EXHIBIT 10.5
Employment Agreement
Agreement made this 6th day of March 2002, between HiEnergy Microdevices, Inc.,
a Delaware Corporation (the "Company"); and Xxxxxx X. Xxxxxxx, an individual
("Xxxxxxx").
WITNESSETH
IN CONSIDERATION of the mutual covenants contained herein, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby agrees to employ Xxxxxxx, during the
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term specified in Paragraph 2, and Xxxxxxx agrees to accept such
employment, all subject to the terms and conditions hereinafter set
forth in this Agreement.
2. TERM. Subject to the terms and conditions of this Agreement, Xxxxxxx'x
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employment by the Company shall be for a term commencing on the date
hereof and ending on December 31, 2006, unless sooner terminated as
hereinafter provided.
3. DUTIES AND RESPONSIBILITIES.
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(a) During the term, Xxxxxxx shall serve as Chief
Scientific Officer and Chairman of the Company and
shall devote the stated time and attention to the
business of the Company. The business of the Company,
for purposes of this Agreement, shall include (i) the
detection of the substances of which objects are
comprised and the development, production, sale and
promotion of devices and technologies to effect such
detection, and (ii) such other endeavors as to which
Xxxxxxx and the Board shall mutually agree.
(b) Subject to the supervision of the Board of Directors,
Xxxxxxx, as Chief Scientific Officer of the Company,
will be responsible for the determination of the
Company's research and development program; its
research and development associations and consortiums;
its patent policy; the selection, hiring, and/or firing
of its scientific, engineering and technical personnel
and of any Principal Investigator or Co-principal
Investigator on research and development contracts of
the Company and of their clerical assistants, as well
as their respective remuneration and budgeting
priorities.
(c) Subject to such requirements as shall be imposed by law
or governmental regulation, Xxxxxxx, as Chief
Scientific Officer, shall be responsible for
determining what technical information may be publicly
disclosed by any officer or employee of the Company.
(d) As Chairman, Xxxxxxx agrees to perform, and shall
perform, the functions of the Chairman as set forth in
the By-Laws of the Company; shall be one of two
signatories on all checks and drafts of the Company in
excess of $1000; and, subject to review
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by the Board of Directors, shall be the officer of the
Company responsible for submitting budgetary
recommendations to the Board.
(e) It is recognized by the Company that Xxxxxxx has
heretofore been engaged, and in the future may be
engaged, in other endeavors, including, without
limitation, those relating to nuclear fusion energy,
satellite-borne nuclear power, and anti-missile
defense, as well as scientific education, including,
without limitation, scientific publications and
documentary films. It is recognized by the Company that
such activities are indirectly beneficial to its
reputation, standing and governmental and business
relations. It is further recognized that, provided the
company does not furnish its personnel, equipment,
facilities or funding for such other endeavors and that
the work conducted on such other endeavors does not
interfere with the services and time on the job
provided to the Company by Xxxxxxx, any patents or
other intellectual property or other benefits derived
from such other endeavors are the sole property of
Xxxxxxx and that the Company shall neither have or
claim any interest therein.
A list of Xxxxxxx'x other endeavors, as discussed
above, shall be maintained mutually by the Company and
Xxxxxxx. All other work conducted by Xxxxxxx during his
employed time, or using the Company's personnel,
facilities or funding, and which is not so listed, will
be work for hire to the Company by Xxxxxxx.
(f) Xxxxxxx shall devote not less than 35 hours per week to
the business of the Company, it being understood that
he may give such time and attention to other endeavors
as does not materially detract from his services for,
and attention to, the business of the Company.
(g) It is contemplated that, for the continuance of this
Agreement, Xxxxxxx will be employed as Chief Scientific
Officer and Chairman of the Company. In the event
Xxxxxxx is not so elected and not so continued in any
or all of such posts, for any reason other than
termination for cause (as defined below), such failure
shall constitute a breach of this Agreement by the
Company and Xxxxxxx shall have the right to terminate
his employment hereunder forthwith by written notice of
such intention to the Company and the Company will be
obligated to make the severance payments set forth in
Paragraph 11 of this Agreement and to satisfy all other
obligations set forth in Paragraph 10.
