EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into at Phoenix, Arizona,
this 7th day of September, 1999 by and between EMPYREAN BIOSCIENCE, INC. (the
"Company") and XXXXXXX X. XXXXX ("Employee").
RECITALS:
A. The Company is in the business of infectious disease prevention through
the development and sale of microbicide lotion and gel (the "Business");
B. Employee has certain expertise in connection with certain aspects of the
Company's business and the ability to expand and grow the Company's operations
and profitability.
NOW, THEREFORE, in consideration of mutual promises and agreements
contained herein and intending to be legally bound hereby, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts such employment by the Company, effective September 7, 1999 ("the
Commencement Date"), upon the terms and conditions set forth herein. Company
agrees that any public announcement or disclosure of Employee's employment by
the Company shall occur after the Commencement Date.
2. SERVICES. Employee shall be appointed Executive Vice President and Chief
Marketing Officer upon commencement of employment. In addition, Employee shall
be appointed to serve as a member of the Board of Directors within six months
from the Commencement Date or at the next Board of Directors' meeting, whichever
occurs earlier. Employee will devote his full working time, experience and best
efforts to the performance of his duties on behalf of the Company. During the
time Employee holds the position of Executive Vice President and Chief Marketing
Officer, Employee shall report to the Chief Executive Officer with respect to
day-to-day operations of the Company. No later than six months following the
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Commencement Date, Employee shall be promoted to Executive Vice President and
Chief Operating Officer, at which time Employee shall report to the Chairman of
the Company and shall assume increased responsibilities commensurate with the
promotion. Employee shall perform all such duties in accordance with such rules,
policies and procedures as the Company and or its Board of Directors may adopt
from time to time.
3. COMPENSATION.
3.1 BASE SALARY. The Company shall pay to Employee an annual base salary of
One Hundred Fifty Thousand Dollars ($150,000.00) payable in consecutive, equal,
biweekly installments. Concurrent with Employee's promotion, as provided in
paragraph 2, Employee's annual base salary shall increase to One Hundred Seventy
Thousand Dollars ($170,000.00). Employee's base salary shall be reviewed
annually thereafter by the Compensation Committee. The first review shall occur
eighteen (18) months from the Commencement Date.
3.2 CERTAIN BASIC FRINGE BENEFITS. Upon commencement of employment, the
Company shall provide to Employee a benefits package including, but not limited
to, company-sponsored group health insurance (including prescription drug plan),
dental insurance, vision insurance, group life insurance, accidental death and
dismemberment benefits, short term disability insurance, long term disability
insurance and the option to participate in any 401(k) program sponsored by the
Company, upon terms and conditions and in amounts to be determined by Employee
as part of a package of benefits he shall be responsible for drafting and
implementing and offering to all employees of the Company. Such program shall be
subject to the approval of the Board of Directors. Company will reimburse
Employee for his costs, less a reasonable employee contribution, of securing
independent health insurance coverage until such time as the new
company-sponsored plan is in effect.
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3.3 BUSINESS EXPENSES. The Company shall promptly reimburse Employee for
all reasonable, ordinary and necessary business expenses incurred by him in the
performance of his duties hereunder, and Employee shall submit receipts,
vouchers or other appropriate evidence to substantiate that said expenses were
incurred by Employee in connection with the business of the Company. In
addition, the Company will reimburse Employee for the cost of coach air fare
between Cleveland, Ohio and Phoenix, Arizona, when incurred by Employee, but not
more frequently than weekly. In addition, the Company shall provide Employee
with a furnished two-bedroom apartment in the Phoenix area, access to a fitness
center (but not including golf playing privileges), a suitable company-provided
automobile and a company credit card for the purchase of fuel for the
company-provided automobile operated by the Employee in Phoenix for purposes
related to the business of the Company and Employee's commuting to and from work
in the Phoenix area. All other charges to the credit card shall be the
Employee's responsibility.
3.4 INCENTIVE COMPENSATION. Employee shall be entitled to participate in an
incentive compensation bonus program to be adopted by the Company and in effect
for Fiscal Year 2000, after consultation with Employee, and pursuant to approval
of the Board of Directors. It will be the responsibility of the Employee to
prepare an incentive program for Senior Managers to present to the Empyrean
Board of Directors for approval.
3.5 INCENTIVE STOCK OPTIONS. Within thirty (30) days of the Commencement
Date, the Company shall, as set forth in and in accordance with the terms of a
stock option agreement to be entered into between the Company and Employee
pursuant to the Company's stock option plan (the "Plan"), grant Employee
Incentive Stock Options to purchase a minimum of 1,500,000 shares of common
stock exercisable at the fair market value of such shares on the date of the
grant. Any shares acquired by Employee upon the exercise of the Incentive Stock
Options shall be subject to and shall be transferable only in compliance with
the Plan and applicable securities laws.
