EXHIBIT 10.16
XXXXXXX LABORATORIES INC.
CHIEF EXECUTIVE OFFICER
EMPLOYMENT CONTRACT
This Employment Contract (the "Agreement") is made as of this 25th
day of March, 1996, between XXXXXXX LABORATORIES INC. ("Company") and XX.
XXXXXXX XXXXXXXXX ("Executive"). The parties agree with each other as follows:
1. TERM OF EMPLOYMENT. Subject to the terms and conditions set
forth in this Agreement, the Company hereby agrees to employ Executive for the
period commencing on the Commencement Date (as hereinafter defined) and ending
July 31, 1998, unless earlier terminated pursuant to Section 4 below. The
"Commencement Date" shall mean the earliest of (a) Xxxxx 00, 0000, (x) three
business days after the date Executive's Xxxxxx/Seagate stock options scheduled
to vest on or about April 25, 1996 in fact vest and (c) as soon as practicable
after Executive and Company agree to additional financial arrangements to
compensate Executive for his loss of the vesting of any stock options which
would have vested had Executive stayed with his current employer until April 25,
1996. This Agreement may be extended for an additional one (1) year term after
the end of this initial term if the parties hereto mutually agree in writing to
such extension.
2. DUTIES OF EXECUTIVE.
(a) Executive shall serve as the Chief Executive Officer of the
Company and serve in such other and/or additional positions as the
Company shall determine. In such capacity Executive shall report to the
Company's Board of Directors and Executive shall perform the duties and
render the services on behalf of the Company associated with the
positions he shall hold as set forth from time to time in resolutions of,
or other directives issued by, the Company's Board of Directors or
authorized delegate of the Board.
(b) Executive agrees to perform such duties and render such
services to the best of his ability, devoting thereto his entire
professional time, attention and energy exclusively to the business and
affairs of the Company and its affiliates, as its business and affairs now
exist and as they hereafter may be changed, and shall not during the term
of his employment hereunder be engaged in any other business activity,
whether or not such business activity is pursued for gain or profit;
PROVIDED, HOWEVER, that Executive may, after July 31, 1996 for so long as
such service does not interfere with Executive's duties hereunder, serve on
the Board of Directors of an unaffiliated company which is not
in the same or related area of business as the Company and its subsidiaries
and is otherwise acceptable to the Company's Board of Directors. The
foregoing shall not be construed as preventing Executive from investing his
assets in such form or manner as will not require any significant services
on his part in the operation of the affairs of the businesses or entities
in which such investments are made; provided, however, that Executive shall
not invest in any business competitive with the Company or any of its
affiliates or otherwise contrary to the policies from time to time adopted
by the Company.
(c) Executive shall be elected to serve on the Company's Board of
Directors.
3. COMPENSATION OF EXECUTIVE. As compensation for the services
performed under this Agreement:
(a) BASE SALARY. Executive shall be paid a base salary at the annual
rate of $400,000, payable in installments consistent with the Company's
payroll practices. The base salary shall be reviewed annually by the
Board or its Compensation Committee and any increase shall be effective
as of the date determined appropriate by the Board or its Compensation
Committee.
(b) ANNUAL BONUS. Executive shall be entitled to an annual bonus
which shall be determined by the Board in its discretion, but subject to
the following:
(1) In the case of the remaining portion of the fiscal year of
the Company (which shall be for the period from the Commencement Date
through July 31, 1996), the Board will set non-financial objectives on or
before May 1, 1996, and the amount of the bonus will range from $0 to a
maximum amount of $100,000 (with a target bonus of $100,000) depending on
the Board's determination of Executive's success in meeting such
objectives. Such bonus shall be paid on or before August 31, 1996.
(2) In the case of the first full year bonus (which shall be for
the period from August 1, 1996 through July 31, 1997), the Board will set
non-financial business objectives on or before August 31, 1996, and the
amount of the bonus will range from a minimum guaranteed amount of $200,000
to a maximum amount of $400,000 (with a target bonus of $400,000) depending
on the Board's determination of Executive's success in meeting such
objectives. Such first full year bonus shall be paid on or before August
31, 1997.
(3) In the case of the second full year bonus (which shall be
for the year ending on July 31, 1998), the Board will set specific
financial and non-financial objectives on or before August 31, 1997, and
the amount of
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the bonus will range from $0 to a maximum amount of $400,000 (with a target
bonus of $400,000) depending on the Board's determination of Executive's
success in meeting such objectives. Such second full year bonus shall be
paid on or before August 31, 1998.