4. COMPENSATION. In consideration of the services to be rendered by
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Xxxxxxx hereunder, the Company agrees to pay Xxxxxxx, and he agrees to
accept, the following:
(a) BASE SALARY. For the period commencing January 1, 2002,
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and ending December 31, 2002, the Company shall pay
Xxxxxxx at the annual
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rate of $125,000 annually, payable in cash monthly. For
the period January 1, 2003, through December 31, 2006,
the Company shall pay Xxxxxxx as follows:
(i) For the period January 1, 2003, through December
31, 2003, $137,500 annually, payable in cash
monthly;
(ii) For the period January 1, 2004, through December
31, 2004, $151,250 annually, payable in cash
monthly;
(iii) For the period January 1, 2005, through December
31, 2005, $166, 375 annually, payable in cash
monthly; and
(iv) For the period January 1, 2006, through December
31, 2006, $183,012 annually, payable in cash
monthly.
(v) In the event that Xxxxxxx, with the approval of
the Company, shall work less than the time
required of him under Paragraph 3(c), his base
salary shall decrease proportionally.
(b) SIGNING BONUS.
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In consideration of Xxxxxxx executing and delivering
this Agreement, the Company has agreed to pay Xxxxxxx a
signing bonus by issuing to him its promissory note in
the face amount of $100,000 in the form of Exhibit A
hereto, payable (i) $50,000 upon receipt by the Company
of One Million Dollars or more from any source, and
(ii) $50,000 upon receipt by the Company of in excess
of $500,000 from its sales or operations (including
grants not directed for equipment) or receipt by the
Company of a further cash infusion of One Million
Dollars or more.
(c) ANNUAL BONUS.
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(i)At the beginning of each fiscal year, the Board of
Directors of the Company shall establish a bonus plan
based upon Company performance goals. At the end of the
fiscal year, officers of the Company, including
Xxxxxxx, shall receive a bonus based upon performance
against the established plan.
(ii) In no event shall Xxxxxxx'x bonus be less than 20%
of the total amount of bonuses paid to officers of the
Company pursuant to the bonus plan referred to in "(i)"
above.
(iii) In the event the Company's gross pretax profit in
any fiscal year shall exceed $.20 per share, then
Xxxxxxx'x bonus in that year shall not be less than
$50,000.
(d) STOCK OPTIONS.
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(i) The Company represents, warrants, and confirms to
Xxxxxxx its agreement in 1998 to then issue to him
options entitling him to purchase 111,040 shares of the
Common Stock of the Company at an exercise price of $3
per share, such options to be exercisable at any time
and from time to time within the period ending November
30, 2008. The Company represents
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and warrants that it will take all corporate action
necessary or desirable to effect the valid issuance of
all such options to Xxxxxxx and the delivery of
certificates therefor to Xxxxxxx no later than March
30, 2002; and
(ii) The Company shall grant and issue to Xxxxxxx
annually during the term hereof five-year stock options
at a rate of not less than one (1%) per annum of the
Company's stock issued and outstanding at the end of
the year, such options to have an exercise price of the
most recent arms length sale, or if publicly traded,
the average price for the preceding thirty days. In no
event shall Xxxxxxx receive, in the aggregate, in any
one year less than 10% of the total number of options
granted by the Company for services in that year.
5. PENSION AND FRINGE BENEFITS.
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(a) Xxxxxxx shall be entitled to participate in any
employee benefit plans generally available to senior
officers and/or key employees of the Company, including
medical, disability, pension, non-qualified deferred
compensation plans, the programs for the allowance for
or the reimbursement of automobile expenses, and any
other plans of general application to senior officers
and/or key employees of the Company on the date hereof
and such plans and programs adopted hereafter for the
benefit of senior officers and/or key employees of the
Company.
