EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of the 26th day of July, 2004 by and
between Viking Systems, Inc., a Nevada corporation (the "Company"), and Xxxxxx
X. Xxxxx (the "Executive"). This agreement shall be deemed effective as of April
12, 2004.
RECITALS:
The Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment (this "Agreement") and the
Executive desires to enter into this Agreement and to accept such employment,
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt
of which is mutually acknowledged, the Company and the Executive
(individually a "Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Base Salary" shall mean the salary provided for in section 4
below.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean that the Executive shall have (i) been
convicted of a criminal violation involving dishonesty, fraud or breach of
trust; or (ii) willfully engaged in misconduct in the performance of
Executive's duties that materially injures the Company or "Affiliate" of the
Company. Affiliate shall mean any company directly or indirectly through one
or more intermediaries, controlling the Company or controlled by, or under
common control with the Company. For purposes of the foregoing, "control"
(and "controlled" and "controlling" respectively), as used in the immediately
preceding sentence, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of the specified
company/Company (whether by the holding of shares or other equity interests,
the possession of voting or contract rights or otherwise).
(d) "Constructive Termination without Cause" shall mean
termination by the Executive of his employment following occurrence of any of
the following events without his written consent (i) a reduction in the
Executive's compensation (Base Salary or equity opportunity); or (ii) a
material diminution in the Executive's duties or the assignment to the
Executive of duties which are materially inconsistent with his current duties.
(e) "Voluntary Termination" shall mean any termination by the
Executive of his employment that is not Constructive Termination without
Cause.
2. Term of Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, for the period commencing April 12,
2004, and ending April 11, 2006, subject to earlier termination, as provided in
Section 11 below ("Termination of Employment"). Anything herein to the contrary
notwithstanding, either the Executive or the Company shall have the right to
terminate Executive's employment hereunder for any reason, with or without
cause, at any time.
3. Position, Duties and Responsibilities. During the Term of
Employment, the Executive shall be employed as President and Chief Executive
Officer of the Company and shall also serve on the Company's Board. The
Executive, in carrying out his duties under this Agreement, shall report to
the Company's Board and shall comply with the directives, policies,
procedures, and requirements issued or established from time to time by the
Company. The Executive's responsibilities and authority will be commensurate
with his position. Executive shall at all times during his employment by the
Company (unless otherwise agreed in writing by the Company) devote his entire
productive time, energies, ability and attention to the business of the
Company and perform faithfully and diligently such duties and
responsibilities to the best of his abilities: provided, however, that
Executive shall be entitled to vacation time and time off for sickness and
disability in accordance with the policies of the Company in effect from time
to time. The Executive will be based no more than 30 miles from La Jolla,
California.
4. Base Salary. The Executive shall be paid an annualized Base
Salary, payable in accordance with the regular payroll practices of the
Company, of one hundred eighty thousand dollars ($180,000).
5. Incentive Compensation. The Compensation Committee of the
Company's Board of Directors shall determine the amount, timing and terms of
any bonus or other incentive compensation to be paid to the Executive.
6. Equity Participation. The Company has granted Executive a stock
option (the "Initial Option") to purchase 1,000,000 shares of the Company's
common stock. The Compensation Committee of the Company's Board of Directors
shall determine the amount, timing and terms of any additional options or
other grants of securities to be provided to Executive as compensation under
this Agreement. Notwithstanding anything else contained herein to the
contrary, the Company shall, during the term of this agreement, grant
Executive an additional option (the "Performance Option") based upon
performance criteria approved by the Compensation Committee. The Performance
Option shall be for not less than 300,000 shares of the Company's common
stock. The exercise period and exercise price of the Performance Option shall
be established by the Compensation Committee.
7. Change of Control. In the event that the employment
agreement of any other executive of the Company contains a change of control
provision, then in such event, this Agreement shall be amended to include a
similar change of control provision applicable to Employee.
8. Employee Benefit Programs. The Executive shall be eligible to
participate in any employee benefit programs of the Company applicable to
other senior level executives. In addition, the Executive shall be entitled
to four weeks per annum vacation.
9. Perquisites. The Executive shall be entitled to perquisites on
the same basis as made available to other senior executives of the Company.
