EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") dated as of October 14,
1996 between Pacific Biometrics, Inc., a Delaware corporation (the "Company"),
and Xxxx X. Xxxxx (the "Executive").
ARTICLE I
EMPLOYMENT
The Company hereby employs Executive, and Executive accepts
employment with the Company, upon the following terms and conditions:
1.1 (a) Employment. The Company hereby employs Executive, and
Executive agrees to serve, as the President and Chief Executive Officer of the
Company during the Term of this Agreement. Subject to the Board of Directors of
the Company, the Executive shall actively manage, and have responsibility for
and supervision over, the business activities and affairs of the Company, and
he shall, manage, supervise and direct its and their officers, employees and
agents. The Executive agrees to devote his full business time and attention and
best efforts to the affairs of the Company during the Term of this Agreement.
(b) Board of Directors. The Company agrees that
during the Term it will use its best efforts to cause the Executive to be
nominated and elected to the Company's Board of Directors.
1.2 Term. The employment of the Executive by the Company
under the terms and conditions of this Agreement will commence on the date
hereof and continue until October 13, 1998 (the "Term") unless terminated
sooner in accordance with the provisions of Article IV.
ARTICLE II
COMPENSATION
2.1 (a) Annual Salary. During the Term the Company shall pay
to the Executive an annual salary of $180,000 (the "Base Salary"), payable in
equal installments every two weeks. Executive shall be entitled to an annual
performance based increase in the Base Salary as determined by the Board of
Directors or compensation committee thereof.
(b) Bonus. After the first anniversary of this
Agreement, Executive may be awarded an annual incentive bonus in such amount as
may be deemed appropriate by the Board of Directors or compensation committee
thereof.
(c) Stock Options. In connection with the
negotiation of this Agreement, the Company granted to Executive on July 9, 1996
an option to purchase 80,000 shares of the Company's Common Stock, $.01 par
value per share, at an exercise price of $3.45 per share. Such options shall
vest equally over a four year period commencing on July 9, 1997 (i.e. 20,000
shares per year over four years). In the event that the Company is acquired by,
or merged into, another entity, or engages in a similar business
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combination or reorganization, all such options shall accelerate and become
fully vested upon the earlier to occur of the execution of definitive
agreements relating to any of the foregoing transactions or the consummation of
any such transaction.
2.2 Reimbursement of Expenses. The Executive shall be
entitled to receive prompt reimbursement of all reasonable expenses incurred by
the Executive in performing services hereunder, including all expenses of a
cellular telephone and travel, entertainment and living expenses while away
from home on business at the request of, or in the service of, the Company,
provided that such expenses are incurred and accounted for in accordance with
the policies and procedures established by the Company.
2.3 Benefits. The Company shall pay the Executive as
additional salary the annual cost of a disability insurance policy which
provides for payments equal to the maximum percentage of the Base Salary
allowable during the term of disability which may be obtained at reasonable
cost to the Company, with payments commencing three months after the
commencement of the disability. The Executive shall be entitled to participate
in and be covered by all health, insurance, pension, 401(k), stock purchase,
stock option and any other employee plans and benefits established by the
Company (collectively referred to herein as the "Company Benefit Plans") for
its full-time employees generally, subject to meeting applicable eligibility
requirements. If no health benefits are offered to employees generally,
Executive shall be entitled to a
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reasonable allowance for health insurance or reimbursement of health insurance
premiums paid directly by Executive with respect to a health plan for Executive
and his dependent family members..
2.4 Vacations and Holidays. During the Term, the Executive
shall be entitled to an annual vacation leave of a minimum of four weeks at
full pay. The Executive shall be entitled to such holidays as are established
by the Company for all employees and such other religious holidays as is
customary pursuant to Executive's religious practice.
ARTICLE III
CONFIDENTIALITY AND NONDISCLOSURE
3.1 Confidentiality. The Executive will not during his
employment by the Company or thereafter at any time disclose, directly or
indirectly, to any person or entity or use, or permit the use of, any trade
secrets or confidential information relating to the Company. "Confidential
Information" shall include all information reasonably expected to be kept
confidential, including, without limitation of the generality of the foregoing,
trade secrets, know-how, production processes, customer lists, supply
arrangements, business and financial plans and projections, marketing plans and
advertising arrangements, the terms of any license agreement relating to any of
the foregoing, and all information denominated as "confidential" and is made
available only on a restricted basis.
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3.2 Return of Company Material. The Executive shall promptly
deliver to the Company on termination of the Executive's employment with the
Company, for whatever the reason, or at any time the Company may so request,
all Company memoranda, notes, records, reports, manuals, drawings, computer
software, and all documents containing Confidential Information belonging to
the Company, including all copies of such materials which the Executive may
then possess or have under Executive's control.