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Company hereby agrees to register the shares under the Securities Act of
1933, as amended, by means of an effective Form S-8 registration statement, and
all shares issued upon exercise of options granted pursuant to the terms of the
Plan will be permitted to be resold under an effective Form S-3 registration
statement, if available. Company hereby agrees to have such registration(s) in
effect, to maintain the registration(s) in effect as long as necessary for
Employee to sell his shares, and to comply with any other requirements,
including the preparation of a reoffer prospectus, if applicable, necessary for
employee to sell his shares.
Options for 500,000 shares will vest over a six-month period as follows:
* Options for 50,000 shares will vest immediately upon the Commencement
Date;
* Options for 90,000 shares will vest on the last day of each of the
second, third, fourth, fifth and sixth month following the
Commencement Date.
Employee agrees not to sell more than the equivalent of one percent (1%) of
the outstanding shares of the Company during any 90 day period for a period of
twelve months from the Commencement Date.
Options for a minimum of 1,000,000 shares will vest based upon achieving
mutually agreed upon performance criteria for Fiscal Year 2000 and 2001 as
follows:
* Fiscal Year 2000 - Options for a base amount of 500,000 shares will
vest based upon three to five performance criteria. The 500,000
options will be divided by the number of performance criteria and an
equal amount will be attached to the achievement of each performance
criterion. Vesting for each performance criterion will be based upon
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the percentage of the criterion achieved with a minimum of 85%
achievement to vest and no maximum. The base number of options for
each criterion will be multiplied by the percentage achievement for
that criterion. These amounts will then be added together to determine
the total options vested. Should the total options vested exceed
500,000, then vesting will be accelerated from the remaining options.
* Fiscal Year 2001 - Options for a base amount of 500,000 shares will
vest under the same procedure as described above. If vesting of any
options were accelerated to Fiscal 2000, then additional options will
be granted subject to Compensation Committee guidelines with a minimum
of 200,000 shares as well as any potential additional vesting earned
through other incentive provisions.
Any options granted to other members of management will vest upon the same
performance criteria as applied to Employee. The options will have a 10-year
term and provide for accelerated vesting in the event of a change in control or
ownership of the Company or termination of Employee's employment without cause.
4. TERM, TERMINATION.
4.1 This Agreement may be terminated by the Company at any time "for cause"
or without cause. "For cause" shall mean any termination of the Employee's
employment resulting from Employee's engaging in fraud, misappropriation of
funds or embezzlement against the Company.
4.2 If Employee is terminated from employment without cause, the Company
shall provide to Employee a twenty-four month evergreen severance provision
whereby Employee's base salary, bonus, benefits and options shall continue for
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twenty-four months, provided, however, if Employee's employment is terminated
less than twelve months from the Commencement Date, Employee's period of
severance will be limited to twelve months.
Any termination of Employee's employment resulting from: (i) Employee's
death; (ii) Employee's inability to perform the essential functions of his job
with or without reasonable accommodation for 180 consecutive business days or
300 of 365 total days; or (iii) Employee's resignation from his positions with
the Company within 30 days after the receipt of written notice from the Company
informing Employee that his base salary rate shall be reduced below its then
current level (the "Salary Reduction Notice"), or within 30 days of a reduction
in duties, title or responsibility, or within 30 days of a change in location, a
change in control or a breach of this Agreement, shall be deemed to be a
termination by the Company without cause.
Bonuses to be earned in accordance with an incentive compensation bonus
program applicable to the fiscal year in which Employee is terminated will be
determined by prorating the full amount of the bonus, which would have been
earned, had Employee been employed for the full fiscal year by the number of
days employed during the fiscal year. Incentive stock options to be vested upon
the attainment of certain performance goals applicable to the fiscal year in
which Employee is terminated shall be accelerated and vested as of the
Employee's termination date. Bonus shall be payable no later than 90 days
following the close of the fiscal year that Employee is terminated.
Such severance shall be paid to Employee in the form of regular payroll
checks, less deductions for taxes and withholdings, in equal installments during
the severance period following Employee's termination. The Company shall
continue to pay to Employee his salary at the annual rate in effect immediately
prior to such termination (unless such termination occurs as a result of the
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Employee's resignation from his positions with the Company within 30 days after
receipt of the Salary Reduction Notice, in which case such payments shall be at
the annual salary rate in effect immediately prior to the receipt of the Salary
Reduction Notice) for the severance period. Employee shall have the option of
accepting a lump sum payment of severance provision calculated by discounting
the stream of payments utilizing a discount rate of fifteen percent (15%).