(c) EQUITY INCENTIVES. On the Commencement Date, Executive shall
receive (1) a grant of shares of the Company's common stock equal to 3.25%
of the number of the Company's common stock outstanding on the Commencement
Date (the "Grant Shares") and (2) options to purchase up to a like number
of shares of the Company's common stock (the "Options").
(1) GRANT SHARES. The Grant Shares shall be issued pursuant to
a Restricted Stock Agreement and shall be subject to forfeiture to the
Company. One hundred percent of the Grant Shares shall initially be
subject to the forfeiture restriction. Thereafter, the Grant shares
held by Executive shall be released from the forfeiture restriction as
follows: twenty-five percent (25%) of the Grant Shares on the last
day of the month in which the one year anniversary of the Commencement
Date occurs and an additional 1/48th of the Grant Shares on the last
day of each month thereafter until all shares are released from the
forfeiture restrictions. During the time that Grant Shares are
subject to the forfeiture restrictions, such Grant Shares may not be
sold, encumbered or otherwise disposed of by Executive. The Grant
Shares shall contain a legend reflecting the forfeiture restrictions
and the Company may take such other steps as it deems reasonable to
assure compliance with the forfeiture restrictions. Executive shall
be entitled to receive and retain all dividends paid on the Grant
Shares regardless of the forfeiture restrictions through the date of
forfeiture (if any).
(2) THE OPTIONS. One-half of the Options shall be incentive
stock options to the maximum extent permitted by applicable law
(without adversely affecting the incentive stock option plan) and the
remainder of the Options shall be non-qualified stock options, in each
case subject to the Xxxxxxx Laboratories, Inc. 1995 Stock Option Plan
and a stock option agreement issued thereunder (which will include
antidilution protection as set forth in the plan and in respect of
below market issuances of the Company's common stock (other than
management and director stock incentives)) and shall entitle Executive
to purchase from the Company at any time after vesting (as set out
below) but prior to March 1, 2006, the shares of the Company subject
thereto for an exercise price of the fair market value of the
Company's shares on the date
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of the grant of the Options. One-half of the Options shall be granted
on the Commencement Date and one-half of the Options shall be granted
on the six month anniversary of the Commencement Date.
The Options shall vest as follows: if Executive is employed with the
Company on the first anniversary of the Commencement Date, 25% of the
Options shall then become vested and fully exercisable on the last day
of the month in which such anniversary occurs; and an additional 1/48
of the Options shall become vested and fully exercisable on the last
day of each month thereafter so long as Executive remains employed
with the Company.
It is the current intention of the Company to provide further unspecified
stock incentives depending on Executive's performance; provided, however,
the Company shall be under no obligation to grant such further incentives.
(d) CERTAIN CHANGES OF CONTROL. In the event that (x) a Change of
Control (as hereinafter defined) occurs and (y) as a result thereof or in
contemplation thereof, without the consent of Executive nor at the behest
of Executive, either Executive's compensation or responsibilities are
reduced or the headquarters of the Company is moved to a location outside a
30 mile radius of the Company's existing headquarters, then:
(1) Immediately prior to the effective date of the Change of
Control, notwithstanding the vesting and forfeiture schedules set out in
subsection (c) above, all of the Options shall thereupon become fully
vested and all of the Grant Shares shall thereupon become free of any
forfeiture restrictions; and
(2) Immediately prior to the effective date of the Change of
Control, Executive shall receive a cash payment equal to a lump sum payment
of $1,600,000, which amount represents two years of Executive's initial
base salary and the target bonuses for the initial term of this Agreement.
(3) For a one year period following the Change of Control,
Executive shall be provided with benefits substantially identical to those
to which Executive was entitled immediately prior to the Change of Control.
(4) In the event that the benefits provided for in this Section
3(d) to Executive constitute "parachute payments" within the meaning of
section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
and will be subject to the excise tax imposed by Section 4999 of the Code,
then Executive shall receive (a) a payment from the
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Company sufficient to pay such excise tax and (b) an additional payment
from the Company sufficient to pay the Federal and California income tax
arising from the payment made under clause (a) of this sentence. Unless
the Company and Executive otherwise agree, the determination of Executive's
excise tax liability and the Federal and California income tax resulting
from the payment under clause (a) above shall be made by the Company's
independent accountants (the "Accountants"), whose determination shall be
conclusive and binding upon the Company and Executive for all purposes.