3.3 Non-Competition; Non-Solicitation. (a) During the Term of
Executive's employment and for a two-year period thereafter (the "Non-Compete
Period") the Executive will not, directly or indirectly, without the express
written approval of the Board of Directors: (i) own, manage, operate, join,
control, or participate in or be connected with, as an officer, employee
partner, stockholder, director, adviser, consultant, or agent (whether paid or
unpaid), any business, which is at the time engaged in any activities which,
directly or indirectly, compete with the business of the Company (a
"Competitive Business") provided that the Company continues to pay to
Executive, in a timely manner, the amounts required pursuant to Section 4.2 of
this Agreement, and in the event of termination by the Company without cause,
such Non-Compete Period shall be limited to nine months provided that the
Company continues to pay to Executive, in a timely manner, the amounts required
pursuant to Section 4.2 of this Agreement; the foregoing provision being also
intended to prohibit the Executive from
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acquiring or holding in excess of 5% of any issue of stock or securities of any
Company which is a Competitive Business which has any securities listed on a
national securities exchange or quoted in the daily listing of over-the-counter
market securities; (ii) recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer, employee, sales
agent, joint venturer, investor, lessor, supplier, customer, consultant, agent,
representative or any other person which has a business relationship with the
Company to discontinue, reduce or modify such employment, agency or business
relationship with the Company, or (iii) employ or seek to employ or cause any
Competitive Business to employ or seek to employ any person or agent who is
then (or was at any time within 90 days prior to the date the Executive or the
Competitive Business employs or seeks to employ such person) engaged or
retained by the Company.
(b) In the event that Executive breaches his obligations in
any respect under this Section 3.3, the Company, in addition to pursuing all
available remedies under this Agreement, at law or otherwise, and without
limiting its right to pursue the same may cease all payments due to the
Executive under this Agreement.
(c) Since a breach of the provisions of this Section 3.3
could not adequately be compensated by money damages, the Company shall be
entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach or a threatened breach, and in either case
no bond or other security shall be required in connection therewith, and
Executive hereby
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consents to the issuance of such injunction. Executive agrees that the
provisions of this Section 3.3 are necessary and reasonable to protect the
Company in the conduct of its business. If any restriction contained in this
Section 3.3 shall be deemed to be invalid, illegal, or unenforceable by reason
of the extent, duration, or geographical scope thereof, or otherwise, then the
court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its reduced
form such restriction shall then be enforceable in the manner contemplated
hereby.
3.4 Copyrights, Patents, Etc. Any interest in patents, patent
applications, inventions, technological innovations, copyrights, copyrightable
works, developments, discoveries, designs, and processes ("Inventions") which
Executive now or hereafter during the period he is employed by the Company
under this Agreement or otherwise and for six months thereafter may own,
conceive of, or develop and either relating to the fields in which the Company
may then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, technology or information of the
Company, shall belong to the Company. As soon as Executive owns, conceives of,
or develops any Invention, he agrees immediately to communicate such fact in
writing to the Company, and without further compensation, but at the Company's
expense (except as noted in clause (a) of this Section 3.4), forthwith upon
request of the Company, Executive
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shall execute all such assignments and other documents (including applications
for patents, copyrights, trademarks, and assignments thereof) and take all such
other action as the Company may reasonably request in order (a) to vest in the
Company all Executive's right, title, and interest in and to such Inventions,
free and clear of liens, mortgages, security interests, pledges, charges, and
encumbrances ("Liens") (Executive to take such action at his expense as is
necessary to remove all such Liens) and (b), if patentable or copyrightable, to
obtain patents or copyrights (including extensions and renewals) therefor in
any and all countries in such name as the Company shall determine.
ARTICLE IV
TERMINATION
4.1 Termination. (a) The Board of Directors may
terminate the Executive's employment hereunder as follows:
(1) upon the death of the Executive, this Agreement shall
immediately terminate, whereupon Executive or his estate, as the case
may be, shall be entitled to receive his Base Salary and bonus at the
rate provided in Section 2.1 to the date on which termination shall
take effect;
(2) upon a determination of Permanent Disability; "Permanent
Disability" shall mean a physical or mental incapacity as a result of
which the Executive becomes totally unable to continue the performance
of his duties hereunder for a period of 180 consecutive days or an
aggregate of 270 days
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in any consecutive 24 month period. A determination of Permanent
Disability shall be subject to the certification of a qualified
medical doctor agreed to by the Company and the Executive or, in the
event of the Executive's incapacity to designate a doctor, the
Executive's legal representative. In the absence of agreement between
the Company and the Executive, each party shall nominate a qualified
medical doctor and the two doctors so nominated shall select a third
doctor, who shall make the determination as to the occurrence and
continuance of a Permanent Disability; or
(3) for Cause. "Cause" shall mean only the following:
(i) the willful and continued failure by the
Executive to substantially perform his duties hereunder
(other than such failure resulting from the Executive's
incapacity due to physical or mental illness);
(ii) willful misconduct by the Executive (which
includes a willful, material breach of this Agreement by
the Executive);
(iii) conviction of a felony;
(iv) theft from the Company or misuse of
Company funds or assets; or
(v) the imposition of a final order issued by any
regulatory authority against the Company which prohibits the
Executive from holding an executive position with the
Company.