10. Reimbursement of Business and Other Expenses. Executive shall
be reimbursed for all necessary travel, entertainment and miscellaneous
expenses reasonably incurred by Executive in the performance of his duties
hereunder in accordance with the Company travel and entertainment policy
applicable to other members of senior management of the Company upon
submission of documentation reasonably satisfactory to the Company of such
expenses.
11. Termination of Employment.
(a) Termination Due To Death. In the event the Executive's
employment is terminated due to his death, his estate or his beneficiaries,
as the case may be, shall be entitled to:
(i) Base Salary through the date of death;
(ii) the right to exercise any Stock Option which was
exercisable at the date of the Executive's death for a period of one
(1) year following the Executive's death;
(iii) any amounts earned, accrued or owing to the Executive
but not yet paid; and
(iv) other benefits in accordance with applicable plans
and programs of the Company.
(b) Termination Due To Disability. In the event the Executive
becomes totally disabled or disabled such that he is rendered unable to
perform substantially all of his usual duties for the Company, and if such
disability shall persist for a continuous period in excess of three (3)
months, or an aggregate period in excess of four (4) months in any one (1)
fiscal year, the Company shall have the right at any time after the end of
such period to terminate the Executive's employment under this Agreement by
delivering a thirty (30) day prior written notice to him. For purposes of
this Agreement, if the Executive and the Company shall disagree as to whether
he is totally disabled, or disabled such that he is rendered unable to
perform substantially all of his usual duties for the Company, the decision
of a doctor, mutually agreed upon by the parties, shall be binding as to both
questions. If the parties cannot agree upon a doctor, the Executive and the
Company shall each select a doctor. The two (2) doctors so selected shall
select a third (3rd) doctor, who shall resolve either or both of the
questions referred to above.
In the event the Executive's employment is terminated due to
disability, he shall be entitled to:
(i) Base Salary through the effective date of his
termination due to disability;
(ii) the right to exercise any Stock Option which is
exercisable on the date of termination for a period of one (1) year;
(iii) any amounts earned, accrued or owing to the Executive
but not yet paid; and
(iv) disability and other benefits in accordance with the
applicable plans and programs of the Company.
(c) Termination by the Company for Cause. In the event the
Company terminates the Executive's employment for Cause, he shall be entitled
to:
(i) Base Salary through the date of such termination;
(ii) any amounts earned, accrued or owing to the Executive
but not yet paid; and
(iii) other benefits, if any, in accordance with applicable
plans and programs of the Company.
(d) Termination Without Cause Or Constructive Termination
Without Cause. In the event the Executive's employment is terminated without
cause or in the event there is a Constructive Termination Without Cause, the
Executive shall be entitled to:
(i) Base Salary through the date of such termination;
(ii) Base Salary, at the annualized rate in effect on the
date of termination of the Executive's employment for a period of nine
(9) months; payable in a lump sum immediately after such termination or
over the term, at the sole discretion of the Company;
(iii) if termination occurs prior to the end of the
Executive's first (1st) year of employment, the immediate vesting of
all unvested Stock Options granted to Executive under Section 6;
(iv) any amounts earned, accrued or owing to the Executive
but not yet paid; and
(v) other benefits in accordance with applicable plans
and programs of the Company.
(e) Voluntary Termination. Same consequences as Termination for
Cause.
(f) No Mitigation. In the event of any termination of
employment, the Executive shall be under no obligation to seek other
employment and there shall be no offset against amounts due him under the
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.
12. Termination of Disputes. Any disputes arising under or in
connection with this Agreement shall, at the election of the Executive or the
Company, be resolved by binding arbitration, to be held in San Diego,
California in accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Costs
of the arbitration or litigation, including, without limitation, reasonable
attorneys' fees of both Parties, shall be borne by the Company. Pending the
resolution of any arbitration or court proceeding, the Company shall continue
payment of all amounts due the Executive under this Agreement and all
benefits to which the Executive is entitled at the time the dispute arises.
13. Indemnification. The Executive shall be entitled to
indemnification by the Company in accordance with the provisions of the
Company's bylaws and the implementing Board resolutions as in effect on the
date of this Agreement or, if more favorable to Executive, the provisions of
such bylaws as in effect at the time indemnification is requested. The
Company shall include Executive as an additional insured under its directors'
and officers' liability insurance if the Company obtains any such insurance
for any officer or director.
