may cause harm to the Company. Therefore,
Employee agrees that during the period commencing with the date hereof and
ending two (2) years after his employment with the Company is terminated for
"Cause", as defined in Section 7 of the Employment Agreement between the
Company and Employee dated of even date herewith (the "Employment
Agreement"), or one (1) year after his employment with the Company is
terminated for any other reason, including the expiration of his Employment
Agreement with the Company, he will not, knowingly, directly or indirectly,
as a principal, officer, director, shareholder (other than as a holder of 5%
or less of a publicly traded corporation's capital stock), partner, employee,
or in any other capacity whatsoever, engage in, be or become associated with,
or advise or assist any business, firm, partnership, individual, corporation,
or any other entity which competes with, or which, on the date of
termination, has a significant active program in place to compete with, any
business engaged in by the Company or any subsidiary of the Company in the
field of contract development or OEM manufacturing of medical devices for
diagostics or therapeutics on which the Employee worked during his
employment; provided, however, that Employee also agrees not to compete with
the Company in relation to any product or device the Company is actively
pursuing at the time of Employee's termination, anywhere in the United States
of America. The parties recognize that, notwithstanding the foregoing
restriction, Employee may have investment, employment or consulting
opportunities with other companies in the medical device field which do not
compete with the business of the Company and which would not necessarily
violate the terms of this Paragraph 1.
(b) Any and all obligations under this Agreement shall automatically
terminate and become of no further force or effect upon the occurrence of a
material breach of the
Employment Agreement by the Company, as provided in the Employment Agreement.
(c) It is agreed that Employee's services are unique, and that any
breach or threatened breach by Employee of any provisions of this Paragraph 1
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 1,
the Company may 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 1. 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
but not limited to, the recovery of damages.
2. Any waiver of any of the terms and conditions of this Agreement
shall not operate as a waiver of any other breach of such terms or
conditions, or any other term or condition, nor shall any failure to enforce
any provision hereof operate as a waiver of such provision or any other
provision hereof.
3. Any and all notices referred to herein shall be sufficient if
furnished in writing, sent by registered or certified mail, return receipt
requested, or via a reputable overnight delivery service, to Employee at his
address as shall be furnished to the Company in writing, and to the Company
at its principal office in Boulder, Colorado.
4. This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado.
5. No modification or changes in this Agreement shall be valid unless
such modification or changes are in writing and signed by all parties hereto.
6. The invalidity or unenforceability of any provision in this Agreement
shall not affect the other provisions hereof. This Agreement shall be
construed as though such invalid or unenforceable provisions were omitted.
7. This Agreement may not be assigned by either party hereto without
the prior written approval of the other party.
8. Any controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration pursuant to the rules established
by Schedule C attached to Employee's Employment Agreement of even date
herewith.
9. As used herein, any reference to the masculine shall include, if
appropriate, the feminine.
-2-
IN WITNESS WHEREOF the parties hereto have set their hands and seals as
of the date and year first above written.
COLORADO MEDTECH, INC.
By XXXX X. XXXXXXXXX XX
-------------------------------------
Xxxx X. Xxxxxxxxx XX, President
EMPLOYEE:
XXXXXXXX XXXXX
---------------------------------------
Xxxxxxxx Xxxxx
-3-
SCHEDULE C
ARBITRATION
Except as provided below, any and all disputes arising under or related to
this Agreement which cannot be resolved through negotiations between the
parties shall be submitted to binding arbitration. If the parties fail to
reach a settlement of their dispute within fifteen (15) days after the
earliest date upon which one of the parties notified the other(s) of its
desire to attempt to resolve the dispute, then the dispute shall be promptly
submitted to arbitration by a single arbitrator through any professional
arbitration provider (the "Service") who can provide a former judge to
conduct such arbitration. The arbitrator shall be selected by the Service on
the basis, if possible, of his or her expertise in the subject matter(s) of
the dispute. The decision of the arbitrator shall be final, nonappealable
and binding upon the parties, and it may be entered in any court of competent
jurisdiction. The arbitration shall take place in Minneapolis, Minnesota.
The arbitrator shall be bound by the laws of the State of Colorado applicable
to the issues involved in the arbitration and all Colorado rules relating to
the admissibility of evidence, including, without limitation, all relevant
privileges and the attorney work product doctrine. All discovery shall be
completed in accordance with the time limitations prescribed in the Colorado
rules of civil procedure, unless otherwise agreed by the parties or ordered
by the arbitrator on the basis of strict necessity adequately demonstrated by
the party requesting an extension of time. The arbitrator shall have the
power to grant equitable relief where applicable under Colorado law, and
shall be entitled to make an award of punitive damages when applicable under
Colorado law. The arbitrator shall issue a written opinion setting forth his
or her decision and the reasons therefor within thirty (30) days after the
arbitration proceeding is concluded. The obligation of the parties to submit
any dispute arising under or related to this Agreement to arbitration as
provided in this Section shall survive the expiration or earlier termination
of this Agreement. Notwithstanding the foregoing, either party may seek and
obtain an injunction or other appropriate relief from a court to preserve or
protect trademarks, tradenames, copyrights, patents, trade secrets or other
intellectual property or proprietary information or to preserve the status
quo with respect to any matter pending conclusion of the arbitration
proceeding, but no such application to a court shall in any way be permitted
to stay or otherwise impede the progress of the arbitration proceeding.
In the event of any arbitration or litigation being filed or instituted
between the parties concerning this Agreement, the prevailing party will be
entitled to receive from the other party or parties its attorneys' fees,
witness fees, costs and expenses, court costs and other reasonable expenses,
whether or not such controversy, claim or action is prosecuted to judgment or
other form of relief.
