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EXHIBIT 10.31
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of May 1, 1995 ("Effective Date") by and between XXXXX MEDICAL CORPORATION
(DELAWARE), a Delaware corporation ("XXXXX"), and XXXXXX X. XXXXXX
("EMPLOYEE").
RECITAL
XXXXX desires to employ EMPLOYEE as its Chief Executive Officer, and
EMPLOYEE is willing to accept such employment by XXXXX, on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENT
THE PARTIES AGREE AS FOLLOWS:
1. Duties. During the term of this Agreement, EMPLOYEE agrees to
be employed by and to serve XXXXX as its Chief Executive Officer and in such
other executive capacities as the Board of Directors may direct, and XXXXX
agrees to employ and retain EMPLOYEE in such capacities. EMPLOYEE shall devote
substantially all of his business time, energy, and skill to the business of
XXXXX and the duties of his position. EMPLOYEE shall report only to XXXXX'
Board of Directors; shall observe and abide by all policies of XXXXX and all
directives of the Board of Directors consistent with his position; and, at all
times during the term of this Agreement, shall have powers and duties at least
commensurate with his position as Chief Executive Officer at XXXXX. EMPLOYEE's
principal place of business with respect to his services to XXXXX shall be in
Orange County, California.
2. Term of Employment.
2.1 Definitions. For purposes of this Agreement the
following terms shall have the following meanings:
2.1.1 "Termination For Cause" shall mean the
termination by XXXXX of EMPLOYEE's employment with XXXXX as the result of
EMPLOYEE's willful misconduct or dishonesty towards, fraud upon, or deliberate
injury or attempted injury to XXXXX; EMPLOYEE's willful and continued material
breach of this Agreement, or; EMPLOYEE's gross negligence or malfeasance in the
performance of his duties and responsibilities, as determined by the good faith
decision of The Compensation Committee of the Board of Directors (the
"Compensation Committee"). Notwithstanding the foregoing, EMPLOYEE shall be
entitled to appeal the termination and request confirmation thereof from the
Board of Directors in the form of a resolution duly adopted by the affirmative
vote of not less than a simple majority of the outside directors, provided the
outside directors voting constitute a majority of the entire membership of the
Board of
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Directors, at a meeting of the Board of Directors duly noticed and held within
45 days of EMPLOYEE's request (after reasonable notice to EMPLOYEE, and
opportunity for EMPLOYEE, together with counsel if desired, to be heard before
the Board of Directors), which resolution shall state that in the good faith
opinion of the Board of Directors, Cause for termination exists, and which
shall enumerate with particularity the specific conduct which constitutes
Cause. In the event the Board of Directors does not adopt a resolution
confirming the termination, then EMPLOYEE shall be reinstated with back pay in
such capacities as the Board of Directors may direct. An act, or a failure to
act, shall not be considered "willful" if, in the good faith determination of
the Board of Directors, it was performed, or omitted, in good faith and with
reasonable grounds for belief that the action or omission was in the interest
of XXXXX. The EMPLOYEE shall not be deemed to be grossly negligent or
malfeasant unless the EMPLOYEE's act or failure to act, in the good faith
determination of the Board of Directors was inappropriate and results in a
material injury to XXXXX. The Compensation Committee may effect a Termination
For Cause at any time by providing EMPLOYEE with written notice of such
termination. The termination shall be effective as of the date of the notice.
2.1.2 "Termination Other Than For Cause" shall mean
termination by XXXXX of EMPLOYEE's employment with XXXXX and shall include (i)
termination for performance, incompatibility with XXXXX, other deficiencies or
any other reason (other than Cause, a Change in Control, Death or Incapacity)
as determined by the Chief Executive Officer, and (ii) constructive termination
of EMPLOYEE's employment by reason of (a) a reduction in EMPLOYEE's Base Salary
of 10% or more, unless such reduction is part of a cost-savings or similar plan
that equally impacts all other similarly situated officers, or (b) a
requirement that EMPLOYEE change his principal place of business to a location
that is more than 50 miles from his current principal place of business.
Notwithstanding the foregoing, in the event of a Termination Other Than For
Cause which is initiated by the Compensation Committee, EMPLOYEE shall be
entitled to appeal the termination and request confirmation thereof from the
Board of Directors in the form of a resolution duly adopted by the affirmative
vote of not less than a simple majority of the outside directors, provided the
outside directors voting constitute a majority of the entire membership of the
Board of Directors at a meeting of the Board of Directors duly noticed and held
within 45 days of EMPLOYEE's request (after reasonable notice to EMPLOYEE and
the opportunity for EMPLOYEE to be heard before the Board of Directors), which
resolution shall state that in the good faith opinion of the Board of
Directors, EMPLOYEE should be terminated for the reasons articulated by the
Compensation Committee. In the event the Board of Directors does not adopt a
resolution confirming the termination, then EMPLOYEE shall be reinstated in
such capacities as the Board of Directors may direct. The Compensation
Committee may effect a Termination Other Than For Cause at any time by
providing EMPLOYEE with written notice of such termination. The EMPLOYEE may
also effect a Termination Other Than For Cause at any time one of the above two
conditions for constructive termination have been met. The termination shall
be effective as of the date of the notice.
2.1.3 "Actual Voluntary Termination" shall mean
termination by EMPLOYEE of EMPLOYEE's employment with XXXXX other than (i)
"Termination For Cause," (ii) "Termination Other Than For Cause," (iii)
"Termination by Reason of Incapacity" or
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"Termination by Reason of Death" and (v) "Termination Upon a Change in Control"
as described in this Agreement.