(b) As Xxxxxxx is covered by Medicare, the Company shall
pay his supplemental Blue Cross, TIAA Long-Term Care
insurance, medical insurance for his children under
eighteen (18) years of age, and dental insurance for
himself and his children, and not less than $1000 per
month into his TIAA annuity pension fund until August
31, 2003.
(c) The Company will provide Xxxxxxx with a Lincoln,
Cadillac, or equivalent U.S. brand automobile of his
choosing for his business and personal use and will pay
for all related expenses thereof, including, without
limitation, the costs of registration, fuel, repairs,
and insurance.
(d) Xxxxxxx shall be entitled to take time off for vacation
or illness in accordance with the Company's policy for
senior executives and/or key employees and to receive
all other fringe benefits as from time to time made
generally available to senior executives and/or key
employees of the Company.
(d) The Company shall reimburse Xxxxxxx for reasonable and
necessary personal attorneys' fees, costs and expenses
incurred in connection with matters relating to the
affairs of the Company, excluding any disputes with the
Company itself. Such reimbursement shall not exceed
$20,000 in any one year, except as may be necessary to
protect the Company from actual or
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claimed liability to others or as shall be otherwise
agreed by the Company or provided for in Paragraph 12
hereof. Nothing contained herein shall limit the Board
of Directors from providing defense costs to all
officers and directors of the Company, including
Xxxxxxx.
6. REIMBURSEMENT. The Company shall reimburse Xxxxxxx for all proper
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expenses, including, without limitation, travel and entertainment
expenses, incurred by him in the performance of his duties hereunder
in accordance with the Company's policies and procedures in effect
from time to time.
7. OFFICE AND LOCATION. The Company shall provide Xxxxxxx, at the
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Company's sole expense, with an executive office at its headquarters
commensurate with his positions as Chief Scientific Officer and
Chairman within the facility then occupied by the Company.
8. EXECUTIVE SECRETARY. The Company shall provide Xxxxxxx, at the
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Company's sole expense, with the services on a full-time basis of an
executive secretary of his choosing. Said executive secretary shall
perform those services for Xxxxxxx that are regularly performed for
the Chairman of the Board of a public company and shall also assist
Xxxxxxx in his positions as Chief Scientific Officer of the Company. A
salary customary in the area in which the Company's offices are
located shall be paid by the Company to Xx. Xxxxxxx'x executive
secretary.
9. INSURANCE. The Company shall, at its sole expense, provide Xxxxxxx
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with the following insurance:
(a) Life Insurance. The Company shall provide Xxxxxxx with,
and pay up to $1,000 in premium per month for two key
man life insurance policies. The owner and beneficiary
of one policy shall be the Company. The owner of the
other ("Xxxxxxx Policy") shall be Xxxxxxx and/or the
beneficiary or beneficiaries designated by him. Every
time the Company increases its insurance on Xxxxxxx'x
life the Xxxxxxx Policy shall increase at the Company's
expense by an identical amount.
(b) Disability Insurance. The Company shall pay the premium
on the disability insurance policy presently maintained
by Xxxxxxx and any renewals thereof provided the
premium shall not exceed $500 per month.
10. TERMINATION.
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(a) Termination for Cause. The Company may terminate
Xxxxxxx'x employment at any time upon Xxxxxxx'x xxxxx
negligence or willful malfeasance in the material
performance of his duties and responsibilities to the
Company under Paragraph 3 of this Agreement. Such
discharge shall be effected by notice (the
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"Discharge Notice") to Xxxxxxx which shall specify the
reasons for Xxxxxxx'x discharge and effective date
thereof. In each instance, such termination shall not
be effective if the gross negligence or willful
malfeasance specified in the Discharge Notice is cured
by Xxxxxxx within ten (10) days following the date of
receipt by Xxxxxxx of the Discharge Notice.
