EMPLOYMENT AGREEMENT
Employment Agreement ("Agreement") dated as of
October 22, 1996 between Pacific Biometrics, Inc., a Delaware
corporation (the "Company"), and Xxxxxxxxx Xxxx Xxxxx, Ph.D. (the
"Executive").
ARTICLE I
EMPLOYMENT
The Company hereby employs Executive, and Executive
accepts employment with the Company, upon the following terms and
conditions:
1.1 Employment. The Company hereby employs
Executive, and Executive agrees to serve, as Vice President and
Director of Laboratories of the Company during the term of this
Agreement. Subject to the Board of Directors of the Company, the
Executive shall provide such services as delegated by the Board of
Directors, provided that such duties shall be reasonably consistent
with those duties assigned to executive officers of organizations
comparable to the Company. The Executive agrees to devote her full
business time and attention and best efforts to the affairs of the
Company during the Term of this Agreement.
1.2 Term. The employment of the Executive by the
Company under the terms and conditions of this Agreement will
commence on the date hereof and continue until October 22, 1998
(the "Term") unless terminated sooner in accordance with the
provisions of Article IV.
ARTICLE II
COMPENSATION
2.1 (a) Annual Salary. During the Term the Company
shall pay to the Executive an annual salary of $85,000 (the "Base
Salary"), payable in equal installments every two weeks. Executive
shall be entitled to an annual increase in the Base Salary as
determined by the Board of Directors or compensation committee
thereof.
(b) Bonus. Executive shall be entitled to receive
the following bonuses: (i) $3,750, payable quarterly for achieving the
laboratory quarterly contribution budget attached hereto as Schedule
"A", provided that, in the event such budget is exceeded, Executive's
bonus shall be increased by the same percentage of such excess over
budgeted amounts; (ii) $5,000 upon the promotion and hire of a
laboratory manager; and (iii) $10,000 upon successful completion of
United States Food and Drug Administration ("FDA") clinical trials for
the Company's Osteopatch product. In addition, Executive shall be
entitled to such other bonuses as may be established by the Company's
Board of Directors or compensation committee thereof.
(c) Stock Options. In connection with the
execution of this Agreement, the Company granted to Executive on July
9, 1996 an option to purchase 80,000 shares of the Company's common
stock, $.01 par value per share, at an exercise price of
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$3.45 per share. Such options shall vest either (i) equally over a
four year period commencing on July 9, 1997 (i.e. 20,000 shares per
year over four years) or (ii) earlier as follows: (a) 40,000 of such
options shall vest immediately upon FDA approval of the Company's
Osteopatch product and (b) 40,000 of such options shall vest
immediately once the Company's laboratory operations achieve twelve
month results of $4.5 million in revenues and $1.4 million in net
profits.
2.2 Reimbursement of Expenses. The Executive shall
be entitled to receive prompt reimbursement of all reasonable expenses
incurred by the Executive in performing services hereunder, including
all expenses of travel, entertainment and living expenses while away
from home on business at the request of, or in the service of, the
Company, provided that such expenses are incurred and accounted for in
accordance with the policies and procedures established by the
Company.
2.3 Benefits. The Company shall pay the Executive as
additional salary the annual cost of a disability insurance policy
which provides for payments equal to the maximum percentage of the
Base Salary allowable during the term of disability which may be
obtained at reasonable cost to the Company, with payments commencing
three months after the commencement of the disability. The Executive
shall be entitled to participate in and be covered by all health,
insurance, pension, 401(k), stock purchase, stock option and any other
employee plans and benefits established by the Company
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(collectively referred to herein as the "Company Benefit Plans") for
its full-time employees generally, subject to meeting applicable
eligibility requirements. If no health benefits are offered to
employees generally, Executive shall be entitled to a reasonable
allowance for health insurance or reimbursement of health insurance
premiums paid directly by Executive with respect to a health plan for
the Executive and dependent family members.
2.4 Vacations and Holidays. During the Term, the
Executive shall be entitled to an annual vacation leave of a minimum
of four weeks at full pay. The Executive shall be entitled to such
holidays as are established by the Company for all employees and such
other religious holidays as is customary pursuant to Executive's
religious practice.
2.5 Indemnification. The Executive shall be
indemnified by the Company with respect to any personal guarantee of
Company indebtedness or Company leasehold obligations the Executive may
still be obligated on at the date of this contract.
ARTICLE III
CONFIDENTIALITY AND NONDISCLOSURE
3.1 Confidentiality. The Executive will not during
her employment by the Company or thereafter at any time disclose,
directly or indirectly, to any person or entity or use, or permit the
use of, any trade secrets or confidential information relating to the
Company. "Confidential Information" shall include all information
reasonably expected to be kept
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confidential, including, without limitation of the generality of the
foregoing, trade secrets, know-how, production processes, customer
lists, supply arrangements, business and financial plans and
projections, marketing plans and advertising arrangements, the terms of
any license agreement relating to any of the foregoing, and all
information denominated as "confidential" and is made available only on
a restricted basis.