2.1.4 "Termination Upon a Change in Control" shall
mean (i) the termination by XXXXX of EMPLOYEE within 1 year after, or during
the 3 months immediately prior to, a "Change in Control," or (ii) the
termination by EMPLOYEE of this Agreement with XXXXX within 1 year after a
"Change in Control." Either XXXXX or EMPLOYEE may effect a Termination Upon a
Change in Control once a "Change in Control" has occurred by providing the
other party with written notice of such termination. The termination shall be
effective as of the date of such notice.
2.1.5 "Change in Control" shall mean (i) the time
that XXXXX first determines that any person and all other persons who
constitute a group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934 ("Exchange Act")) have acquired direct or indirect
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of 20% or more of XXXXX' outstanding securities; (ii) the merger, consolidation
or reorganization of XXXXX with one or more corporations as a result of which
XXXXX is merged out of existence or becomes a subsidiary of another
corporation, the sale of all or substantially all of the assets of XXXXX; or
(iii) as a result of any tender or exchange offer, merger, consolidation or
other business combination, or any combination of any of the foregoing
transactions, the persons who were directors of XXXXX before such transaction
cease to constitute a majority of the Board of Directors of XXXXX or of any
successor to XXXXX.
2.2 Basic Term. The term of employment of EMPLOYEE by
XXXXX shall be twenty (20) months commencing May 1, 1995 through December 31,
1996 unless terminated earlier pursuant to Section 3, which term is subject to
renewal upon at least 90 days notice prior to the expiration of the initial or
any renewal periods. Therefore, at any time before October 1, 1996, XXXXX and
EMPLOYEE may by mutual written agreement renew this Agreement and, thereby,
extend EMPLOYEE's employment under the terms of this Agreement for such
additional periods as they may agree.
3. Termination of Employment.
3.1 Termination For Cause. Upon any Termination For
Cause, EMPLOYEE shall immediately be paid all accrued salary, bonus
compensation to the extent fully earned, vested deferred compensation (other
than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of XXXXX in
which EMPLOYEE is a participant to the full extent of EMPLOYEE's rights under
such plans, accrued paid time off ("PTO") pay and any appropriate business
expenses incurred by EMPLOYEE in connection with his duties hereunder, all to
the date of termination. EMPLOYEE shall not be paid any other compensation or
reimbursement of any kind including, without limitation, severance
compensation, continued vesting or extended rights to exercise beyond the
minimum required by the applicable plan.
3.2 Termination Other Than For Cause. Upon any
Termination Other Than For Cause, EMPLOYEE shall immediately be paid all
accrued salary, bonus compensation calculated
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by pro-rating all achievements and other measuring numbers set forth in the
bonus plan for other similarly situated officers as though the year and date
ended on the date of termination, vested deferred compensation (other than
pension plan or profit sharing plan benefits which will be paid in accordance
with the applicable plan), any benefits under any plans of XXXXX in which
EMPLOYEE is a participant to the full extent of EMPLOYEE's rights under such
plans, accrued PTO pay and any appropriate business expenses incurred by
EMPLOYEE in connection with his duties hereunder, all to the date of
termination, and all severance compensation provided in Section 5. 1, but no
other compensation or reimbursement of any kind.
3.3 Termination by Reason of Incapacity. If, during the
term of this Agreement, EMPLOYEE, in the reasonable judgment of the Board of
Directors of XXXXX, has failed to perform his duties under this Agreement on
account of illness or physical or mental incapacity, and such illness or
incapacity continues for a period of more than 6 weeks, XXXXX shall have the
right to terminate EMPLOYEE's employment hereunder, such termination to be
effective retroactive to the first day of such illness or incapacity, by
written notification to EMPLOYEE and payment to EMPLOYEE of all accrued salary,
bonus compensation calculated by pro-rating all achievement and other measuring
numbers set forth in the bonus plan used for other similarly situated officers
for that year as though the year ended on the date of termination, vested
deferred compensation (other than pension plan or profit sharing plan benefits
which will be paid in accordance with the applicable plan), any benefits under
any plans of XXXXX in which EMPLOYEE is a participant to the full extent of
EMPLOYEE's rights under such plans, accrued PTO pay and any appropriate
business expenses incurred by EMPLOYEE in connection with his duties hereunder,
all to the date of termination, with the exception of medical and dental
benefits which shall continue through the expiration of the Agreement and all
severance compensation provided in Section 5.2, but no other compensation or
reimbursement of any kind.
3.4 Termination by Reason of Death. In the event of
EMPLOYEE's death during the term of this Agreement, EMPLOYEE's employment shall
be deemed to have terminated as of the last day of the month during which his
death occurs and XXXXX shall pay to his estate or such beneficiaries as
EMPLOYEE may from time to time designate all accrued salary, bonus compensation
calculated by pro-rating all achievement and other measuring numbers set forth
in the bonus plan used for other similarly situated officers for that year as
though the year ended on the date of termination, vested deferred compensation
(other than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of XXXXX in
which EMPLOYEE is a participant to the full extent of EMPLOYEE's rights under
such plans, accrued PTO pay and any appropriate business expenses incurred by
EMPLOYEE in connection with his duties hereunder, all to the date of
termination, and all severance compensation provided in Section 5.3, but no
other compensation or reimbursement of any kind.