(b) TERMINATION FOR DISABILITY. In the event of disability
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of Xxxxxxx rendering him unable to perform his services
hereunder for a period of one hundred eighty (180)
consecutive days, the Company shall have the right to
terminate this Agreement upon giving not less than
thirty (30) days' notice ("Termination Notice") of its
intention to do so. If Xxxxxxx shall have resumed his
duties hereunder within such a thirty (30) day period
and shall have continuously performed his services for
at least thirty (30) consecutive days thereafter, the
Termination Notice shall be deemed of no force and
effect and this Agreement shall thereupon continue in
full force as though such notice of termination had not
been given.
(c) TERMINATION BY XXXXXXX. Xxxxxxx may terminate this
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Agreement at any time by giving not less than three (3)
months' notice of his intention to terminate, in which
case all Company benefits shall be terminated "in due
course" as of the effective date of termination. Any
notes and earned stock options of Xxxxxxx shall
immediately vest and be paid as agreed.
11. SEVERANCE PAYMENTS. If this agreement is terminated, the Company shall
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pay Xxxxxxx, on the termination date, an amount of money equal to the
aggregate unpaid balance of the minimum annual base salaries provided for
in Paragraph 4(a) hereof through a period of two (2) years after the
termination date. Additionally, the Company shall continue to pay Xxxxxxx,
for said two year period, all of the benefits provided for in Paragraph
5(a) and (b) above and, thereafter, all premiums associated with the
continuation of Xxxxxxx'x insurance under COBRA for the period that COBRA
shall be available to Xxxxxxx. Upon termination, all of Xxxxxxx'x options
respecting shares of the capital stock of the Company shall forthwith vest
in Xxxxxxx and become immediately exercisable.
12. COMPROMISE OF UNPAID CONTRACTUAL OBLIGATIONS TO XXXXXXX. Xxxxxxx
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and the Company have certain differences in their understanding of the
existence and magnitude of the Company's obligations to Xxxxxxx under
an Employment Agreement initially entered into between Xxxxxxx and
Advanced Physics Corporation on the 31st day of December 1993 and
understood by Xxxxxxx to have been adopted and approved by the Company
on August 23, 1995. If Xxxxxxx is correct, the Company's current
obligations to Xxxxxxx under the aforesaid Employment Agreement would
exceed $4,000,000. Xxxxxxx and the Company have agreed that Xxxxxxx
will cancel all obligations or alleged obligations of the Company to
Xxxxxxx respecting the aforesaid Employment Agreement in exchange for
indemnification of Xxxxxxx by the Company against any personal tax
liabilities arising from the issuance to
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Xxxxxxx of securities of the Company, up to a total possible
indemnification payment of Seventy-five Thousand dollars ($75,000).
Accordingly, upon the release by Xxxxxxx of the Company from his
claims under the aforesaid Employment Agreement, the Company agrees to
indemnify and hold harmless Xxxxxxx from and against any and all
personal tax liability or liabilities or alleged tax liability or
liabilities of any kind or description, and against all attorney's
fees, costs and expenses of counsel of Xxxxxxx'x selection with
respect to such tax liabilities or alleged tax liabilities, to the
fullest extent permitted by law and subject to the payment of no more
than $75,000. It is understood by the Company that it is a material
condition of Xx. Xxxxxxx'x entering into this Employment Agreement
with the Company that he have no tax liability whatsoever respecting
the issuance by the Company of securities to him, and it is the
intention of the Company that to the limit of $75,000, it bear any and
all such liability in full. The parties will execute and deliver such
other and further documents as shall be necessary or advisable to
carry out the transactions contemplated by this Paragraph 12. If the
ultimate determination of tax liability by Xxxxxxx is in excess of
$75,000, the Company will advance to Xxxxxxx an additional amount
equal to the excess, up to an additional $75,000, as an advance
against salary, without the collection of interest thereon.
