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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of this 1st day of September, 1998,
between CRYSTAL MEDICAL PRODUCTS, INC., an Illinois corporation (the "Company")
and XXXXXX XXXXX ("Employee").
BACKGROUND
The Company is in the business of development and marketing of a
commercially feasible device to identify pathogens in foods, bodily fluids or
tissue through an electronic measurement technique. The principal office of the
Company is located at 000 Xxxxxx Xxxxxx, 000 Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxxx. The Company services, or will service customers on a nationwide
basis.
The Company desires to employ Employee as its Executive Vice President and
Chief Scientific Officer, and Employee desires to accept such position and to be
employed by Company.
Employee, in the course of employment, will have access to confidential
and proprietary information of the Company and will likely build personal
relationships with the employees, customers and suppliers of the Company. It is
important to the Company that Employee not compete or interfere with, divulge
confidential information of, or otherwise harm it. Therefore, as a precondition
to Employee's employment, and in consideration thereof, the Company is requiring
Employee to enter into this Agreement, which includes certain restrictions on
Employee's right to engage in activities competitive with the Company or to
interfere with its business and on Employee's use of confidential information of
the Company, as more fully set forth below.
NOW, THEREFORE, in consideration of the foregoing, the covenants contained
herein and the employment of Employee by the Company, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Employment. Subject as provided in this Agreement, the Company hereby
employs Employee, and Employee hereby accepts employment by the Company. During
the period of his employment hereunder, Employee shall serve as the Executive
Vice President and Chief Scientific Officer of the Company, or in such other
capacity as may be determined from time to time by its Board of Directors.
Employee shall perform such duties and have such responsibilities as are
consistent with the position of Executive Vice President and Chief Scientific
Officer (or such other office as may be hereafter held by him), including such
duties and responsibilities as shall be assigned him from time to time by the
Board of Directors. Employee shall devote his best efforts to the promotion of
the business and affairs of the
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Company and shall perform faithfully and to the fullest extent of his ability
all duties which relate to his position of employment by the Company.
2. Term. Employee's employment hereunder shall commence on September 1,
1998 and continue for a period of five (5) years, ending on August 31, 2003
(Initial Term) unless sooner terminated, as provided in Section 4 hereof.
3. Renewal. At the end of the Initial Term, this Agreement will renew
automatically for successive one (1) year renewal terms, unless either party
gives written notice not to renew sixty (60) days prior to the end of the
Initial Term or any Renewal Term.
4. Termination.
4.1 Death. This Agreement shall terminate immediately upon the death
of Employee.
4.2 Termination for Cause. This Agreement shall terminate
immediately if the Board of Directors of the Company discharges Employee for
cause, in which event the Company shall not be obligated to make any further
payments hereunder other than amounts accrued as of the date of termination.
"Cause" shall mean, and be limited to, the following, to be determined in the
sole judgment of the Board of Directors, reasonably exercised, at a meeting. At
least thirty (30) days' written notice will be given to Employee, who shall have
the opportunity to attend with counsel, and be heard at such meeting:
(i) Employee's fraud, misappropriation, embezzlement or
willful misconduct;
(ii) Employee's material violation of any provision of this
Agreement; or
(iii) Employee's conviction of a felony involving moral
turpitude.
4.3 Special Termination. This Agreement shall terminate if there is
not an initial registration of the Company's stock under Section 5 of the
Securities Act of 1933, as amended (a "Public Offering") by January 30, 1999, in
which event the Company shall not be obligated to make any further payments
hereunder other than amounts accrued as of the date of termination.
5. Compensation.
5.1 Base Salary. The Company shall pay, and Employee shall accept,
as base compensation during the term of his employment hereunder, a salary at
the annual rate of Two Hundred Thousand Dollars ($200,000). Such base salary
shall be paid to Employee in equal
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installments on the first day of each calendar month during the term hereof or
in accordance with established pay periods of the Company, but in no event less
frequently than monthly.
5.2 Bonus. The Company will pay Employee a bonus of One Hundred
Thousand Dollars ($100,000). Employee shall also be eligible for such additional
bonuses as may be approved from time to time by the Board of Directors, whether
for all employees generally or for senior management.
5.3 Stock Options. Subject to shareholder approval of the Company's
Stock Option Plan (the "Plan"), the Company shall grant Employee options to
acquire up to five hundred thousand (500,000) shares of the Company's Common
Stock pursuant to all the terms and conditions of the Plan and the form of grant
attached hereto.