3.2 Return of Company Material. The Executive shall
promptly deliver to the Company on termination of the Executive's
employment with the Company, for whatever the reason, or at any time
the Company may so request, all Company memoranda, notes, records,
reports, manuals, drawings, computer software, and all documents
containing Confidential Information belonging to the Company,
including all copies of such materials which the Executive may then
possess or have under Executive's control.
3.3 Non-Competition; Non-Solicitation. (a) During
the Term of Executive's employment and for a period of nine
months thereafter (the "Non-Compete Period") the Executive will
not, directly or indirectly, without the express written consent
of the Board of Directors: own, manage, operate, join, control,
or participate in or be connected with, as an officer, employee
partner, stockholder, director, adviser, consultant, or agent
(whether paid or unpaid), any business, which is at the time
engaged in any activities which, directly or indirectly, compete
with the business of the Company (a "Competitive Business")
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provided that the Company continues to pay to Executive, in a
timely manner, the amounts required pursuant to Section 4.2 of
this Agreement; the foregoing provision being also intended to
prohibit the Executive from acquiring or holding in excess of 5%
of any issue of stock or securities of any Company which has any
securities listed on a national securities exchange or quoted in the
daily listing of over-the-counter market securities.
(b) During the Term of Executive's employment and
for a period of two years thereafter the Executive will not directly
or indirectly without the express written consent of the Board of
Directors: (i) recruit, solicit or otherwise induce or influence any
proprietor, partner, stockholder, lender, director, officer, employee,
sales agent, joint venturer, investor, lessor, supplier, customer,
consultant, agent, representative or any other person which has a
business relationship with the Company to discontinue, reduce or
modify such employment, agency or business relationship with the
Company, or (ii) employ or seek to employ or cause any Competitive
Business to employ or seek to employ any person or agent who is then
(or was at any time within one year prior to the date the Executive or
the Competitive Business employs or seeks to employ such person)
engaged or retained by the Company.
(c) In the event that Executive breaches her
obligations in any respect under this Section 3.3, the Company, in
addition to pursuing all available remedies under this Agreement, at
law or otherwise, and without limiting its right to
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pursue the same may cease all payments due to the Executive under this
Agreement.
(d) Since a breach of the provisions of this Section
3.3 could not adequately be compensated by money damages, the
Company shall be entitled, in addition to any other right and remedy
available to it, to an injunction restraining such breach or a
threatened breach, and in either case no bond or other security shall
be required in connection therewith, and Executive hereby consents to
the issuance of such injunction. Executive agrees that the provisions
of this Section 3.3 are necessary and reasonable to protect the
Company in the conduct of its business. If any restriction contained
in this Section 3.3 shall be deemed to be invalid, illegal, or
unenforceable by reason of the extent, duration, or geographical scope
thereof, or otherwise, then the court making such determination shall
have the right to reduce such extent, duration, geographical scope, or
other provisions hereof, and in its reduced form such restriction
shall then be enforceable in the manner contemplated hereby.
3.4 Copyrights, Patents, Etc. Any interest in
patents, patent applications, inventions, technological innovations,
copyrights, copyrightable works, developments, discoveries, designs,
and processes ("Inventions") which Executive now or hereafter during
the period she is employed by the Company under this Agreement or
otherwise and for six months thereafter may own, conceive of, or
develop and either relating
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to the fields in which the Company may then be engaged or contemplates
being engaged or conceived of or developed utilizing the time, material,
facilities, technology or information of the Company, shall belong to
the Company. As soon as Executive owns, conceives of, or develops any
Invention, she agrees immediately to communicate such fact in writing to
the Company, and without further compensation, but at the Company's
expense (except as noted in clause
(a) of this Section 3.4), forthwith upon request of the Company,
Executive shall execute all such assignments and other documents
(including applications for patents, copyrights, trademarks, and
assignments thereof) and take all such other action as the Company may
reasonably request in order (a) to vest in the Company all Executive's
right, title, and interest in and to such Inventions, free and clear
of liens, mortgages, security interests, pledges, charges, and
encumbrances ("Liens") (Executive to take such action at his expense
as is necessary to remove all such Liens) and (b), if patentable or
copyrightable, to obtain patents or copyrights (including extensions
and renewals) therefor in any and all countries in such name as the
Company shall determine.