13. EXCHANGE BY XXXXXXX OF SHARES OF CLASS B COMMON STOCK FOR SHARES OF
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CLASS A COMMON STOCK OF THE COMPANY. Xxxxxxx is the owner of record of 100%
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of the authorized and issued Class B shares of the Company. The Company has
determined that it is in the best interests of the Company and its
shareholders for it to exchange Class A shares of the Company for all of
Xxxxxxx'x Class B shares. Xxxxxxx agrees that he will accept 100,000 shares
of the Class A common stock of the Company in exchange for all of his Class
B shares, and the Company agrees that such an exchange is fair and
reasonable and agrees to such exchange. The Company represents and warrants
to Xxxxxxx that its Board of Directors has or will take all necessary or
appropriate action to vest in Xxxxxxx full and unfettered title to such
100,000 shares of Class A Common Stock, free and clear of any liens or
encumbrances of any kind whatsoever, upon Xxxxxxx'x delivery to the Company
of his Class B Common Stock in exchange for said 100,000 shares of Class A
Common Stock.
14. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RESPECTING CERTAIN SECURITIES
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ISSUED TO XXXXXXX AND ASSOCIATES AND RATIFICATION OF TRANSACTIONS RELATED
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THERETO.
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(a) The Company hereby represents and warrants to Xxxxxxx that the
securities set forth below have been duly and validly issued by
the Company and registered by the Company in the names of the
persons listed below and are outstanding, fully paid and
non-assessable securities of the Company:
(i) Advanced Projects Group, Inc. 58,000 share of Class A
(majority owned by Xxxxxx Xxxxxxx Common Stock
and Xxxxxxx Family Holdings, Inc.)
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(ii) Xxxxxx X. Xxxxxxx 76,000 shares of
Class A Common Stock
and all shares of Class
B Common Stock
(converted by Xxxxxxx
into 100,000 shares of
Class A Common Stock
pursuant to Paragraph
13 hereof)
(iii) Xxxxxxx Family Holdings, Inc. 166,049 shares of
Class A Common
Stock
(b) The Company hereby ratifies and reaffirms all transactions which
resulted in the issuance of the securities listed in "(a)" above
and represents and warrants that its Board of Directors has or
will take all action necessary or appropriate to vest in the
parties listed above full and unfettered title to all of said
shares as stated above.
15. NON-DISCLOSURE AND COVENANT NOT TO COMPETEE
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(a) NON-DISCLOSURE. During the term of this Agreement and from and
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after the termination of this Agreement, Xxxxxxx shall not, except as
required by law or to perform his duties under this Agreement,
divulge, disclose or communicate to any person, firm, or corporation,
any confidential information. The term "confidential information"
includes, without limitation, information about the business of the
Company (or any division, subsidiary or affiliate of the Company)
including, but not limited to, methods of operation, pricing
information and customer lists, but excluding such information that
was in the public domain at the time it was acquired by Xxxxxxx or
that comes into the public domain other than through disclosure by
Xxxxxxx. If confidential information is contained in any document or
writing or is fixed in any other tangible form, magnetically,
electronically, or otherwise, and if such confidential information is
in Xxxxxxx'x possession or under his control, he shall return such
information and all copies thereof to the Company upon his
termination. Xxxxxxx shall not directly or indirectly, take, copy, or
transfer, in any manner whatsoever, any of the business records of the
Company (or any division, subsidiary or affiliate of the Company).
(b) NON-COMPETE. During the term of Xxxxxxx'x employment hereunder,
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and for a period of five (5) years following the date of
termination of Xxxxxxx'x employment hereunder, Xxxxxxx shall not,
directly or indirectly, engage (whether for compensation or
without compensation) as an individual proprietor, partner,
stockholder, officer, employee, director, consultant, joint
venturer, lender, or in any other capacity whatsoever (otherwise
than as a holder of no more than 1% of the total outstanding
stock of a publicly held company) in any business activity or
business activities that compete with the remote-non-intrusive
detection business of the Company, it being understood and agreed
by the Company that "other endeavors" of Xxxxxxx referred to and
listed in Paragraph
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3(a) and 3(b) hereof are not and never shall be considered as
competing activities to those of the Company. During the term of
Xxxxxxx'x employment hereunder, and for a period of the greater
of one year or any time during which Xxxxxxx is receiving
severance payments pursuant to Paragraph 11 hereof, Xxxxxxx shall
not, directly, or indirectly: either for himself or for any other
person, firm or corporation, divert or take away or attempt to
divert or take away any person, firm or corporation who was or is
a customer of the Company during the term of this Agreement, or
(b) induce or influence any person who is engaged by the Company
as an employee, agent or otherwise, to terminate his or her
engagement or to engage or otherwise participate in a business
activity directly or indirectly competitive with the Company.