For purposes of making the calculations required by this Section 3(d)(4),
the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on interpretations of the Code for
which there is a "substantial authority" tax reporting position. The
Company and Executive shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make the
determinations required by this Section 3(d)(4). The Company shall bear
the expenses of the Accountants under this Section 3(d)(4).
For purposes of this subsection, "Change of Control" means the occurrence
of any one of the following: (i) any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or otherwise) that
results in any person, entity or group acting in concert, acquiring
"beneficial ownership" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of such percentage of the
aggregate voting power of all classes of common equity stock of the Company
as shall exceed 50% of such aggregate voting power, or (ii) a merger or
consolidation of the Company, other than a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 50% of the voting power represented by the voting
securities of the Company or such entity outstanding immediately after such
merger or consolidation, or (iii) the shareholders approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all, or substantially all, of the Company's
assets (other than in connection with a sale or disposition to subsidiaries
of the Company or in connection with a reorganization or restructuring of
the Company), or (iv) there occurs a change in the composition of the Board
as a result of which fewer than a majority of the directors are Incumbent
Directors (as hereinafter defined). "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of the
Commencement Date or (B) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the Incumbent
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Directors casting votes at the time of such election or nomination.
(e) BENEFITS. Executive shall be entitled to vacation and to
participate in the Company's directors and officers' insurance, health,
life insurance, long term disability, dental and medical programs as the
same may exist from time to time on the terms and conditions applicable to
other officers of the Company. Nothing in this Agreement shall preclude
the Company or any affiliate of the Company from terminating or amending
any employee benefit plan or program or its vacation policy from time to
time.
(f) RETIREMENT BENEFIT. Executive shall be entitled to a retirement
benefit to be mutually agreed upon. The Board of Directors of the Company
is currently considering different alternatives.
(g) RELOCATION: Upon submission of appropriate receipts, the Company
shall reimburse Executive for the following relocation expenses:
(1) The reasonable cost of an independent appraiser to appraise
Executive's existing home.
(2) A guarantee to purchase Executive's current residence at the
appraised value if it is not sold within 90 days from the date it is first
placed for sale. Such appraised value shall be determined by an
independent professional appraiser to be chosen by Executive reasonably
acceptable to the Company not more than two weeks after this Agreement has
been signed by Executive. In the event that the house is sold to a bona
fide buyer in excess of the appraised value, the Executive shall be
entitled to the excess amount.
(3) All reasonable out-of-pocket moving expenses incurred by
Executive in moving from his current home to his permanent new home in the
San Diego area including the brokerage commission on the sale of
Executive's existing home, attorney and title fees and other closing costs
for his existing and his new home (to the extent normal and customary) and,
to the extent not waived by the mortgagee, the $20,000 prepayment penalty
contained in Executive's current mortgage, storage and shipment of
household goods and shipment of up to two vehicles.
(4) Temporary and reasonable rental expenses (for up to six
months) for living quarters for Executive and his family until Executive
moves into his new home.
(5) Reasonable travel expenses for up to two house hunting trips
for Executive and his family including
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transportation, accommodations and reasonable expenses for meals and other
incidentals.
(6) Airline expenses for Executive to travel to or from San Xxxx
and San Diego each weekend until Executive and his family move into their
new home and for two trips for Executive's family to travel to or from San
Xxxx and San Diego.
To the extent that any of the relocation benefits detailed in this Section
3(g) are taxable to Executive under applicable tax law, upon request of
Executive, the benefits shall be provided to Executive on a "grossed up"
basis in the year that the benefits are paid.
(h) CONSULTING ARRANGEMENT. Between the date of this Agreement and
the Commencement Date, Executive shall have the right to act as a
consultant to the Company for which he shall be paid compensation at the
rate of $2000 for each full day of consulting work.