3.5 Termination Upon a Change in Control. Upon the
occurrence of a Termination Upon a Change in Control, EMPLOYEE shall
immediately be paid all accrued salary, bonus compensation calculated by
pro-rating all achievement and other measuring numbers set forth in the bonus
plan used for other similarly situated officers for that year as though the
year ended on the date of the termination, vested deferred compensation (other
than pension plan or profit sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans
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of XXXXX in which EMPLOYEE is a participant to the full extent of EMPLOYEE's
rights under such plans, accrued PTO pay and any appropriate business expenses
incurred by EMPLOYEE in connection with his duties hereunder, all to the date
of the termination and all severance compensation provided in Section 5.4, but
no other compensation or reimbursement of any kind.
3.6 Termination Upon Expiration of Agreement. In the
event that XXXXX fails or otherwise refuses for any reason (except as otherwise
provided herein) to extend this Agreement at least 90 days prior to the initial
or any renewal period, EMPLOYEE shall immediately be paid all accrued salary,
bonus compensation calculated by pro-rating all achievement and other measuring
numbers set forth in the bonus plan for other similarly situated officers as
though the year ended on the date of the failure to extend the Agreement,
vested deferred compensation (other than pension plan or profit sharing plan
benefits which will be paid in accordance with the applicable plan), any
benefits under any plans of XXXXX in which EMPLOYEE is a participant to the
full extent of EMPLOYEE's rights under such plans, accrued PTO pay and any
appropriate business expenses incurred by EMPLOYEE in connection with his
duties hereunder, all to the date of termination and all severance compensation
provided in Section 5.5, but no other compensation or reimbursement of any
kind.
3.7 Actual Voluntary Termination. In the event of an
Actual Voluntary Termination, EMPLOYEE shall immediately be paid all accrued
salary, bonus compensation to the extent fully earned, vested deferred
compensation (other than pension plan or profit sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of XXXXX in which EMPLOYEE is a participant to the full extent of
EMPLOYEE's rights under such plans, accrued PTO pay and any appropriate
business expenses incurred by EMPLOYEE in connection with his duties hereunder,
all to the date of termination. EMPLOYEE shall not be paid any other
compensation or reimbursement of any kind, including without limitation,
severance compensation.
4. Salary, Benefits and Bonus Compensation.
4.1 Base Salary. As payment for the services to be
rendered by EMPLOYEE as provided in Section 1 and subject to the terms and
conditions of Sections 2 and 3, XXXXX agrees to pay to EMPLOYEE a "Base Salary"
of $264,000 per annum, which amount is payable in equal semi-monthly
installments. The Base Salary for each year (or portion thereof) beginning
January 1, 1996 shall be determined by the Board of Directors. EMPLOYEE's Base
Salary shall be reviewed at least annually by the Compensation Committee of the
Board of Directors (the "Compensation Committee").
4.2 Bonuses. EMPLOYEE shall be eligible to receive a
bonus each year (or portion thereof) during the Base Term and any extensions
thereof, with the actual amount of any such bonus to be determined in the sole
discretion of the Board of Directors in accordance with the Plan adopted for
Corporate Officers. All such bonuses shall be payable within 60 days after the
end of the year to which such bonus relates. All such bonuses shall be
reviewed annually by the Compensation Committee of the Board of Directors.
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4.3 Additional Benefits. During the term of this
Agreement, EMPLOYEE shall be entitled to the following fringe benefits:
4.3.1 Benefits. EMPLOYEE shall be eligible to
participate in such of XXXXX' benefits and deferred compensation plans as are
now generally available or later made generally available to officers of XXXXX,
including, without limitation, Xxxxx' Incentive Stock Option Plan, 401K, dental
and medical plans, PTO, life insurance, personal catastrophe and disability
insurance. For purposes of establishing the length of service under any
benefit plans or programs of XXXXX, EMPLOYEE's employment with XXXXX will be
deemed to have commenced on the date EMPLOYEE commenced services as an employee
of XXXXX, to the extent permitted under applicable law and the terms of such
plans or programs.
4.3.2 Reimbursement for Expenses. During the term
of this Agreement, XXXXX shall reimburse EMPLOYEE for reasonable and properly
documented out-of-pocket business and/or entertainment expenses incurred by
EMPLOYEE in connection with his duties under this Agreement. Any such expenses
shall be submitted by EMPLOYEE to XXXXX on a periodic basis, and are subject to
approval by the Chief Financial Officer.
5. Severance Compensation.
5.1 Severance Compensation in the Event of a Termination
Other Than for Cause. In the event EMPLOYEE's employment is terminated as a
result of a Termination Other Than for Cause, EMPLOYEE's Base Salary (at the
rate payable at the time of such termination) shall be continued in
semi-monthly installments for a period equal to 9 months, plus 2 weeks for each
year (or part thereof) of EMPLOYEE's employment by XXXXX up to a maximum of 12
months from the effective date of such termination. Notwithstanding anything
in this Section 5.1 to the contrary, EMPLOYEE may, anytime following
notification of a Termination Other Than For Cause, submit to the Board of
Directors a written request for a lump sum severance payment equal to the total
of all unpaid cash payments that would otherwise be paid to EMPLOYEE pursuant
to this Section 5.1. If the Board of Directors elects to grant the request for
a lump sum severance payment, XXXXX shall make such payment to EMPLOYEE within
20 days following the date on which EMPLOYEE requests a lump sum severance
payment or the effective date of such termination, whichever occurs earlier.