In the event that participation in any such benefits package is barred, the
Company shall arrange to provide Employee with benefits during the severance
period substantially similar to those which he is entitled to receive, or
reimburse him for his costs of securing independent benefits coverage
substantially similar to the benefits package available to him prior to
termination, including gross up for any tax cost incurred as a result.
In the event the Company replaces the benefits package available to senior
officers of the Company during the Employee's severance period, Employee shall
be entitled to participate in any such replacement package, provided, however,
that if the new benefits package is substantially worse, in the aggregate, than
the benefits package available to Employee prior to termination, the Company
shall arrange to provide him with benefits substantially similar to those which
he is entitled to receive, or reimburse him for his costs of securing
independent benefits coverage substantially similar to the benefits package
available to him prior to termination.
In the event of a breach of this Agreement by the Company, Employee is
eligible, at Employee's option, to receive severance pay in accordance with the
two-year evergreen severance provision set forth above. Such severance payment
and acceleration of options as set forth in Section 4.2 shall be Employee's sole
remedy at law or in equity against Company for any breach of this agreement and
Employee shall sign a full and final release of claims, in a form acceptable to
Company, as a condition of receiving such severance payment.
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The Company and Employee mutually agree not to make or utter any
disparaging comments about one another, including the Company's past, present
and future officers, directors and or employees, and both the Company and the
Employee agree not to take any action to injure or harm one another's reputation
or business relationships.
5. COVENANTS OF EMPLOYEE.
5.1 Employee acknowledges that during the course of his employment by the
Company he will have access to trade secrets and other confidential information
with respect to the business, operations, accounts, books and records, sales,
customers, pricing, marketing, development, testing, scientific research and
other activities of the Company ("Trade Secrets"). Accordingly, Employee shall,
at all times, keep secret and inviolate all Trade Secrets which he now knows or
may hereafter come to know. In addition, Employee shall at no time copy, remove
from the premises of the Company or retain, without the prior consent of the
Company, any Trade Secrets, including, but not limited to, unpublished records,
agreements, books of account, corporate documents, work papers, correspondence,
customer lists, memoranda, computer software or documentation in connection
therewith, plans, drawings or copies or extracts from any of the foregoing,
except as may be required in the normal operation of the Company's business.
Upon the termination of Employee's employment, Employee shall promptly return to
the Company all Trade Secrets in his possession or under his control and shall
verify in writing his return of same as a condition to receipt of any severance
pay.
5.2 Employee agrees that during the term hereof (except as permitted
hereunder) and for a period of time equivalent to the length of Employee's
severance benefit following the termination of his employment, whether by
Company or by Employee, with or without cause, he will not engage in the
Business within any County or State where Company has conducted or may hereafter
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conduct any activities; or, own, manage, operate, control, or participate in, or
have any ownership interest in a similar business as the Business described in
Recital A, provided, however, that Employee may own any securities of any
publicly owned and traded entity in which Employee owns less than five percent
(5%) interest, which is engaged in the business similar to or competitive with
the business of the Company.
5.3 Employee agrees that for a period of time equivalent to the length of
Employee's severance benefit following the termination of his employment,
whether by Company or by Employee, with or without cause, he will not, directly
or indirectly, solicit the Company's employees. If during the severance period,
Employee is involved in a similar business as the Business described in Recital
A, Employee will not attempt to divert or take away, solicit or contact for
purposes related to the Business, any of the Company's customers and he shall
refrain from committing any act which would in any way jeopardize any
relationship the Company has with any such customer.
5.4 Employee hereby assigns to the Company any and all right, title and
interest Employee has or may have in any product, invention, device, method,
technique or formula created (in whole or in part) by him during the term
hereof, if such product, invention, device, method, technique or formula is
created during the hours in which Employee is employed or with the use or
assistance of the Company's facilities, materials or personnel. Employee shall
execute, acknowledge and deliver all documents and/or instruments which may be
requested by the Company in order to effectuate such assignment.
5.5 The Company shall have the royalty-free right to use in the Business
and to make, use and sell products and processes derived from any inventions,
discoveries, concepts and ideas (whether or not patentable or copyrightable),
including but not necessarily limited to processes, methods, formulae and
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techniques, as well as derivatives or improvements thereof or know-how related
thereto, which are conceived or made by Employee during the term of, during the
hours in which Employee is employed by the Company or with the use or assistance
of the Company's facilities, materials or personnel.