14. Effect of Agreement On Other Benefits. Except as specifically
provided in this Agreement, the existence of this Agreement shall not
prohibit or restrict the Executive's entitlement to full participation in the
employee benefit and other plans or programs in which senior executives of
the Company are eligible to participate.
15. Assignability; Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors,
heirs (in the case of the Executive) and assigns. Without the prior written
consent of the Company, no rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided in Section 23 below.
16. Confidentiality, Disclosure of Information.
(a) The Executive recognizes and acknowledges that he will have
access to Confidential Information (as defined below) relating to the
business or interest of the Company or of persons with whom the Company may
have business relationships. Except as permitted herein or as may be approved
by the Company from time to time, the Executive will not during the Term of
Employment or at any time thereafter, use, disclose or permit to be known by
any other person or entity, any Confidential Information of the Company
(except as required by applicable law or in connection with the performance
of the Executive's duties and responsibilities hereunder). If Executive is
requested or becomes legally compelled to disclose any of the Confidential
Information, he will give prompt notice of such request or legal compulsion
to the Company. The Company may waive compliance with this Section 16(a) or
will provide Executive with legal counsel at no cost to Executive to seek an
appropriate remedy. The term "Confidential Information" means information
relating to the Company's business affairs, proprietary technology, trade
secrets, patented processes, research and development data, know-how, market
studies and forecasts, competitive analyses, pricing policies, employee
lists, employment agreements (other than this Agreement), personnel policies,
the substance of agreements with customers, suppliers and others, marketing
arrangements, customer lists, commercial arrangements, or any other
information relating to the Company's business that is not generally known to
the public or to actual or potential competitors of the Company (other than
through a breach of this Agreement). This obligation shall continue until
such Confidential Information becomes publicly available, other than pursuant
to a breach of this Section 16 by the Executive, regardless of whether the
Executive continues to be employed by the Company.
(b) It is further agreed and understood by and between the
parties to this Agreement that all "Company Materials," which include, but
are not limited to, computers, computer software, computer disks, tapes,
printouts, source, HTML and other code, flowcharts, schematics, designs,
graphics, drawings, photographs, charts, graphs, notebooks, customer lists,
sound recordings, other tangible or intangible manifestation of content, and
all other documents whether printed, typewritten, handwritten, electronic, or
stored on computer disks, tapes, hard drives, or any other tangible medium,
as well as samples, prototypes, models, products and the like, shall be the
exclusive property of the Company and, upon termination of Executive's
employment with the Company, and/or upon the request of the Company, all
Company Materials, including copies thereof, as well as all other Company
property then in the Executive's possession or control, shall be returned to
and left with the Company. Anything in this Section 16(b) to the contrary
notwithstanding, Executive shall be entitled to retain his personal rolodex
and any Company Materials contained in his personal computer so long as he
does not disclose any Company Materials to any third parties.
17. Inventions Discovered By Executive. The Executive shall promptly
disclose to the Company any invention, improvement, discovery, process,
formula or method or other intellectual property, whether or not patentable
or copyrightable (collectively, "Inventions"), conceived or first reduced to
practice by the Executive, either alone or jointly with others, while
performing services hereunder (or, if based on any Confidential Information,
within one (1) year after the Term):
(a) which pertain to any line of business activity of the
Company, if then conducted or then being actively planned by the Company,
with which the Executive was or is involved,
(b) which is developed using time, material or facilities of
the Company, whether or not during working hours or on the Company premises,
or
(c) which directly relates to any of the Executive's work
during the Term, whether or not during normal working hours.
The Executive hereby quitclaims to the Company all of the Executive's
right, title and interest in and to any such Inventions. During and after the
Term, the Executive shall execute any documents necessary to perfect the
quitclaim of such Inventions to the Company and to enable the Company to
apply for, obtain and enforce patents, trademarks and copyrights in any and
all countries on such Inventions, including, without limitation, the
execution of any instruments and the giving of evidence and testimony,
without further compensation beyond the Executive's agreed compensation
during the course of the Executive's employment. Without limiting the
foregoing, the Executive further acknowledges that all original works of
authorship by the Executive, whether created alone or jointly with others,
relating to the Executive's employment with the Company, and which are
protectable by copyright, are "works made for hire" within the meaning of the
United States Copyright Act, 17 U.S.C. Section 101, as amended, and the
copyright of which shall be owned solely, completely and exclusively by the
Company.