In the event that the Board of Directors elects to deny such request, XXXXX
shall provide security, satisfactory to EMPLOYEE, which approval shall not be
unreasonably withheld, to ensure payment of all amounts owing to EMPLOYEE when
due. EMPLOYEE, shall be entitled, at no cost to EMPLOYEE to participate in the
full executive program of any outplacement firm, acceptable to both EMPLOYEE
and XXXXX, until EMPLOYEE's reemployment by another employer. In addition to
the cost of such outplacement program, to the extent that any part of such cost
constitutes income to EMPLOYEE for state or federal income tax purposes, XXXXX
shall "gross-up" such amount to compensate EMPLOYEE for all taxes hi may be
required to pay. EMPLOYEE shall be entitled to all COBRA benefits for the 9 to
12 month period from the effective date of such termination but shall not
otherwise continue to accrue retirement benefits or continue to enjoy any other
benefits under any plans of XXXXX in which EMPLOYEE is a participant. Any
awards
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granted to EMPLOYEE under Xxxxx' Incentive Stock Option Plan that are vested as
of the date of termination shall expire 60 days after the termination date.
5.2 Severance Compensation for Termination by Reason of
Incapacity. In the event EMPLOYEE's employment is terminated as a result of a
Termination by Reason of Incapacity, EMPLOYEE's Base Salary (at the rate
payable as of the effective date of the termination) shall be continued in
semi-monthly installments for a period equal to 9 months plus 2 weeks for each
year (or part thereof) of EMPLOYEE's employment by XXXXX up to a maximum of 12
months from the effective date of such termination. Notwithstanding anything
in this Section 5.2 to the contrary, EMPLOYEE may, anytime following
notification of a Termination by Reason of Incapacity, submit to the Board of
Directors a written request for a lump sum severance payment equal to the total
of all unpaid cash payments that would otherwise be paid to EMPLOYEE pursuant
to this Section 5.2, which request shall not be unreasonably denied. If the
Chief Executive Officer elects to grant the request for a lump sum severance
payment, XXXXX shall make such payment to EMPLOYEE within 20 days following the
date on which EMPLOYEE requests a lump sum severance payment or the effective
date of such termination, whichever occurs earlier. In the event that the
Board of Directors elects to deny such request, XXXXX shall provide security,
satisfactory to EMPLOYEE, which approval shall not be unreasonably withheld, to
ensure payment of all amounts owing to EMPLOYEE when due. EMPLOYEE shall
continue to accrue retirement benefits and shall continue to enjoy any other
benefits under any plans of XXXXX in which EMPLOYEE is a participant for the 9
to 12 month period from the effective date of the Termination except that any
awards granted to EMPLOYEE under Xxxxx' Incentive Stock Option Plan shall cease
to vest as of the termination date and EMPLOYEE's rights to exercise any awards
vested as of the termination date shall be extended (but not beyond their
original term) to the date of EMPLOYEE's re-employment with another employer or
60 days after the end of the 9 to 12 month period, whichever occurs first.
5.3 Severance Compensation for Termination by Reason of
Death. In the event EMPLOYEE's employment is terminated as a result of
EMPLOYEE's death, EMPLOYEE's Base Salary (at the rate payable as of the
effective date of the termination) shall be continued in semi-monthly
installments for a period of 3 months. XXXXX shall also continue to fund
dental and medical coverage for EMPLOYEE's spouse and dependents for the 3
month period from the effective date of the termination. Any awards granted to
the EMPLOYEE under Xxxxx' Incentive Stock Option Plan shall cease to vest as of
the termination date and EMPLOYEE's rights to exercise any awards vested as of
the termination date shall be extended (but not beyond their original term) to
the date EMPLOYEE's estate is closed or 2 years from the date of his death,
whichever occurs first.
5.4 Severance Compensation in the Event of a Termination
Upon A Change In Control. In the event EMPLOYEE elects to terminate this
Agreement as a result of a Termination Upon A Change In Control, EMPLOYEE's
Base Salary (at the rate payable at the time of such termination) shall be
continued in semi-monthly installments for a period of 18 months from the
effective date of such termination. Notwithstanding anything in this Section
5.4 to the contrary, EMPLOYEE may, anytime following notification of a
Termination Upon A Change In Control, submit to the Board of Directors a
written request for a lump sum severance payment equal to the total of all
unpaid cash payments that would otherwise be paid to EMPLOYEE pursuant to this
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Section 5.4, which request shall not be unreasonably denied. If the Board of
Directors elects to grant the request for a lump sum severance payment, XXXXX
shall make such payment to EMPLOYEE within 20 days following the date on which
EMPLOYEE requests a lump sum severance payment or the effective date of such
termination, whichever occurs earlier. In the event that the Board of
Directors elects to deny such request, XXXXX shall provide security,
satisfactory to EMPLOYEE, which approval shall not be unreasonably withheld, to
ensure payment of all amounts owing to EMPLOYEE when due. In addition to the
severance payment payable under this Section 5.4, EMPLOYEE shall be paid an
amount equal to 1.5 times the highest bonus earned by EMPLOYEE as an employee
of XXXXX. EMPLOYEE shall also be entitled to accelerated vesting of any awards
granted to EMPLOYEE under Xxxxx' Incentive Stock Option Plan with no
acceleration, however, of EMPLOYEE's rights to exercise such awards. EMPLOYEE,
shall be entitled, at no cost to EMPLOYEE, to participate in the full executive
program of any outplacement firm, acceptable to both EMPLOYEE and XXXXX, until
EMPLOYEE's reemployment by another employer. In addition to the cost of such
outplacement program, to the extent that any part of such cost constitutes
income to EMPLOYEE for state or federal income tax purposes, XXXXX shall
"gross-up" such amount to compensate EMPLOYEE for all taxes hi may be required
to pay. EMPLOYEE shall continue to accrue retirement benefits and shall
continue to enjoy any benefits under any plans of XXXXX in which EMPLOYEE is a
participant to the full extent of EMPLOYEE's rights under such plans, including
any perquisites provided under this Agreement, for the 18 month period from the
effective date of such termination; provided, however, that the benefits under
any such plans of XXXXX (other than Xxxxx' Incentive Stock Option Plan) in
which EMPLOYEE is a participant, including any such prerequisites, shall cease
upon EMPLOYEE's re-employment by another employer.