4. EARLY TERMINATION OF EMPLOYMENT.
(a) TERMINATION FOR CAUSE. Notwithstanding anything herein to the
contrary, the Company may terminate Executive's employment hereunder upon a
finding by the Board of Directors of cause for any one of the following
reasons: (i) Executive's loss of legal capacity; (ii) the Executive's
conviction of a criminal offense during the term of this Agreement; (iii) a
willful breach of this Agreement by Executive; (iv) actions or conduct of
Executive which is dishonest, or (v) actions or omissions which constitute
a willful disregard of the interests of the Company or which are seriously
detrimental to the reputation or business interests of the Company. In
each of the foregoing circumstances, except (i) or (ii), written notice
shall be given to the Executive specifying in reasonable detail the facts
giving rise thereto and that continuation thereof may be cause for
termination unless such conduct is not cured to the satisfaction of the
Board within five (5) business days of receipt of such notice by the
Executive. In the event of termination for any of the above contained in
this subsection (a), Executive shall be paid only his salary and unused
vacation due him at the time of termination.
(b) TERMINATION WITHOUT CAUSE. Notwithstanding anything herein to
the contrary, the Company may terminate Executive's employment hereunder at
any time, for any reason, with or without notice; provided, however, that
in the event of such termination for other than "cause" as described in the
preceding subsection (a), Executive will be paid immediately the greater of
(x) one year's annual base salary at the time of his termination plus the
target bonus
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for that year and (y) the aggregate base salary plus the target bonus due
Executive from the date of termination of employment through the end of the
stated term set forth in Section 1 above. In the event of such termination
for other than "cause" as described in the preceding subsection (a),
notwithstanding anything herein to the contrary, all of the Options shall
thereupon become fully vested and all of the Grant Shares shall thereupon
become free of any forfeiture restrictions.
(c) TERMINATION BY EXECUTIVE. Executive may terminate his employment
hereunder at any time, for any reason upon the giving of not less than 30
days prior notice to the Board of Directors. In the event of termination
by Executive, notwithstanding anything herein to the contrary, Executive
shall be paid only the base salary and unused vacation time then due him on
the effective date of his termination.
(d) COOPERATION. In the event of termination of employment by the
Company or by Executive (whether by expiration of the stated term in
Section 1 or pursuant to a subsection of this Section 4) Executive shall
cooperate with the Company, as requested by the Company, to effect a
transition of Executive's responsibilities and to ensure that the Company
is aware of all matters being handled by Executive.
5. RESOLUTION OF DISPUTES. The parties recognize that claims,
controversies and disputes may arise out of this Agreement with respect to
Executive's employment, termination of employment, or other terms of this
Agreement or based on common law or statute, either during the existence of the
employment relationship or afterwards. The parties agree that should any such
claim, controversy or dispute arise, the parties will use their best efforts to
resolve such dispute informally, between them. In the event that any such
claim, controversy or dispute between Company and Executive cannot be resolved
within thirty (30) days after either party first gives notice in writing that
any such claim, controversy or dispute exists, either party may then refer the
matter to arbitration before JAMS/ENDISPUTE pursuant to its rules for resolution
of employment disputes.
The parties hereby agree that referral to arbitration shall be the
sole recourse of either party under this Agreement with respect to any such
claim, controversy or dispute and that the decision of the arbitrator(s) shall
be binding on the parties in accordance with applicable law; provided, however,
that nothing in this Section 5 shall be construed as precluding either party
from bringing an action for injunctive relief or other equitable relief. The
parties shall keep confidential the existence of each such the claim,
controversy or dispute from third parties (other than arbitrator(s)), and the
determination
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thereof, unless otherwise required by law. Such decision rendered by the
arbitrator shall be final and conclusive and may be entered in any court having
jurisdiction thereof as a basis of judgment and of the issuance of execution for
its collection.
The parties further agree that the party prevailing in the arbitration
shall be entitled to its reasonable attorney's fees and that the arbitration
itself shall take place within the County of San Diego, California, and that the
internal laws of the State of California shall apply.
6. NO SOLICITATION. Executive agrees that in the event he is no
longer employed by the Company, for any reason, he shall not hire, solicit or
otherwise cause to be solicited for employment elsewhere, either directly or
indirectly, for a period of one year from his termination of employment, any
employee, officer or director of the Company or any individual who chooses not
to join Xxxxxxx, provided that Executive participated actively in the recruiting
of such individual.
7. CONFIDENTIALITY AGREEMENT. Executive shall sign an Employee
Non-Disclosure and Confidentiality Agreement in the form attached hereto as
Exhibit A (the "Confidentiality Agreement").