6. Benefits. During the term of his employment, Employee shall be entitled
to receive or participate in such employee benefits of the Company as are made
available generally to the members of its executive management, such as
vacations, holidays, medical, dental and other insurance or qualified retirement
plans which may be established by the Company.
7. Automobile; Expense Reimbursement.
7.1 The Company shall pay Employee a reasonable car allowance of up
to Nine Hundred Dollars ($900) per month.
7.2 The Company shall reimburse Employee for job-related expenses
incurred by him, including expenses for: travel, hotel, meals, cellular phone,
business-related entertainment, postage, telephone and office supplies. Employee
shall promptly submit to the Company, at least monthly, an itemization of his
job-related expenses incurred, with such documentation as the Company may
reasonably require, and the Company shall reimburse him therefor within ten (10)
days from the date of such submission. The quality and types of expenses to be
reimbursed shall be agreed in advance with the Company and shall be consistent
with the Company's budget.
8. Change in Control.
8.1 A "Change in Control" shall be deemed to have occurred if there
is a sale of the Company or if a meeting of the shareholders of the Company
involving a contest for the election of directors results in a new Board of
Directors of which the directors of the Company immediately prior to such
meeting no longer constitute a majority of the Board.
8.2 If, after a Change in Control, Employee resigns as a result of
his reasonable determination that he is unable to exercise the authorities,
powers, functions or duties
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attached to his position as contemplated by this Agreement, Employee shall be
entitled to a lump sum payment equal to the amount of his salary for the
remainder of the term of this Agreement.
9. Definitions.
9.1 "Affiliate" means any Entity owned or controlled by, or under
common control with, the Company.
9.2 "Competitor" means any individual or Entity which is currently
engaged in, or shall conduct or be engaged in, development or marketing of a
device to identify pathogens in foods, bodily fluids or tissue through an
electronic measurement technique or in any other business or activity in which
the Company is engaged during the term of Employee's employment by the Company.
9.3 "Confidential Business Information" means all information
(whether or not in written or tangible form) which is not generally known or
available to the public or a Competitor, the knowledge of which could benefit a
Competitor. Confidential Business Information includes any and all information
of a confidential, proprietary or secret nature which is or may be either
applicable to or related in any way to the business, present or future, of the
Company or any Affiliate, the business of any customer of the Company or any
Affiliate and shall include, but not be limited to, trade secrets, processes,
formulas, data, algorithms, source codes, object codes, documentation,
flow-charts, drawings, correspondence, know-how, improvements, inventions,
techniques, concepts, technologies, programs, designs, personnel records,
marketing plans and strategies, customer lists, projections, financial
information, internal accounting statistics, pricing and bidding policies and
practices, costing information, salaries, proposals to licensors or customers,
any data, confidential information or property entrusted to the Company or any
Affiliate by any licensors or customers and confidential information concerning
customers or employees of the Company or any Affiliate.
9.4 "Confidential Materials" means all documents, materials,
programs, recordings or any other tangible media (including, without limitation,
copies or reproductions of any of the foregoing) in which any Confidential
Business Information may be contained.
9.5 "Entity" means any partnership, corporation, trust, joint
venture, association or other business enterprise in any form.
10. Confidentiality.
10.1 Employee acknowledges that in the course of, or incident to,
his employment with the Company, Employee will likely obtain from the Company
Confidential
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Business Information. Employee acknowledges that all Confidential Business
Information and all Confidential Materials are, and shall remain, the exclusive
property of the Company.
10.2 Employee shall hold and maintain in the strictest confidence
and duly safeguard all Confidential Business Information, and shall not,
directly or indirectly, disclose, communicate or divulge the same to any person
or Entity other than in connection with his business activities on behalf of the
Company or any Affiliate, or use or otherwise exploit the same for the direct or
indirect benefit of any person or Entity other than the Company or its
Affiliate. Notwithstanding the foregoing or any other provision of this
Agreement, Employee may disclose Confidential Business Information or
Confidential Materials (i) if and to the extent required by law, including
pursuant to a judicial or administrative order or ruling (provided that, to the
extent reasonably possible, the Company is given prior notice to enable it to
seek a protective order) and (ii) in order to enforce his rights in any action,
suit or proceeding against or involving the Company.
10.3 In the event of termination of Employee's employment with the
Company for any reason, whether voluntary or involuntary or by either party,
Employee shall return immediately to the Company all Confidential Materials and
Confidential Business Information in Employee's possession or within Employee's
control, in whatever form, written, photographic, computer disk, other media or
otherwise, and all keys, credit cards, business card files, product samples and
other property belonging to the Company.