5.5 Severance Compensation In The Event Of A Failure Of
XXXXX To Renew This Agreement. In the event XXXXX fails or otherwise refuses
for any reason (except pursuant to Section 3.1 hereof) to extend this Agreement
beyond the Basic Term and any extensions thereof, EMPLOYEE's Base Salary (at
the rate payable at the time of such termination) shall be continued in
semi-monthly installments for a period of 18 months from the effective date of
such termination. Notwithstanding anything in this Section 5.5 to the
contrary, EMPLOYEE may, anytime following expiration of this Agreement, submit
to the Board of Directors a written request for a lump sum severance payment
equal to the total of all unpaid cash payments that would otherwise be paid to
EMPLOYEE pursuant to this Section 5.5. If the Board of Directors elects to
grant the request for a lump sum severance payment, XXXXX shall make such
payment to EMPLOYEE within 20 days following the date on which EMPLOYEE
requests a lump sum severance payment or the effective date of such
termination, whichever occurs earlier. In the event that the Board of
Directors elects to deny such request, XXXXX shall provide security,
satisfactory to EMPLOYEE, which approval shall not be unreasonably withheld, to
ensure payment of all amounts owing to EMPLOYEE when due. In addition to the
severance payment payable, under this Section 5.5, EMPLOYEE shall be paid an
amount equal to 1.5 times the highest bonus earned by EMPLOYEE as an employee
of XXXXX. EMPLOYEE shall also be entitled to accelerated vesting of any awards
granted to EMPLOYEE under Xxxxx' Incentive Stock Option Plan with no
acceleration, however, of EMPLOYEE's right to exercise any such awards.
EMPLOYEE, shall be entitled, at no cost to EMPLOYEE to participate in the full
executive program of any outplacement firm, acceptable to both EMPLOYEE and
XXXXX, until EMPLOYEE's reemployment by another employer. In
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addition to the cost of such outplacement program, to the extent that any part
of such cost constitutes income to EMPLOYEE for state or federal income tax
purposes, XXXXX shall "gross-up" such amount to compensate EMPLOYEE for all
taxes he may be required to pay. EMPLOYEE shall continue to accrue retirement
benefits and shall continue to enjoy any benefits under any plans of XXXXX in
which EMPLOYEE is a participant to the full extent of EMPLOYEE's rights under
such plans, including any perquisites provided under this Agreement, for the 18
months from the effective date of such termination; provided, however, that the
benefits under any such plans of XXXXX (other than Xxxxx' Incentive Stock
Option Plan) in which EMPLOYEE is a participant, including any such
perquisites, shall cease upon EMPLOYEE's reemployment by another employer.
5.6 No Severance Compensation Upon Other Termination. In
the event of an Actual Voluntary Termination or Termination For Cause, EMPLOYEE
shall not be paid any severance compensation.
5.7 Limit on Aggregate Compensation Upon A Change In
Control. Notwithstanding anything to the contrary in this Agreement, solely in
the event of a Termination Upon A Change In Control pursuant to Section 3.5,
the amount of severance compensation paid to EMPLOYEE under Sections 3 and 5 or
otherwise shall not include any amount that XXXXX is prohibited from deducting
for federal income tax purposes by virtue of Section 28OG of the Internal
Revenue Code or any successor provision.
6. Loans to XXXXX. Any loans which may, on the effective date of
termination, be owed by EMPLOYEE to XXXXX, shall be due and payable 2 years
after the effective date of termination or, if applicable, 1 year after
EMPLOYEE becomes reemployed by another employer, whichever is sooner; provided,
however, that the proceeds from the sale of any stock of XXXXX held by EMPLOYEE
shall be applied first to pay taxes, if any, resulting from the sale of such
stock; second to any reduction in EMPLOYEE's margin debt necessitated by the
sale of such stock, which margin debt to the extent secured by stock in XXXXX
shall not be increased by EMPLOYEE after the effective date of any termination
of EMPLOYEE, without the consent of XXXXX; and then to repay any loans owed by
EMPLOYEE to XXXXX. In order to be eligible for the deferred repayment of any
loans owed by EMPLOYEE to XXXXX at the time of termination, EMPLOYEE shall,
within thirty days of a request by XXXXX, provide XXXXX with security equal, in
then current value, to 1 1/2 times the amount of such loan(s).
7. Consulting Responsibilities. In addition to all other
responsibilities of EMPLOYEE hereunder, in the event of a Termination of
Agreement Upon a Change in Control, a Termination Other Than For Cause or an
Actual Voluntary Termination, EMPLOYEE shall make himself available at the
request of XXXXX, upon reasonable notice and at mutually convenient times and
places as shall not unreasonably interfere with EMPLOYEE's other
responsibilities, to assist XXXXX in preparing for, managing and conducting any
litigation involving XXXXX (including by way of example and not as limitation,
giving testimony), and to otherwise consult with XXXXX with respect to any
matters consistent with his duties prior to termination; for which EMPLOYEE
shall be compensated at the rate of $150.00 per hour for the first 100 hours
and $300.00 per hour for each additional hour; provided, however, in no event
shall EMPLOYEE be obligated to provide any services to XXXXX after 18 months
from the effective date of termination.