8. NONCOMPETITION. Executive agrees that for a period of one year
following termination of his employment with the Company for any reason, he will
not, nor will he permit any entity or other person under his control to,
directly or indirectly, own, manage, operate or control, or participate in the
ownership, management, operation or control of, or be connected with or have any
interest in, as a shareholder, director, officer, employee, agent, consultant,
partner, creditor or otherwise, any business or activity which is competitive
with any business or activity engaged in by the Company or any of its
subsidiaries or affiliates anywhere within (i) the State of California, or (ii)
any other state of the United States and the District of Columbia in which the
Company engages in or has engaged in business during the past five years.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire
Employment Agreement between the parties and contains all agreements between
them with the exception of the Restricted Stock Agreement, the 1995 Stock Option
Plan (and the agreement issued thereunder) and the Confidentiality Agreement
which are supplementary to this Employment Agreement but are incorporated herein
by reference. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied in this Agreement, and that no agreement, statement or promise not
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contained in this Agreement shall be valid or binding. This Agreement also
supersedes any and all other agreements and contracts whether verbal or in
writing relating to the subject matter hereof.
10. AMENDMENT. Except as otherwise specifically provided herein, the
terms and conditions of this Agreement may be amended at any time by mutual
agreement of the parties; provided that before any amendment shall be valid or
effective, it shall have been reduced to writing and signed by the Chairman of
the Board on behalf of the Company and by Executive.
11. INVALIDITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect its other provisions, and this
contract shall be construed in all respects as if such invalid or unenforceable
provision has been omitted.
12. BINDING NATURE. Executive's rights and obligations under this
Agreement shall not be assignable, transferable or delegable by assignment or
otherwise, and any purported assignment, transfer or delegation thereof shall be
void. This Agreement shall inure to the benefit of, and be enforceable by, any
purchaser of substantially all of the Company's assets, any corporate successor
to the Company or any assignee thereof.
13. ASSISTANCE IN LITIGATION. Executive shall, during and after
termination of employment, upon reasonable notice, furnish such information and
proper assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become a party. Except where Executive is a named
defendant, Executive shall be paid a reasonable hourly fee to be mutually agreed
upon.
14. INDEMNIFICATION. The Company shall indemnify Executive in
accordance with its standard indemnification policy for officers and directors
of the Company and as required by applicable law.
15. NO DUTY TO MITIGATE. Executive shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that executive may receive from any other source not paid for by the
Company.
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16. CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
Dated: March 25, 1996 /s/ Xxxxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx
Dated: March 25, 1996 /s/ Xxxx Xxxxxx
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Xxxx X. Starry
Chairman of the Board
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AMENDMENT TO
EMPLOYMENT CONTRACT
This Amendment to Employment Contract ("Amendment") is made as of this 18th
day of April, 1996, by and between Xxxxxxx Laboratories, Inc., a Delaware
corporation ("Company") and Xx. Xxxxxxx Xxxxxxxxx, an individual ("Executive").
WHEREAS, the Company and Executive are parties to that certain Chief
Executive Officer Employment Contract ("Employment Contract") dated March 25,
1996, pertaining to certain terms and conditions of Executive's employment by
the Company as Chief Executive Officer; and
WHEREAS, the parties desire to set forth herein amendments which have been
agreed to with respect to equity incentives in the form of stock options
provided for in the Employment Contract;
NOW, THEREFORE, the parties agree as follows:
1. AMENDMENTS TO SECTION 3(C). Section 3(c) of the Employment
Contract is hereby amended as follows:
(a) The phrase "On the Commencement Date," at the beginning of the
first sentence of said section 3(c) is hereby deleted, and the sentence
shall begin with the word "Executive" following such phrase.
(b) The first sentence of section 3(c)(1) is hereby amended to read
in its entirety as follows: "The Grant Shares shall be issued on the
Commencement Date pursuant to a Restricted Stock Agreement and shall be
subject to forfeiture to the Company."
(c) The last sentence of section 3(c)(2) is hereby amended to read in
its entirety as follows: "The Options shall be granted on such date
between the date hereof and the Commencement Date as the Stock Option
Committee of the Company's Board of Directors shall determine."
2. EFFECT OF AMENDMENT. This Amendment to Employment Contract is
effective as of the date set forth above and, as amended herein, the Employment
Contract remains in full force and effect.
SIGNATURES. The parties hereto have executed this Amendment as of the date
first above mentioned.
XXXXXXX LABORATORIES, INC.
By /s/Xxxx X. Starry
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/s/Xxxxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx
