EX-10.51
XXXXXXX XXXXXXXXX, XX.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of October 5, 1998, between PHARMANEX,
INC., a Delaware corporation ("Company"), and XXXXXXX XXXXXXXXX, XX.
("Executive").
WHEREAS, the Company is a wholly owned subsidiary of Generation Health
Holdings, Inc.;
WHEREAS, in connection with the transactions contemplated by that
certain Agreement and Plan of Merger and Reorganization between Generation
Health Acquisitions, Corp., Nu Skin Enterprises, Inc. ("Parent") and Generation
Health Holdings, Inc., dated as of October 5, 1998 ("Merger Agreement"), the
Company will become an indirect wholly owned subsidiary of the Parent;
WHEREAS, following the transactions contemplated by the Merger
Agreement, the Company wishes to have the Executive continue to provide services
for the period provided in this Agreement and Executive wishes to remain in the
employ of the Company for such period; and
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EFFECTIVENESS OF AGREEMENT
1.1. General. This Agreement shall become effective as of the
Effective Time (as defined in the Merger Agreement).
2. EMPLOYMENT AND DUTIES
2.1. General. The Company hereby employs the Executive, and
the Executive agrees to serve, as President of the Company, upon the
terms and conditions herein contained. In such capacity, Executive
shall report directly to the Chief Executive Officer of the Parent. The
Executive shall perform such other duties and services for the Company
and the Parent as may be reasonably designated from time to time by the
Parent and as are consistent with Executive's title. The Executive
agrees to serve the Company faithfully and to the best of his ability
under the direction of the Parent.
2.2. Exclusive Services. Except as may otherwise be approved
in advance by the Board of Directors of the Company ("Board"), and
except during vacation periods and reasonable periods of absence due to
sickness, personal injury or other disability, the Executive shall
devote his full working time throughout the Employment Term (as defined
below) to the services required of him hereunder. The Executive shall
render his services exclusively to the Company during the Employment
Term, and shall use his best efforts, judgment and energy to improve
and advance the business and interests of the Company in a manner
consistent with the duties of his position. Executive may participate
in charitable and philanthropic activities so long as they don't
interfere with his duties hereunder.
2.3. Term of Employment. The Executive's employment under this
Agreement shall commence as of the Effective Time and shall terminate
on the earlier of (a) December 31, 2001, or (b) the termination of the
Executive's employment pursuant to this Agreement. The period
commencing as of the Effective Time and ending on December 31, 2001 or
such earlier date on which Executive's employment with the Company
terminates, is hereinafter referred to as the "Employment Term".
Executive may terminate his employment with the Company at any time and
for any reason upon twelve (12) months prior written notice to the
Company.
2.4. Reimbursement of Expenses. The Company shall reimburse
the Executive for reasonable travel and other business expenses
incurred by him in the fulfillment of his duties hereunder upon
presentation by the Executive of an itemized account of such
expenditures, in accordance with the Parent's policies and procedures.
2.5. Termination of Prior Agreements. Executive agrees and
acknowledges that, upon the Effective Time, all prior employment
agreement, compensation and incentive arrangements and rights to
acquire equity of the Company (except as provided expressly herein and
except for options expressly assumed by Parent in the Merger Agreement
and except for the Indemnity Agreement between Executive and Generation
Health Holdings, Inc. (unless Executive and the Company enter into a
replacement Indemnification Agreement in form and substance
satisfactory to Executive)) are cancelled in their entirety and are of
no further force or effect.
3. SALARY
3.1. Base Salary. From the Effective Time, the Executive shall
be entitled to receive a base salary ("Base Salary") at a rate of
$230,000 per annum, payable twice monthly in arrears in equal
installments in accordance with the Parent's payroll practices.
3.2. Annual Review. The Executive's Base Salary shall be
reviewed for potential increase by the Parent, based upon the
Executive's performance, not less often than annually. Any positive
adjustments in Base Salary effected as a result of such review shall be
made by the Parent in its sole discretion; provided, however, that
during the three year period of the Employment Term only, the Executive
shall receive a minimum increase of ten percent (10%) per annum.
3.3. Bonus. During his employment under this Agreement, the
Executive shall be entitled to participate in Parent's Cash Incentive
Plan ("Bonus Plan"), under which the Executive shall be entitled to
participate as a "Large Country Manager" (as such term is defined in
the Bonus Plan) and to receive an annual bonus of up to 130% of his
Base Salary, based on his level of achievement of the applicable
performance criteria. Any bonus will be paid in cash in accordance with
of the terms and conditions of the Bonus Plan. If Executive would have
been entitled to a bonus under this Section for any bonus period
(January 1 to June 30, and July 1 to December 31) but for the fact that
he is no longer employed by the Company on a bonus payment date (March
15 or September 15), as opposed to during a bonus period, other than as
a result of a termination for Cause or Executive's resignation, then
Executive shall nonetheless be entitled to and be paid the applicable
bonus.
4. LONG-TERM INCENTIVE COMPENSATION.
The Company will provide the Executive with the following long-term
incentive compensation arrangement in accordance with the terms of Parent's 1996
Incentive Stock Option Plan ("Stock Option Plan").
(a) As soon as practicable after the Effective Time,
Parent will grant the Executive nonqualified stock options
("Options") to acquire 450,000 shares of Parent common stock
("Shares"); 120,000 of the Options will be designated Series A
Options ("Series A Options"), 150,000 of the Options will be
designated Series B Options ("Series B Options") and 180,000
of the Options will be designated Series C Options ("Series C
Options"), in each case with an exercise price equal to $17.00
per share.
(b) For each of the three fiscal years of the Company
beginning with fiscal year 1999 ("Performance Period"),
one-third of each of the Series A, Series B and Series C
Options will vest (and become exercisable) at the end of each
fiscal year if the following conditions are satisfied: (i) the
Pharmanex/IDN Gross Profit objectives for such fiscal year for
such series and set forth on Appendix A (which may be
equitably adjusted from time to time, in the sole
determination of Parent's Board of Directors acting reasonably
and in good faith, to reflect significant changes and
developments in the Company's operations resulting from
acquisitions or dispositions of other companies or business)
("Gross Profit") are met or exceeded, (ii) the Parent=s
Consolidated Revenue objectives for such fiscal year for such
series and set forth in Appendix B (which may be equitably
adjusted from time to time, in the sole determination of the
Parent's Board of Directors acting reasonably and in good
faith, to reflect significant changes and developments in
Company and Parent operations resulting from acquisitions or
dispositions of other companies or businesses) ("Consolidated
Revenue") are met or exceeded, and (iii) the Executive is
employed by the Company or an affiliate continuously until the
last day of such fiscal year. For purposes of this Agreement,
Gross Profit of the Company and Consolidated Revenue of the
Parent shall be calculated by the Parent=s independent
certified public accountants in accordance with generally
accepted accounting principles. In the event that Parent's
Board of Directors determines that an increase in the Gross
Profit or Consolidated Revenue objectives is warranted in
accordance with the foregoing, such objectives shall be
adjusted upward by an amount equal to the annualized gross
profit (for the Gross Profit objectives) or revenue (for the
Consolidated Revenue objectives) results for the acquired
company in the year of acquisition, plus the lesser of (i) 10%
ten percent per annum to reflect a modest anticipated growth
rate, or (ii) the average historical growth rate in gross
profit (for the Gross Profit objectives) or revenue (for the
Consolidated Revenue objectives) of the acquired company
during the acquired company's prior three fiscal years.
Moreover, if any one-third installment of such Options have not become
exercisable in accordance with the immediately preceding paragraph, such Options
shall become vested and exercisable at the earlier to occur, if any, of the
following dates or events:
(i) the end of any subsequent fiscal year in the
Performance Period if the cumulative Gross Profit objectives
and the cumulative Consolidated Revenue objectives for the
period ending with the end of such fiscal year as set forth on
Appendix A and Appendix B are met or exceeded; provided that
the Executive is employed by the Company continuously until
the last day of such fiscal year; or
(ii) the date which is seven years after the
Effective Time; provided the Executive is employed by the
Company continuously until such date.
Notwithstanding the foregoing, upon the occurrence of a change of
control of the Parent (as defined in the Stock Option Plan), all unvested
Options will become immediately vested and exercisable; provided the Executive
is employed by the Company or an affiliate on such date.
(c ) Unless the Company determines otherwise, the
Executive shall forfeit all Options, whether or not vested, if
the Executive's employment with the Company or any of its
affiliates is terminated for Cause or, if following
termination of the Executive's employment with the Company or
any of its affiliates for any other reason, the Company
determines that, during the period of the Executive's
employment, circumstances existed which would have entitled
the Company or any such affiliate to terminate the Executive's
employment for Cause and the Company notifies Executive of
such determination in writing no later than ninety (90) days
after termination of Executive's employment with the Company.
(d ) In connection with the grant of the Options, the
Company and the Executive shall enter into an award document
which shall set forth the term of the Options, the procedures
for exercising the Options and such other terms as the Company
may determine, in its reasonable discretion, are necessary and
appropriate; provided, however, that notwithstanding the
foregoing the Options shall have the longest term permissible
under the Stock Option Plan.
5. EMPLOYEE BENEFITS
The Executive shall, during his employment under this Agreement, be
included to the extent eligible thereunder in all employee benefit plans,
programs or arrangements (including, without limitation, any plans, programs or
arrangements providing for retirement benefits, profit sharing, disability
benefits, health and life insurance, or vacation and paid holidays) that shall
be established or adopted by the Company or the Parent for, or made available
to, the Company's or the Parent's senior executives. In addition, the Company
shall furnish the Executive with the following benefits during his employment
under this Agreement:
(a) at the Company's expense, maintain an executive
quality apartment or condominium in Provo, Utah for use in
connection with Company business; and
(b) reimburse up to $6,500 per annum for expenses
with respect to his participation in the Young President=s
Organization ("YPO"). In addition, every year Executive shall
be entitled to attend one YPO University one week session and
receive reimbursement therefor; and
(c) the payment of Executive's reasonable relocation
expenses incurred in connection with any move of the Company's
principal headquarters at any time during the term of this
Agreement in accordance with the policies of the Parent; and
(d) Four (4) weeks vacation per annum.
6. TERMINATION OF EMPLOYMENT
6.1. Termination Without Cause.
6.1.1. General. Subject to the provisions of Sections
6.1.3 and 6.1.4, if, prior to the expiration of the Employment
Term, the Executive's employment is terminated by the Company
without Cause (as defined below), the Company shall continue
to pay the Executive the Base Salary (at the rate in effect on
the date of such termination) for twelve (12) months (such
period being referred to hereinafter as the "Severance
Period"), at such intervals as the same would have been paid
had the Executive remained in the active service of the
Company. The Executive shall have no further right to receive
any other compensation or benefits after such termination or
resignation of employment, except as determined in accordance
with the terms of the employee benefit plans or programs of
the Company or as provided in this Agreement. In addition, the
Executive may, but only within twelve (12) months after he
ceases to be an employee, exercise his Options to the extent
they have vested. To the extent that the Executive is not
otherwise entitled to exercise the Options at the date of such
termination, or if he fails to exercise the Options within the
time specified in the preceding sentence, such Options will
terminate.
6.1.2 To the extent that any of the Options would
have vested at the end of the fiscal year in which Executive
is terminated under Section 4 of this Agreement but for the
termination of the Executive without Cause, then
notwithstanding Section 6.1.1 hereof, such Options shall vest
when the necessary calculations under Section 4 have been
completed, and Executive shall have twelve (12) months from
such determination date to exercise the Options. The Company
shall notify Executive within ten days after the necessary
calculations under Section 4 have been completed (which
calculations shall be made no later than ninety (90) days
after the fiscal year in question) as to whether any of the
Options have vested. This provision shall survive termination
of the Agreement.
6.1.3. Conditions Applicable to the Severance Period.
If, during the Severance Period, the Executive breaches any of
his obligations under Section 8, the Company may, upon written
notice to the Executive, terminate the Severance Period and
cease to make any further payments or provide any benefits
described in Section 6.1.1.
6.1.4. Death During Severance Period. In the event of
the Executive's death during the Severance Period, payments of
Base Salary under Section 6.1.1 shall continue to be made
during the remainder of the Severance Period to the
beneficiary designated in writing for this purpose by the
Executive or, if no such beneficiary is specifically
designated, to the Executive's estate.
6.1.5. Date of Termination. The date of termination
of employment without Cause shall be the date specified in a
written notice of termination to the Executive as the last day
of the Executive's employment.
6.1.6. Constructive Termination. The term
"Constructive Termination" means:
(a) the continued assignment to Executive of any
duties or the continued material reduction in Executive's
duties, either of which is materially inconsistent with
Executive's position with the Company, for thirty (30)
calendar days after Executive's delivery of written notice to
the Company objecting to such assignment or reduction; or
(b) the relocation of the principal place for the
rendering of Executive's services hereunder to a location more
than twenty (20) miles from Los Angeles or the Company's
initial business offices in the San Francisco Area; or
(c) a material reduction in compensation and benefits
under this Agreement, which remains in effect for thirty (30)
calendar days after Executive delivers written notice to the
company of such material reduction.
None of the foregoing will constitute a Constructive Termination to the
extent mutually agreed upon in advance of the occurrence thereof by the
Executive and the Company. A Constructive Termination will be treated as a
termination of the Executive by the Company without Cause.
6.2. Termination for Cause; Resignation.
6.2.1. General. If, prior to the expiration of the
Employment Term, the Executive's employment is terminated by
the Company for Cause, or the Executive resigns from his
employment hereunder, the Executive shall be entitled only to
payment of his Base Salary as then in effect through and
including the date of termination or resignation. In the event
the Executive resigns Executive may, but only within twelve
(12) months after he ceases to be an employee, exercise his
Options to the extent they have vested. The Executive shall
have no further right to receive any other compensation or
benefits after such termination or resignation of employment,
except as determined in accordance with the terms of the
employee benefit plans or programs of the Company or as
provided in this Agreement.
6.2.2. Date of Termination. The date of termination
for Cause shall be the date specified in a written notice of
termination to the Executive as the last day of the
Executive's employment. The date of resignation shall be the
date specified in the written notice of resignation from the
Executive to the Company as the last day of the Executive's
employment, or if no date is specified therein, twelve (12)
months after receipt by the Company of written notice of
resignation from the Executive.
6.3. Cause. Termination for "Cause" shall mean termination of
the Executive's employment because of:
(a) any act or omission that constitutes a material
breach by the Executive of any of his obligations under this
Agreement, which breach is materially injurious to the
Company;
(b) the willful and continued failure or refusal of
the Executive to substantially perform the duties required of
him in his position with the Company, which failure is not
cured within twenty (20) days following written notice of such
failure;
(c) any willful violation by the Executive of any
material law or regulation applicable to the business of the
Company or any of its subsidiaries or affiliates, or the
Executive's conviction of, or a plea of nolo contendre to, a
felony, or any willful perpetration by the Executive of a
common law fraud; or
(d) any other willful misconduct by the Executive
that is materially injurious to the financial condition or
business reputation of, or is otherwise materially injurious
to, the Company or any of its subsidiaries or affiliates.
7. DEATH OR DISABILITY
In the event of termination of employment by reason of death or
Disability (as hereinafter defined), the Executive (or his estate, as
applicable) shall be entitled to Base Salary through the date of termination.
Other benefits shall be determined in accordance with the terms of the benefit
plans maintained by the Company, and the Company shall have no further
obligation hereunder. In addition, the Executive (or his estate or the person or
persons to whom the Options may have been transferred by will or by the laws of
decent and distribution, as applicable) may, but only within twelve months after
Executive ceases to be an employee, exercise Executive's Options to the extent
Executive was entitled to exercise such Options on the date of his death or on
the date he is terminated by the Company by reason of Disability (all of which
shall be terminations without Cause). To the extent that the Executive was not
otherwise entitled to exercise the Options on such date, or if he (or his estate
or the person or persons to whom the Options may have been transferred by will
or by the laws of decent and distribution, as applicable) fails to exercise the
Options within the time specified in the preceding sentence, such Options will
terminate. For purposes of this Agreement, "Disability" means a physical or
mental disability or infirmity of the Executive, as determined by a physician of
recognized standing selected by the Company, that prevents (or, in the opinion
of such physician, is reasonably expected to prevent) the normal performance of
his duties as an employee of the Company for any continuous period of 180 days,
or for 180 days during any one 12-month period.
8. CONFIDENTIALITY; NONCOMPETITION; NONSOLICITATION
8.1. Key-Employee Covenants. The Executive agrees to perform
his obligations and duties and to be bound by the terms of the
Key-Employee Covenants attached hereto as Appendix C which are
incorporated by reference and which shall be in force unless otherwise
expressly modified by this Agreement.
(a) Executive agrees that the period of
non-competition set forth in Section 8 of the Key-Employee
Covenants is lengthened from six months to one year. The
Company, or the Parent may extend the period of
non-competition set forth in Section 8 of the Key-Employee
Covenants for up to an additional two (2) years thereafter,
provided that (i) where Executive has either voluntarily
resigned his employment with the Company or his employment is
terminated for Cause, within thirty (30) days of the
termination of the applicable non-competition period the
Company or the Parent notifies the Executive in writing that
it wishes to so extend the period of non-competition for an
additional one-year period, (ii) where Executive's employment
with the Company is terminated without Cause or as a result of
the expiration of the term of this Agreement (where Executive
does not continue in the employ of the Company), the Company
notifies the Executive in writing within sixty (60) days of
the termination of Executive's employment hereunder, that it
wishes to so extend the period of non-competition and
specifies therein whether such extension shall be for a one
(1) or two (2) year period, and (iii) the Company pays
Executive for each year that it decides to extend the period
of non-competition an amount equal to fifty percent (50%) of
Executive's most recent Base Salary, which amount shall be
payable by the Company twice monthly over the period in
question.
8.2. Certain Remedies. Without intending to limit the remedies
available to the Company, the Executive agrees that a breach of any of
the covenants contained in the Key-Employee Covenants may result in
material and irreparable injury to the Company or its subsidiaries or
affiliates for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and
that, in the event of such a breach or threat thereof, the Company
shall be entitled to seek a temporary restraining order or a
preliminary or permanent injunction, or both, without bond or other
security, restraining the Executive from engaging in activities
prohibited by the Key-Employee Covenants or such other relief as may be
required specifically to enforce any of the covenants in the
Key-Employee Covenants. Such injunctive relief in any court shall be
available to the Company in lieu of, or prior to or pending
determination in, any arbitration proceeding.
9. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration pursuant to the rules of the American
Arbitration Association in Salt Lake City, Utah before three arbitrators of
exemplary qualifications and stature. Each party hereto shall choose an
independent arbitrator meeting such qualifications within ten (10) business days
after demand for arbitration is made and such independent arbitrators shall
mutually agree as to the third arbitrator meeting such qualifications within
twenty (20) business days after demand for arbitration is made. If such
arbitrators cannot come to an agreement as to the third arbitrator by such date,
the American Arbitration Association shall appoint the third arbitrator in
accordance with its rules and the qualification requirements set forth in this
section. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The parties hereby agree that the arbitrators shall be empowered
to enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The party that prevails in any arbitration hereunder shall be
reimbursed by the other party hereto for any reasonable legal fees and
out-of-pocket expenses directly attributable to such arbitration, and such other
party shall bear all expenses of the arbitrators. Upon the request of a party,
the arbitration award shall specify the factual and legal basis for the award.
10. MISCELLANEOUS
10.1. Communications. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed
to have been duly given or made as of the date delivered or on the
fifth business day after mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the party at the following addresses (or at such other
address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
(a) if to the Company:
c/o Nu Skin Enterprises, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxx, Esq.
with copies to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Executive:
0000 Xxxx Xxxxxx
Xxxxxxxxx 0
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
10.2. Waiver of Breach; Severability. (a) The waiver by the
Executive or the Company of a breach of any provision of this Agreement
by the other party hereto shall not operate or be construed as a waiver
or any subsequent breach by either party.
(b) The parties hereto recognize that the laws and
public policies of various jurisdictions may differ as to the
validity and enforceability of covenants similar to those set
forth herein. It is the intention of the parties that the
provisions hereof be enforced to the fullest extent
permissible under the laws and policies of each jurisdiction
in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws
or policies) of any provisions hereof shall not render
unenforceable, or impair, the remainder of the provisions
hereof. Accordingly, if at the time of enforcement of any
provision hereof, a court of competent jurisdiction holds that
the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the
maximum period, scope, or geographic area reasonable under
such circumstances will be substituted for the stated period,
scope or geographical area and that such court shall be
allowed to revise the restrictions contained herein to cover
the maximum period, scope and geographical area permitted by
law.
10.3. Assignment; Successors. No right, benefit or interest
hereunder shall be assigned, encumbered, charged, pledged, hypothecated
or be subject to any setoff or recoupment by the Executive. This
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company; provided, however that the
Company may not assign this Agreement without Executive's consent.
10.4. Entire Agreement. This Agreement and the Appendices
attached hereto, which are incorporated herein by this reference,
contain the entire agreement of the parties with respect to the subject
matter hereof, and on and after the Effective Time, and except as
otherwise set forth herein, supersedes all prior agreements, promises,
covenants, arrangements, communications, representations and warranties
between them, whether written or oral, with respect to the subject
matter hereof.
10.5. Cancellation of Options. As consideration with for
entering into this Agreement, the Executive agrees to cancel and waive
all rights and interest that he may have to the options described in
Appendix D effective as of the Effective Time.
10.6. Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes,
and such other deductions as may be required under the Company's
employee benefit plans, if any.
10.7. Governing Law. This Agreement shall be governed by, and
construed with, the law of the State of Utah.
10.8. Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe any of
its provisions.
10.9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed, the Parent has agreed and accepted terms hereof, and the Executive has
hereunto set his hand, as of the day and year first above written.
PHARMANEX, INC.
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Chief Financial Officer
Agreed and accepted as to its
duties pursuant to this Agreement:
NU SKIN ENTERPRISES, INC.
By: /s/ Xxxxxx Xxxx
Name: Xxxxxx Xxxx
Title: Vice President