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For purposes of this Agreement, no act, or failure to act, on
the Executive's part shall be considered "willful" unless done, or
omitted to be done, by the Executive in bad faith and without a
reasonable belief that such action or omission by the Executive was in
the best interests of the Company.
4.2 Termination Benefits. (a) If the Executive's employment
hereunder is terminated by the Company for Cause, neither party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, and (ii) obligations or covenants contained herein that
extend beyond the term of this Agreement.
(b) If the Executive's employment hereunder is terminated by
the Company without Cause or as the result of a change in control of the
Company, the Executive shall be entitled to receive immediate payment for all
debt owed by the Company to Executive, together with interest thereon, plus the
Company shall continue to pay the Executive's Base Salary plus bonus and all
benefits for a period of nine months from such date of termination. In
addition, Executive's stock options acquired subsequent to July 1, 1996 shall
immediately vest. All options acquired prior to the date of this Agreement
shall not be affected by Executive's termination pursuant to any provision of
this Agreement. Executive shall be entitled to exercise all vested options
received subsequent to July 1, 1996 for a period of 90 days from such date
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of termination; provided, however, such exercise shall not extend the
expiration date of any option. Further, the Company covenants and agrees that
it shall provide, out of available funds, a loan to Executive for the purpose
of permitting Executive to exercise such option. The loan will mature in three
years with interest payable in cash or stock payable quarterly at the rate of
7% per annum and will be collateralized by the shares of stock received by
Executive upon exercise of the options. A "change in control" shall mean either
of the following events: (i) a third party obtains control of the Company and
fails to assume this Agreement, or (ii) there is a change in the current
majority of the Board of Directors, except that director nominees approved by
the Board from time to time subsequent to the date hereof shall be considered
members of the current majority of the Board.
ARTICLE V
ASSUMPTION OF OBLIGATIONS BY SUCCESSOR TO COMPANY
5.1 Assumption of Obligations. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Any failure of the Company to obtain such agreement
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prior to the effectiveness of any such succession or assignment shall be a
material breach of this Agreement. (If at any time during the Term of this
Agreement the Executive is employed by any corporation, a majority of the
voting securities of which is then owned by the Company, "Company" as used in
this Agreement shall in addition include such employer.) In such event, the
Company agrees that it shall pay or shall cause such employer to pay any
amounts owed to the Executive pursuant to this Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notice. For purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt required, postage prepaid, as follows:
If to the Company:
Pacific Biometrics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn.: Chairman, Compensation Committee of
Board of Directors
If to the Executive:
Xxxx X. Xxxxx
00000 Xxxxxxxxx Xxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 00000
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
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6.2 No Waivers. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
6.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Delaware without regard to its conflict of law provisions.
6.4 Severability or Partial Invalidity. The invalidity or
unenforceability of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
6.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
6.6 Entire Agreement. This Agreement constitutes the
entire agreement of the parties and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings, and
negotiations between the parties with respect to the subject matter
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hereof. This Agreement is intended by the parties as the final expression of
their agreement with respect to such terms as are included in this Agreement
and may not be contradicted by evidence of any prior or contemporaneous
agreement. The parties further intend that this Agreement constitutes the
complete and exclusive statement of its terms and that no extrinsic evidence
may be introduced in any judicial proceeding involving this Agreement.
6.7 Assignment. Subject to the provisions of Article IV
hereof, this Agreement and the rights, duties, and obligations hereunder may
not be assigned or delegated by any party without the prior written consent of
the other party. Any such assignment or delegation without the prior written
consent of the other party shall be void and be of no effect. Notwithstanding
the foregoing provisions of this Section 6.7, the Company may assign or
delegate its rights, duties, and obligations hereunder to any person or entity
which succeeds to all or substantially all of the business of the Company
through merger, consolidation, reorganization, or other business combination or
by acquisition of all or substantially all of the assets of the Company;
provided that such person assumes the Company's obligations under this
Agreement in accordance with Section 5.1.
6.8 Beneficial Interests. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal and
legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive
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should die while any amounts are still payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other designee
or, if there be no such designee, to the Executive's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
PACIFIC BIOMETRICS, INC.
By: s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx, Chairman
EXECUTIVE
s/ Xxxx X. Xxxxx
XXXX X. XXXXX
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