(c) SCOPE OF RESTRICTIONS. The restrictions set forth in this
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Paragraph 15 are considered by the parties to be reasonable.
However, if any such restriction is found to be unenforceable
because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it
shall be interpreted to extend only over the maximum period of
time, range of activities or geographic area as to what may be
enforceable.
(d) REMEDIES. In the event of a breach or a threatened breach of this
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Paragraph 15 that is not cured by Xxxxxxx after receipt of ten
day's written notice from the Company, the Company shall be
entitled to an injunction restraining Xxxxxxx from committing or
continuing such breach, as well as to any and all other legal and
equitable remedies permitted by law.
16. MISCELLANEOUS.
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(a) ENFORCEABILITY. The failure of any party at any time to require
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performance by another party of any provision hereunder shall in
no way affect the right of that party thereafter to enforce the
same, nor shall it affect any other party's right to enforce the
same, or to enforce any of the other provisions of this
Agreement; nor shall the waiver by any party of the breach of any
provision hereof be taken or held to be a waiver of any
subsequent breach of such provision or as a waiver of the
provision itself.
(b) BINDING EFFECT. This Agreement shall be binding upon the Company,
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its successors and assigns and Xxxxxxx, his heirs, and personal
representatives. This Agreement may not be assigned by either
party without the prior written consent of the other party being
first obtained.
(c) MODIFICATIONS. This Agreement may not be orally cancelled,
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changed, modified or amended, and no cancellation, change,
codification or amendment shall be effective or binding, unless
in writing and signed by the parties to this Agreement.
(d) SEVERABILITY; SURVIVAL. In the event any provision or portion of
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this Agreement is determined to be invalid or unenforceable for
any reason, in whole or in part, the remaining provisions of this
Agreement shall nevertheless be binding upon the parties
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with the same effect as through the invalid or unenforceable part
had been severed and deleted. The respective rights and
obligations of the parties thereunder shall survive the
termination of the executive's employment to the extent provided
elsewhere herein and to the extent necessary to the intended
preservation of such rights and obligations.
(e) NOTICES. Any notice, request, instruction or other document to be
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given hereunder by any party to another party shall be in writing
and shall be deemed effective (i) upon personal delivery, if
delivered by hand against receipt, (ii) mailed postage prepaid,
by United States certified or registered mail, return receipt
requested, (iii) upon being sent by facsimile transmission (if
receipt is electronically confirmed) and, in each case, addressed
as follows:
If to the Company:
HiEnergy Microdevices, Inc.
00 Xxxxxxx Xxxxx
Xxxxxx, XX 00000
With a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
If to Xxxxxxx:
Xxxxxx X. Xxxxxxx
000 Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
With a copy to:
Xxxxx Xxxxxx Xxxx, Esq.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Any party may change the address to which notices are to be sent by giving
notice of such change of address to the other party in the manner herein
provided for giving notice.
(f) APPLICABLE LAW. This Agreement shall be governed by, and
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construed in accordance with, the laws of the State of
California, without application of conflict of law provisions
applicable herein.
(g) ENTIRE AGREEMENT. This Agreement represents the entire agreement
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between the Company and Xxxxxxx with respect to the subject
matter hereof, and all prior agreements, plans and arrangements
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relating to the employment of Xxxxxxx by the Company are
nullified and superceded hereby.
(h) HEADINGS. The headings contained in this Agreement are for
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reference purposes only, and shall not affect the meaning or
interpretation of this Agreement
(i) COUNTERPARTS. This Agreement may be executed in one or more
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counterparts, all of which shall constitute one and the same
agreement, and each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HiEnergy Microdevices, Inc., a Delaware Corporation
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
President and Duly Authorized Signatory
/s/ X. X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Individually
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