10.4 The restrictions in this Section 10 shall survive the
termination of Employee's employment and of this Agreement for any reason
whatsoever.
11. Company's Rights to Certain Discoveries.
11.1 Employee shall disclose promptly to the Company any and all
concepts, inventions, improvements, discoveries, developments, techniques,
modifications, procedures, formulas, ideas, trade secrets, innovations, systems,
programs, know-how or designs (collectively, the "Discoveries") related to the
business or activities of the Company that he conceives, develops or reduces to
practice during the time that he is employed by the Company, Employee agrees
that all his right, title and interest in such Discoveries shall belong to the
Company, in confirmation of which he shall execute deeds of assignment of such
right, title and interest to the Company, its nominees, successor or assigns,
whenever requested, without demanding separate or additional compensation
therefor. All of the foregoing shall be subject to the same confidentiality,
nonuse and nondisclosure requirements as are prescribed in Section 10 hereof.
Any of the Discoveries related to the business of the Company that Employee may
reduce to practice, or apply for a copyright or patent on, during the first two
(2) years after termination of his employment hereunder shall be presumed to
have been conceived by him during the time of such employment and, as such,
shall belong to the Company, and the burden
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shall be upon Employee, if he contends it was not, to prove it was not by clear
and convincing evidence.
11.2 Employee shall assist the Company and its nominees, successors
or assigns (at its or their request) in every proper way during and following
the period of his employment (entirely at its or their expense) to obtain and
maintain for its or their own benefit copyrights or patents in any and all
countries for all Discoveries described in Section 11.1 hereof. Such assistance
shall include, but not be limited to, the execution and delivery of all lawful
papers and documents of every nature which relate to the securing and
maintenance of such copyrights and patent rights, and the performance of all
other lawful acts, such as the giving of testimony in any interference
proceedings, infringement suits or other litigation, as may be deemed necessary
or advisable by the Company or its nominees, successors or assigns.
12. Non-Competition and Non-Interference. During the entire term of
Employee's employment with the Company, and for a period of five (5) years
following the cessation of such employment, for any reason, whether voluntary or
involuntary or by either party, within the United States (and in such other
countries in which the Company is actively conducting, or seeking to conduct,
its business), Employee shall not, without prior written authorization of the
Company, directly or indirectly (i) compete with the Company, including, but not
limited to, own, manage, invest or acquire any economic stake or interest in,
assist or advise or otherwise engage or participate in any manner whatsoever in,
any Competitor (whether as a proprietor, partner, shareholder, investor,
manager, director, officer, employee, venturer, representative, agent, broker,
independent contractor, consultant, lender, guarantor, adviser or otherwise) or
(ii) solicit, induce or influence, or attempt to induce or influence, any
employee, customer, supplier, consultant or other business contact of the
Company to terminate, reduce, discourage or otherwise materially harm any
business relationship with, or commitment to, the Company or otherwise divert
from the Company any trade or business conducted by the Company. Nothing herein
set forth shall prohibit Employee from owning securities of any public company
(other than the Company), provided that Employee shall not own more than one
percent (1%) of any class of publicly-traded equity securities. EMPLOYEE
ACKNOWLEDGES THAT THE RESTRICTION SET FORTH HEREIN IS REASONABLE AND NECESSARY
TO PROTECT THE LEGITIMATE BUSINESS INTERESTS OF THE COMPANY AND THAT EMPLOYEE
HAS SUFFICIENT SKILLS, TRAINING, EDUCATION AND EXPERIENCE TO OBTAIN SATISFACTORY
EMPLOYMENT TO PROVIDE FOR HIS FINANCIAL NEEDS DURING THE PERIOD SPECIFIED HEREIN
WHILE COMPLYING WITH THE TERMS AND THE SPIRIT OF THE COVENANT SET FORTH IN THIS
SECTION 12.
13. Remedies.
13.1 The parties acknowledge that the Company is engaged in a
competitive business and that the provisions and restrictions set forth herein
regarding confidentiality, Discoveries, non-competition and non-interference are
reasonable and necessary for the
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protection of the legitimate interests of the Company. Employee further
acknowledges that the Company's rights protected by the provisions and
restrictions hereof are unique and that in the event of any breach or threatened
breach or violation of any of these rights by Employee, the Company has no
adequate remedy at law and such breaches or violations are likely to result in
irreparable harm and injury to the Company. Therefore, Employee agrees that,
upon a breach or threatened breach or violation of the provisions or
restrictions hereof by Employee, the Company shall be entitled to obtain
specific performance, temporary and permanent injunctive relief, as well as an
equitable accounting of all profits and benefits arising therefrom, in addition
to other rights and remedies, at law or in equity, which may be available to it.