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8. Protection of Company Assets and Dispute Resolution.
8.1 Non-Competition. During the term of this Agreement,
including the period, if any, during which EMPLOYEE shall be entitled to
severance compensation hereunder, EMPLOYEE shall not engage in any activity,
business or transactions in competition with XXXXX. In furtherance of this
prohibition, EMPLOYEE shall notify XXXXX, in written detail, of all business
activity which, to the best of EMPLOYEE's knowledge, could be perceived by
XXXXX as violating this provision. In the event that EMPLOYEE fails to provide
such notice, XXXXX may avail itself of whatever remedies may exist, and
EMPLOYEE hereby consents to XXXXX' obtaining injunctive relief. In the
alternative event that EMPLOYEE provides such notice, XXXXX must, within 20
days of actual receipt of such notice, consent to EMPLOYEE's involvement in the
business activity described, or notify EMPLOYEE, in written detail, of all
reasons XXXXX believes the business activity described violates this provision.
If XXXXX consents or fails to timely provide such written response, such
failure shall constitute consent by XXXXX thereby, in either case, enabling
EMPLOYEE to engage in such business activity to the extent described in
EMPLOYEE's written notice to XXXXX. In no event, however, shall EMPLOYEE be
relieved of responsibility to provide XXXXX with notice, in written detail, of
any other business activity which EMPLOYEE, to the best of his knowledge,
believes XXXXX would perceive to be violative of this provision. If EMPLOYEE
challenges XXXXX' decision to not consent, EMPLOYEE shall, within 10 days of
actual receipt of XXXXX' objections, so notify XXXXX in writing by providing
XXXXX with his response, in detail, to XXXXX' objections, and both EMPLOYEE and
XXXXX hereby agree that such dispute shall be finally settled by arbitration in
accordance with Section 8.2 below.
8.2 Arbitration. XXXXX and EMPLOYEE agree that any
controversy, claim or dispute of any kind arising out of or relating to this
Agreement, the interpretation of this Agreement, EMPLOYEE's employment with
XXXXX or the termination thereof, or the course of dealing by the parties
hereunder (including any claim based on contract, tort or statute) whether for
damages or for provisional or permanent equitable relief, shall be finally
settled by arbitration administered by the American Arbitration Association
("AAA") in accordance with its then-existing commercial Arbitration rules
("Rules") in Irvine, California before an arbitrator who shall be a retired or
former judge of the California Superior Court and who shall be selected from
those former or retired judges affiliated with the Judicial Arbitration and
Mediation Service ("JAMS") located in the City of Orange, California who are
willing and able to comply with the time constraints and other procedures
herein agreed to. The party initiating the claim shall obtain from JAMS a
current list of available judges and shall immediately mail such list to the
other party. Each party to the dispute shall have 10 days from the mailing
date in which to cross off any names objected to, number the remaining names in
order of preference, and return the list to the AAA. If either party fails to
return the list within the time specified, all persons named therein shall be
deemed acceptable. From among the persons who have been approved on both
lists, and in accordance with the designated order of mutual preference, the
AAA shall invite the acceptance of an arbitrator to serve. If the parties fail
to agree on any of the persons named, or if acceptable arbitrators are unable
to act, or if for any other reason the appointment cannot be made from the
submitted lists, the AAA shall have the power to make the appointment from
among other California Superior Court judges who are willing and able to comply
with the time constraints and other procedures herein agreed to. Both parties
shall share equally the payment of the arbitrator's fee, though the arbitrator,
in his or his sole discretion, may order the
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non-prevailing party to pay the prevailing party's share of the arbitrator's
fee. Any controversy regarding whether a dispute is an arbitratable dispute
hereunder shall be determined by the arbitrator. The designation of a situs or
a governing law for this Agreement or arbitrations hereunder shall not be
deemed an election to preclude application of the U.S. Arbitration Act, if it
would be applicable. Judgment upon the award rendered by the arbitrator may be
entered and enforced in any court having proper jurisdiction. At the request
of either party, arbitration proceedings will be conducted in secrecy; in such
case all documents, testimony and records will be received, heard and
maintained by the arbitrator in secrecy under seal, available for inspection
only by the parties and their respective attorneys and experts, who will agree,
in advance and in writing, to receive all such information confidentially and
to maintain such information in secrecy until such information becomes
generally known.
It is the intention of both parties that any dispute arising in connection with
this Agreement or EMPLOYEE's employment shall be resolved expeditiously.
Therefore, all discovery must be completed and the hearing commenced within 30
days of the arbitrator's appointment. The award must be reasoned and must be
issued within 30 days of commencement of the hearing and will not be subject to
judicial review in whole or in part.
8.3 No Solicitation/Raiding of Employees. EMPLOYEE
acknowledges and agrees that XXXXX has invested substantial time and effort in
assembling its present staff. Accordingly, EMPLOYEE agrees and covenants that
during the term of this Agreement, including the period, if any, during which
EMPLOYEE shall be entitled to severance compensation hereunder, but in no event
for a period less than one year after the termination of his employment with
XXXXX, EMPLOYEE will not directly or indirectly, induce or solicit any employee
to leave employment with XXXXX.
8.4 Confidential Information and Trade Secrets. EMPLOYEE
acknowledges and agrees that in the course of employment with XXXXX, he has
been granted access to and become acquainted with information of a
confidential, proprietary or secret nature which is or may be either applicable
to or related in any way to the present or future business of XXXXX. Such
"confidential information" includes but is not limited to business strategies,
financial results, pricing, marketing strategies, sales techniques, etc.
EMPLOYEE acknowledges and agrees that such confidential information constitutes
"trade secret" information within the meaning of the Uniform Trade Secret Act
(California Civil Code section 3426 set seq.)" In addition to such confidential
information, "trade secrets" include but are not limited to various devices,
secret inventions, processes, compilation of information, records,
specifications, etc. EMPLOYEE acknowledges and agrees that such confidential
information and trade secrets have independent economic value, are not
generally known to the public and/or other persons who can obtain economic
value from the disclosure or use thereof, and that such confidential
information and trade secrets have remained confidential due to the
extraordinary precautions, safeguards and efforts of XXXXX and its employees to
maintain the secrecy and confidential thereof. EMPLOYEE covenants and agrees
not to disclose to any person, company or entity other than XXXXX any trade
secrets, confidential or proprietary information, directly or indirectly, or to
use them in any way, for his own benefit or for the benefit of any other person
or entity other than XXXXX, except as required in the course of employment with
XXXXX.
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EMPLOYEE agrees to abide by the policies and procedures of XXXXX, as
established from time-to-time, for the protection of trade secrets,
confidential and proprietary information.
8.5 Conflicts of Interest. EMPLOYEE acknowledges and
agrees that during the term of this Agreement, including the period, if any,
during which EMPLOYEE shall be entitled to severance compensation hereunder,
EMPLOYEE will not, without the prior written consent of the Board of Directors
of XXXXX, directly or indirectly engage in any employment, consulting, or other
activity which would conflict with the business of XXXXX or the duties of
EMPLOYEE.
8.6 Injunctive Relief. In the event of any breach of the
provisions of this Agreement, XXXXX and EMPLOYEE respectively agree that an
injunction may issue from any court of competent jurisdiction to enforce these
provisions, including the terms of this paragraph. These provisions shall not
in any way limit the right of either party to bring an action for other
injunctive or other equitable relief and for damages occasioned by any breach
of this Agreement by the other party.
8.7 Preservation of Company Property. EMPLOYEE
acknowledges that from time-to-time in the course of employment with XXXXX,
EMPLOYEE has had the opportunity to inspect and use certain property of XXXXX,
both tangible and intangible, including but not limited to files, records,
documents, drawings, specifications, lists, equipment, graphics, designs and
similar items relating to the business of XXXXX. EMPLOYEE acknowledges and
agrees that all such property, including but not limited to any and all copies
thereof, whether prepared by EMPLOYEE or otherwise in the possession of
EMPLOYEE, are and shall remain the exclusive property of XXXXX, that EMPLOYEE
shall have no right or proprietary interest in such property, that EMPLOYEE
will safeguard and return to XXXXX all such property, and that EMPLOYEE has not
and will not take, remove, duplicate or otherwise remove any such property from
the business premises of XXXXX at any time without the consent of the Chief
Executive Officer.
8.8 No Solicitation of Customers. Because of the
sensitive and unique nature of the business of XXXXX, EMPLOYEE acknowledges and
agrees that the solicitation of a past, current or potential customer of XXXXX
with whom EMPLOYEE has had a business contact on behalf of XXXXX of necessity
requires the use of confidential information, and that the use and application
of such confidential information by EMPLOYEE would be unfair and cause
irreparable injury to XXXXX.
EMPLOYEE further acknowledges and agrees that the identity of the customers of
XXXXX are not generally known to the public or the competitors of XXXXX and
that EMPLOYEE has had access to the identity of such customers solely as a
result of this employment with XXXXX. Therefore, EMPLOYEE covenants and agrees
that during the term of this Agreement, including the period, if any, during
which EMPLOYEE shall be entitled to severance compensation hereunder, but in no
event for a period less than one year following the effective date of the
termination of his employment with XXXXX, EMPLOYEE shall not, directly or
indirectly, for himself or for any person, company or entity, attempt to
divert, solicit or take away any business or patronage of any customer of XXXXX
with whom EMPLOYEE has had business contact or about which EMPLOYEE has had
access to confidential information, and that EMPLOYEE also will not, directly
or indirectly,
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for himself or any other person, company or employer, contact any such customer
of XXXXX for the purpose of soliciting or diverting the business or patronage
of any such customer.
8.9 Inventions. EMPLOYEE agrees to promptly disclose to
XXXXX any and all inventions, discoveries, improvements, trade secrets,
formulas, techniques and processes, whether or not patentable and whether or
not reduced to practice, made or conceived by EMPLOYEE, either solely or in
conjunction with others, during the period of his employment with the Company,
which relate to or result from the actual anticipated business, work or
research for XXXXX and which result, to any extent, from the use of the
premises or property of XXXXX, or are suggested by any tasks assigned to
EMPLOYEE or any work performed by EMPLOYEE for or on behalf of XXXXX. EMPLOYEE
agrees to and hereby does grant and assign to XXXXX all rights which EMPLOYEE
may have or acquire in any such invention. EMPLOYEE acknowledges and agrees
that all such inventions shall be the sole property of XXXXX and EMPLOYEE
hereby assigns to XXXXX his entire right, title and interest in and to such
inventions; provided, however, that such assignment does not apply to any
invention which qualifies fully under the provisions of Section 2870 of the
California Labor Code, the provisions of which are incorporated herein by
reference.
9. Release. It is understood and agreed by and between EMPLOYEE
and XXXXX that in consideration of each party entering into this Agreement,
each party is hereby respectively discharging and releasing the other party
from any and all claims which such party may have or may have had against the
other relating, arising out of or in connection with EMPLOYEE's employment by
XXXXX, including the termination of such employment as provided herein, other
than for purposes of enforcement of this Agreement. In addition, by entering
into this Agreement, each party is hereby waiving, as to the other party,
Section 1542 of the California Civil Code.
10. Disclosure of Investments. Simultaneously with EMPLOYEE's
execution of this Agreement and upon each anniversary of the Effective Date,
EMPLOYEE shall notify the Chairman of the Compensation Committee of the nature
and extent of EMPLOYEE's investments, stock holdings, employment as an
employee, director, consultant, partner or any similar interest in any business
or enterprise other than XXXXX; provided, however, that EMPLOYEE shall have no
obligation to disclose any investment under $100,000 in current market value or
any holdings of publicly traded securities which are not in excess of one
percent of the outstanding class of such securities.
11. Miscellaneous.
11.1 Payment Obligations. XXXXX' obligation to pay
EMPLOYEE the compensation and to make the arrangements provided herein shall be
unconditional, and EMPLOYEE shall have no obligation whatsoever to mitigate
damages hereunder. If litigation or arbitration is required after a Change in
Control to enforce or interpret any provision contained herein, XXXXX, to the
extent permitted by applicable law and XXXXX' Certificate of Incorporation and
Bylaws, hereby indemnities EMPLOYEE for EMPLOYEE's reasonable attorneys' fees
and disbursements incurred in such proceeding.
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11.2 Waiver. The waiver of the breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
11.3 Entire Agreement; Modifications. Except as otherwise
provided herein, this Agreement represents the sole, entire and complete
understanding among the parties with respect to the subject matter hereof, and
this Agreement supersedes any and all prior understandings, agreements, plans
and negotiations, whether written or oral, with respect to the subject matter
hereof, including without limitation, any understandings, agreements or
obligations respecting any past or future compensation, bonuses, reimbursements
or other payments to EMPLOYEE from XXXXX. All modifications to the Agreement
must be in writing and signed by both EMPLOYEE and XXXXX.
11.4 Notices. All notices and other communications under
this Agreement shall be in writing and shall be given by facsimile or first
class mail, certified or registered with return receipt requested, and shall be
deemed to have been duly given three days after mailing or 12 hours after
transmission of a facsimile to the respective persons named below:
If to XXXXX: Chairman of the Compensation Committee of
The Board of Directors
XXXXX MEDICAL CORPORATION (Delaware)
0000 Xxxx Xxxx Xxxx
Xxxxx Xxx, XX 00000
If to EMPLOYEE: Xxxxxx X. Xxxxxx
Chief Executive Officer
XXXXX MEDICAL CORPORATION (California)
0000 Xxxx Xxxx Xxxx
Xxxxx Xxx, XX 00000
Any party may change such party's address for notices by notice duly given
pursuant to this Section 11.4.
11.5 Headings. The Section headings herein are intended
for reference and shall not by themselves determine the construction or
interpretation of this Agreement.
11.6 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts entered into and wholly to be performed within the State of
California by California residents.
11.7 Severability. Should any court of competent
jurisdiction determine that any provision of this Agreement is illegal or
unenforceable to any extent, such provision shall be enforced to the extent
permissible and all other provisions of this Agreement shall continue to be
enforceable to the extent possible.
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11.8 Survival of XXXXX' Obligations. XXXXX' obligations
hereunder shall not be terminated by reason of any liquidation, dissolution,
bankruptcy, cessation of business, or similar event relating to XXXXX. This
Agreement shall not be terminated by any merger or consolidation or other
reorganization of XXXXX. In the event any such merger, consolidation or
reorganization shall be accomplished by transfer of stock or by transfer of
assets or otherwise, the provisions of this Agreement shall be binding upon and
inure to the benefit of the surviving or resulting XXXXX or person. This
Agreement shall be binding upon and inure to the benefit of the executors,
administrators, heirs, successors and assigns of the parties; provided,
however, that except as herein expressly provided, this Agreement shall not be
assignable either by XXXXX (except to an affiliate of XXXXX in which event
XXXXX shall remain liable if the affiliate fails to meet any obligations to
make payments or provide benefits or otherwise) or by EMPLOYEE.
11.9 Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall constitute one and the
same Agreement.
11.10 Withholdings. All compensation and benefits payable
to EMPLOYEE hereunder and shall be reduced by all federal, state, local and
other withholdings and similar taxes and payments required by applicable law.
11.11 Indemnification. In addition to any rights to
indemnification to which EMPLOYEE is entitled to under XXXXX' Certificate of
Incorporation, Bylaws, any policy of insurance or other agreement, XXXXX shall
indemnify EMPLOYEE at all times during and after the term of this Agreement to
the maximum extent permitted under Section 145 of the General Corporation Law
of the State of Delaware or any successor provision thereof and any other
applicable state law, and shall pay EMPLOYEE's expenses in defending any civil
or criminal action, suit, or proceeding brought by any third party against
EMPLOYEE as a result of EMPLOYEE's relationship with XXXXX or against XXXXX in
advance of the final disposition of such action, suit, or proceeding, to the
maximum extent permitted under such applicable state laws. Unless otherwise
provided herein, this indemnification shall not apply to and XXXXX shall not
indemnify EMPLOYEE with respect to any disputes arising under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
XXXXX MEDICAL CORPORATION (DELAWARE)
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Xxxxxx Xxxxxxxx
Chairman, Compensation Committee
Signature: /s/ Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
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