If any Invention is considered to be a work not included in the
categories of work covered by the United States Copyright Act, 17 U.S.C.
Section 101, as amended, such work is hereby conveyed and transferred
completely and exclusively to the Company. The Executive hereby irrevocably
designates counsel to the Company as the Executive's agent and
attorney-in-fact to do all lawful acts necessary to apply for and obtain
patents and copyrights and to enforce the Company's rights under this
section.
This Section 17 shall survive the termination of this Agreement. Any
conveyance of copyright hereunder includes all rights of paternity,
integrity, disclosure and withdrawal and any other rights that may be known
as or referred to as "moral rights" (collectively "Moral Rights"). To the
extent such Moral Rights cannot be conveyed under applicable law and to the
extent the following is allowed by the laws in the various countries where
Moral Rights exist, the Executive hereby waives such Moral Rights and
consents to any action of the Company that would violate such Moral Rights in
the absence of such consent. The Executive agrees to confirm any such waivers
and consents from time to time as requested by the Company.
18. Non-Competition and Non-Solicitation. The Executive acknowledges
that the Company has invested substantial time, money and resources in the
development and retention of its Inventions, Confidential Information
(including trade secrets), customers, accounts and business partners, and
further acknowledges that during the course of the Executive's employment
with the Company the Executive has had and will have access to the Company's
Inventions and Confidential Information (including trade secrets), and will
be introduced to existing and prospective customers, accounts and business
partners of the Company. The Executive acknowledges and agrees that any and
all "goodwill" associated with any existing or prospective customer, account
or business partner belongs exclusively to the Company, including, but not
limited to, any goodwill created as a result of direct or indirect contacts
or relationships between the Executive and any existing or prospective
customers, accounts or business partners. Additionally, the parties
acknowledge and agree that Executive possesses skills that are special,
unique or extraordinary and that the value of the Company depends upon his
use of such skills on its behalf.
In recognition of this, the Executive covenants and agrees that:
(a) During the Executive's employment with the Company, and for
a period of one (1) year thereafter, the Executive may not, without the prior
written consent of the Company, (whether as an employee, agent, servant,
owner, partner, consultant, independent contractor, representative,
stockholder, or in any other capacity whatsoever) perform any work directly
competitive in any way to the business of the Company or a substantially
planned business that the Executive is aware of during the Executive's
employment with the Company on behalf of any entity or person other than the
Company (including the Executive).
(b) During the Executive's employment with the Company, and for
a period of one (1) year thereafter, the Executive may not entice, solicit or
encourage any Company employee to leave the employ of the Company or any
independent contractor to sever its engagement with the Company, absent prior
written consent from the Company.
(c) During the Executive's employment with the Company, and for
a period of one (1) year thereafter, the Executive may not, directly or
indirectly, entice, solicit or encourage any customer or prospective customer
of the Company to cease doing business with the Company, reduce its
relationship with the Company or refrain from establishing or expanding a
relationship with the Company.
19. Non-Disparagement; Non-Disclosure.
(a) The Executive hereby agrees that during the Term of
Employment and at all times thereafter, the Executive will not make any
public statement, or engage in any conduct, that is disparaging to the
Company, any of its officers, directors, or shareholders known to Executive,
including, but not limited to, any statement that disparages the products,
services, finances, financial condition, capabilities or other aspect of the
business of the Company. Notwithstanding any term to the contrary herein, the
Executive shall not be in breach of this Section 19 for the making of any
truthful statements under oath.
(b) The Executive will not directly or indirectly disclose,
discuss, disseminate, be the source of or otherwise publish or communicate in
any manner to any person or entity any Confidential Information concerning
the personal, social or business activities of the Company, its Affiliates or
the executives and principals and the officers, directors, agents and
employees of all of the foregoing during or at any time after the termination
of Executive's employment. In addition, the Executive agrees that without
Employer's express written approval in each case, Executive will not:
(i) write, be the source of or contribute to any
articles, stores, books, screenplays or any other communication or
publicity of any kind (written or otherwise) or deliver lectures in any
way regarding or concerning the Confidential Information, or
(ii) grant any interviews regarding or concerning the
Confidential Information during or at any time after the termination of
his employment.
20. Provisions Necessary and Reasonable.
(a) The Executive agrees that:
(i) the provisions of Sections 16, 17, 18 and 19 of this
Agreement are necessary and reasonable to protect the Company's
Confidential Information, Inventions and goodwill;
(ii) the specific temporal, geographic and substantive
provisions set forth in Section 18. of this Agreement are reasonable
and necessary to protect the Company's business interests; and
(iii) in the event of any breach of any of the covenants
set forth in Sections 16, 17, 18 and 19 herein, the Company would
suffer substantial irreparable harm and would not have an adequate
remedy at law for such breach.
In recognition of the foregoing, the Executive agrees that in the
event of a breach or threatened breach of any of these covenants, in addition
to such remedies as the Company may have at law, without posting any bond or
security, the Company shall be entitled to seek and obtain equitable relief,
in the form of specific performance, and/or temporary, preliminary or
permanent injunctive relief, or any other equitable remedy which then may be
available. The seeking of such injunction or order shall not affect the
Company's right to seek and obtain damages or other equitable relief on
account of any such actual or threatened breach.
(b) If any of the covenants contained in Sections 16, 17, 18
and 19 hereof, or any part thereof, are hereafter construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect without regard to the invalid
portions.
(c) If any of the covenants contained in Sections 16, 17, 18
and 19 hereof, or any part thereof, are held to be unenforceable by a court
of competent jurisdiction because of the temporal or geographic scope of such
provision or the area covered thereby, the parties agree that the court
making such determination shall have the power to reduce the duration and/or
geographic area of such provision and, in its reduced form, such provision
shall be enforceable.
21. Representations Regarding Prior Work and Legal Obligations. The
Executive represents that the Executive has no agreement or other legal
obligation with any prior employer, or any other person or entity that
restricts the Executive's ability to accept employment with, or to perform
any function for, the Company. The Executive has been advised by the Company
that at no time should the Executive divulge to or use for the benefit of the
Company any trade secret or confidential or proprietary information of any
previous employer. The Executive expressly acknowledges that the Executive
has not divulged or used any such information for the benefit of the Company.
The Executive acknowledges that the Company is basing important business
decisions on these representations, and affirms that all of the statements
included herein are true.
22. No Conflicts of Interest. Executive does not now, and during the
term of his employment will not have any financial interest, whether by stock
ownership or otherwise, in any entity which is a supplier, customer or
competitor of the Company; provided, however, that the foregoing shall not
prohibit the ownership of securities of corporations which are listed on a
national securities exchange or traded in the national over-the-counter
market in an amount which shall not exceed 1% of the outstanding shares of
any such corporation.
23. Entire Agreement. This Agreement contains the entire
understanding and agreement between the Parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the parties
with respect thereto.
24. Amendment or Waiver. No provision in this Agreement may be
amended unless such amendment is agreed to in writing and signed by the
Executive and an authorized officer of the Company. No waiver by either Party
of any breach by the other Party of any condition or provision contained in
this Agreement to be performed by such other Party shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by the Executive or
an authorized officer of the Company, as the case may be.
25. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
in whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.
26. Survivorship. The respective rights and obligations of the
Parties hereunder shall survive any termination of the Executive's employment
to the extent necessary to the intended preservation of such rights and
obligations.
27. Beneficiaries/References. The Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following the Executive's death by giving the Company written
notice thereof. In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
28. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of California without reference
to principles of conflict of laws.
29. Notices. Any notice given to a Party shall be in writing and
shall be deemed to have been given when delivered personally or sent by
registered mail, postage prepaid, return receipt requested, duly addressed to
the Party concerned at the address indicated below or to such changed address
as such Party may subsequently give such notice of:
If to the Company: Viking Systems, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, XX 00000
If to the Executive: Xxxxxx X. Xxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, XX 00000
30. Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
31. Counterparts. This Agreement may be executed in two (2) or more
counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
VIKING SYSTEMS, INC.
/s/___________________________ By/s/__________________________
Xxxxxx X. Xxxxx Xxxxxx Xxxxxxx
Chief Financial Officer/Secretary