13.2 If Employee violates any restrictive covenant contained herein
and the Company institutes action for equitable relief, the Company, as a result
of the time involved in obtaining such relief, shall not be deprived of the
benefit of the full restriction period as set forth in Section 12. Accordingly,
such period shall be deemed to have the duration specified in Section 12 hereof,
computed from and commencing on the date on which relief is granted by a final
order from which there is no appeal.
13.3 Each provision hereof, including, without limitation, the
periods of time, geographical areas and types and scopes of duties of, and
restrictions on the activities of, Employee specified herein are divisible, and
if any portion thereof (including any sentence, clause or part) shall be held
contrary to law or invalid or unenforceable in any respect in any jurisdiction,
or as to one or more periods of time, areas or business activities, the
remaining provisions shall not be affected, but shall remain in full force, and
any such invalid or unenforceable provision shall be deemed, without further
action on the part of any person, modified, amended and limited to the extent
necessary to render the same valid and enforceable in such jurisdiction.
13.4 In order to enable the Company to enforce Sections 10, 11 and
12, Employee, regardless of his residence, and the Company hereby consent to the
personal jurisdiction of any federal or state court of competent jurisdiction in
the Eastern District of Pennsylvania and to the receipt of service of process in
any action brought hereunder in the manner provided in Section 14 for the giving
of notices.
14. Notices. Any notice required or permitted hereunder shall be delivered
personally or sent by facsimile transmission, national courier service
guaranteeing overnight delivery, or registered or certified mail, with all
postage or other delivery charges prepaid, to the respective parties hereto at
the addresses set forth below, or to such other address, or in care of such
other person, as any party shall from time to time designate by due notice
hereunder. Any notice hereunder shall be deemed given when received by the
person to whom or which addressed.
If to the Company:
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Crystal Medical Products, Inc.
000 Xxxxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
copies to:
Xxxxxx Xxxxxxx, CPA
Xxxxxxx Xxxxx & Co.
000 Xxxxxx Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
and
Xxxx X. Xxxxxx, Esquire
Xxxxxx & Xxxxx, P.C.
Xxx Xxxxxxx Xxxxx, 00xx floor
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
If to Employee:
Xxxxxx Xxxxx
X.X. Xxx 000
000 Xxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
15. Miscellaneous.
15.1 Employee represents and warrants to the Company that Employee's
commencement of the employment contemplated hereby will not violate or cause a
breach of any covenant, agreement or instrument to which Employee is a party or
by which Employee is bound.
15.2 This Agreement, its interpretation, performance and
enforcement, and the rights and remedies of the parties hereto, shall be
governed and construed according to the laws of the Commonwealth of
Pennsylvania, without regard to the principles of conflict of laws.
15.3 The Company reserves the right to waive the restrictive
covenants contained herein, or any one of them, provided that any waiver shall
be in writing executed by such person as shall be specifically authorized for
such purpose by its Board of Directors (not including Employee). A waiver of any
condition or breach of any term or covenant shall not be deemed or construed as
a further or continuing waiver of such condition or breach of any other term or
covenant set forth in this Agreement.
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15.4 This Agreement represents the entire agreement and
understanding of the parties and supersedes all prior agreements and
understandings, both written and oral, between the parties hereto with respect
to the subject matter hereof.
15.5 This Agreement shall not be modified or amended except by a
writing signed by each of the parties hereto. The Company may assign this
Agreement to any person or Entity which may become a successor in interest to
the Company by acquisition of all or substantially all of the Company's assets
or business, whether by merger, consolidation, reorganization, purchase or
otherwise. This Agreement is a personal service contract and, as such, shall not
be assignable, in whole or part, by Employee.
15.6 Subject as aforesaid, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
15.7 The Company shall indemnify and defend Employee to the fullest
extent permitted by law from and against all suits, actions, proceedings,
obligations, liabilities, and all costs and expenses incurred in connection
therewith, suffered or incurred by Employee arising out of or in connection with
his employment hereunder and shall advance to Employee all expenses he may incur
in any such action unless prohibited by law. The Company's Bylaws shall contain
the broadest available indemnification provisions for the purpose of
implementing this provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
CRYSTAL MEDICAL PRODUCTS, INC.
BY: /s/ XXXXXXX XXXXXX
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NAME: XXXXXXX XXXXXX
TITLE: CHAIRMAN
/s/ XXXXXX XXXXX
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XXXXXX XXXXX
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