5.6 Company and Employee agree that the remedy at law for any breach of the
foregoing provisions of Section 5 will be inadequate, and either party shall be
entitled to both temporary and permanent injunctive relief enforcing such
provisions, in addition to any other remedy it may have at law or in equity.
5.7 The covenants of Company and Employee contained in this Section 5 are
separate and independent of any other provisions hereof and shall survive the
termination of this Agreement.
5.8 Employee has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon the Company,
and he hereby acknowledges and agrees that the same are reasonable in time and
territory, are designed to eliminate competition which otherwise would be unfair
to the Company, are fully required to protect the legitimate interest of the
Company, and do not confer a benefit upon the Company disproportionate to the
detriment to Employee.
6. REPRESENTATIONS BY EMPLOYEE. Employee represents and warrants to the
Company that (a) Employee has the legal right, power and authority to enter into
this Agreement and perform the obligations imposed upon him, (b) there are no
legal proceedings pending, or to the knowledge of Employee, threatened against
Employee which would in any way adversely affect the performance of the
obligations, and (c) Employee is not a party to any restrictive covenant,
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agreement, contract or instrument which would in any way prohibit Employee from
entering into or performing such obligations.
7. REPRESENTATIONS BY COMPANY. Company represents and warrants to the
Employee that (a) Company has the legal right, power and authority to enter into
this Agreement and perform the obligations imposed upon it, (b) there are no
legal proceedings pending, or to the knowledge of Company, threatened against
Company which would in any way adversely affect the performance of the
obligations, and (c) Company is not a party to any restrictive covenant,
agreement, contract or instrument which would in any way prohibit Company from
entering into or performing such obligations.
8. INDEMNIFICATION; INSURANCE. The Company will indemnify Employee to the
maximum extent permitted by law (including advancing expenses where appropriate)
with respect to actions taken by him as an officer or director of the Company,
any of its subsidiaries, or any affiliated entity of the Company or any of its
subsidiaries. The Company's obligation to provide indemnification shall survive
termination of employment. The Company will also maintain in effect during
Employee's employment hereunder directors and officer liability insurance with
minimum coverage of $5,000,000 per occurrence and $10,000,000 in the aggregate.
Employee will remain insured under such policy until the fifth anniversary of
termination of Employee's employment with the Company.
9. NOTICES. All notices hereunder shall be in writing and shall be deemed
to have been given at the time when mailed in any general or branch of the
United States Post Office enclosed in a registered or certified, postage prepaid
envelope addressed to the address of the respective parties as set forth below,
or to such other address as a party may have fixed by notice as stated below:
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TO EMPLOYEE: TO THE COMPANY:
------------ ---------------
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxxx, President and CEO
00000 Xxxxxxxxx Xxxx Empyrean Bioscience, Inc.
Xxxxxx Xxxx, Xxxx 00000 0000 Xxxx Xxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
10. SEVERABILITY. The invalidity or unenforceability of any portion of this
Agreement shall not impair or affect the validity or enforceability of any other
portion of this Agreement, which shall remain in full force and effect.
11. ASSIGNMENT. Employee shall not assign, transfer, pledge or encumber
this Agreement or any rights or obligations hereunder. The Company may not
assign or transfer this Agreement to successor Company in the event of merger,
consolidation, or transfer or sale of all or substantially all of the assets of
the Company without prior written approval of Employee; provided, however, that
in the case of any such assignment or transfer, this Agreement shall be binding
upon and inure to the benefit of such transferee, which shall assume and perform
all of the obligations of the Company hereunder.
12. WAIVER. A waiver by either party of a breach of any provisions of this
Agreement shall not operate or be construed to be a waiver of any subsequent
breach.
13. MISCELLANEOUS. This Agreement (a) shall be governed by and interpreted
in accordance with the local laws of the State of Arizona, (b) shall not be
modified except in a writing signed by the parties, (c) constitutes the entire
understanding of the parties with respect to the subject matter hereof,
superseding all prior understandings and agreements (both oral and written), and
(d) shall be binding upon and inure to the benefit of the parties hereto, their
heirs, executors, administrators, successors and permitted assigns. The
paragraph headings are for convenience only and shall not affect the
construction or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
multiple counterparts at the place and as of the date and year first above
written. EMPYREAN BIOSCIENCE, INC. (Company)
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxx, President and CEO
/s/ Xxxxxxx X. Xxxxx
------------------------------------------
XXXXXXX X. XXXXX (Employee)
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