ARTICLE IV
TERMINATION
4.1 Termination. (a) The Board of Directors may
terminate the Executive's employment hereunder as follows:
(1) upon the death of the Executive, this
Agreement shall immediately terminate, whereupon
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Executive or her estate, as the case may be, shall
be entitled to receive her Base Salary and bonus at
the rate provided in Section 2.1 to the date on
which termination shall take effect;
(2) upon a determination of Permanent
Disability; "Permanent Disability" shall mean a
physical or mental incapacity as a result of which
the Executive becomes totally unable to continue the
performance of her duties hereunder for a period of
180 consecutive days or an aggregate of 270 days in
any consecutive 24 month period. A determination of
Permanent Disability shall be subject to the
certification of a qualified medical doctor agreed
to by the Company and the Executive or, in the event
of the Executive's incapacity to designate a doctor,
the Executive's legal representative. In the absence
of agreement between the Company and the Executive,
each party shall nominate a qualified medical doctor
and the two doctors so nominated shall select a
third doctor, who shall make the determination as to
the occurrence and continuance of a Permanent
Disability; or
(3) for Cause. "Cause" shall mean only the
following:
(i) the willful and continued
failure by the Executive to substantially
perform her duties hereunder (other than
such failure
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resulting from the Executive's incapacity due
to physical or mental illness);
(ii) personal dishonesty;
(iii) willful misconduct by the Executive
(which includes a willful, material breach of this
Agreement by the Executive);
(iv) continued incompetence in the
performance of Executive's duties;
(v) conviction of a crime;
(vi) theft from the Company or misuse of
Company funds or assets; or
(viii) a willful violation of any
law, rule or regulation, or the imposition
of a final order issued by any regulatory
authority against the Company which
prohibits the Executive from holding an
executive position with the Company.
For purposes of this Agreement, no act, or failure
to act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive in bad
faith and without a reasonable belief that such action or
omission by the Executive was in the best interests of the
Company.
4.2 Termination Benefits. If the Executive's
employment hereunder is terminated by the Company for Cause, neither
party shall have any further obligations hereunder except
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for (i) obligations accruing prior to the date of termination, and (ii)
obligations or covenants contained herein that extend beyond the term of
this Agreement.
(b) If the Executive's employment hereunder is
terminated by the Company without Cause or as the result of a change
in control of the Company, the Executive shall be entitled to receive
her Base Salary and all benefits for a period of nine months from such
date of termination. Additionally, the Executive's stock options will
vest completely at the date of termination. A "change in control"
shall mean either of the following events: (i) a third party obtains
control of the Company and fails to assume this Agreement, or (ii)
there is a change in the current majority of the Board of Directors,
except that director nominees approved by the Board from time to time
subsequent to the date hereof shall be considered members of the
current majority of the Board.
ARTICLE V
ASSUMPTION OF OBLIGATIONS BY SUCCESSOR TO COMPANY
5.1 Assumption of Obligations. The Company will
require any successor or assign (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company, by agreement in form
and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the
same manner and to the same extent
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that the Company would be required to perform it if no such succession
or assignment had taken place. Any failure of the Company to obtain such
agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement. (If at any time
during the Term of this Agreement the Executive is employed by any
corporation, a majority of the voting
securities of which is then owned by the Company, "Company" as used in
this Agreement shall in addition include such employer.) In such
event, the Company agrees that it shall pay or shall cause such
employer to pay any amounts owed to the Executive pursuant to this
Agreement.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notice. For purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt required,
postage prepaid, as follows:
If to the Company:
Pacific Biometrics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn.: Chairman, Compensation Committee of
Board of Directors
If to the Executive:
Xxxxxxxxx Xxxx Xxxxx, Ph.D.
00000 00xx Xxxxxx, X.X.
Xxxxxxx, XX 00000
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or such other address as either party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
6.2 No Waivers. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and the
Company. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall
be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
6.3 Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
State of Delaware without regard to its conflict of law
provisions.
6.4 Severability or Partial Invalidity. The
invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
6.5 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
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original but all of which together will constitute one and the
same instrument.
6.6 Entire Agreement. This Agreement constitutes the
entire agreement of the parties and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings, and
negotiations between the parties with respect to the subject matter
hereof. This Agreement is intended by the parties as the final
expression of their agreement with respect to such terms as are
included in this Agreement and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend
that this Agreement constitutes the complete and exclusive statement
of its terms and that no extrinsic evidence may be introduced in any
judicial proceeding involving this Agreement.
6.7 Assignment. Subject to the provisions of Article
IV hereof, this Agreement and the rights, duties, and obligations
hereunder may not be assigned or delegated by any party without the
prior written consent of the other party. Any such assignment or
delegation without the prior written consent of the other party shall
be void and be of no effect. Notwithstanding the foregoing provisions
of this Section 6.7, the Company may assign or delegate its rights,
duties, and obligations hereunder to any person or entity which
succeeds to all or substantially all of the business of the Company
through merger, consolidation, reorganization, or other business
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combination or by acquisition of all or substantially all of the
assets of the Company; provided that such person assumes the Company's
obligations under this Agreement in accordance with Section 5.1.
6.8 Beneficial Interests. This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal and
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while
any amounts are still payable to her hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
PACIFIC BIOMETRICS, INC.
By s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx, President and Chief
Executive Officer
s/ Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxx Xxxx Xxxxx, Ph.D.
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