EXHIBIT 10.04
March __, 1997
Xxxxxxxx X. Xxxxxx
Executive Vice President
Osmotics Corporation
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Dear Xxx. Xxxxxx:
This letter (this "Agreement") constitutes the terms and conditions of your
employment by Osmotics Corporation (hereinafter referred to as "Osmotics" or the
"Company).
1. Employment. Effective on the date of the closing (the "Effective
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Date") of the initial public offering by the Company of its securities (the
"IPO") that is currently contemplated by that certain Registration Statement on
Form SB-2 filed by the Company with the Securities and Exchange Commission on
July 19, 1996, the Company agrees to employ you in the position of Executive
Vice President of the Company and you agree to serve in that position. Your
duties shall be such as you have performed from the date of incorporation of the
Company to date and as determined from time to time by the Board of Directors of
the Company commensurate in material respects with the duties expected of an
officer with your title and position. You agree to devote your entire business
time and effort to your employment hereunder and shall have no other employment
except with the Company so long as this Agreement shall remain in effect. This
provision shall not preclude passive investments which are not competitive with
the Company's business and which do not require you to devote any time or
effort.
2. Term. This Agreement shall be effective on the Effective Date and
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shall continue for a period of three (3) years thereafter (the "Term"), unless
your employment is terminated prior thereto pursuant to Section 9 hereof. The
Term may be extended by mutual agreement of the parties. If the Term is not so
extended and your employment has not been otherwise terminated, then your
employment may continue after the Term but will then be terminable by either
party at will, with or without cause.
3. Salary. Your annual base salary will be one hundred one hundred
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twenty-five thousand dollars ($125,000) per annum from the Effective Date until
the first anniversary thereof. For each remaining year of this Agreement your
salary shall be not less than that in the first year or such greater amount that
the Board of Directors or any Compensation Committee formed by the Board of
Directors shall determine. Said salary will be paid periodically in accordance
with the Company's normal payroll cycle.
4. Fringe Benefits. You shall be entitled to participate in all of the
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employee benefit plans provided by the Company, including but not limited to the
medical and dental plans and the 401(k) Plan now in effect, on the same basis
generally made available to its other executives.
5. Executive Incentive Compensation Plan. You will be eligible to
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participate in the Company's Executive Incentive Compensation Plans when and if
they exist on the same basis generally made available to its other executives.
Payment of a bonus under this plan will be based upon the achievement of
financial performance objectives by the Company as well as achievement of
individual performance objectives by you.
6. Stock Options.
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(a) You will be eligible to participate in the Company's 1997 Equity
Incentive Plan (the "Plan") and any other applicable stock option or equity
incentive plans the Company may adopt.
(b) Upon the Effective Date you will be granted an incentive stock
option (the "Option") to purchase fifty thousand (50,000) shares of Common Stock
of the Company (which number of shares shall be proportionately adjusted in the
event the Company at any time after the date hereof splits, subdivides or
combines its Common Stock) during the period commencing upon the Effective Date
and ending five (5) years thereafter (the "Option Term") pursuant to the Plan
and the Stock Option Agreement in the form satisfactory to the Company. The
exercise price for these shares will be 110% of the price at which the shares of
the Company's Common Stock are initially offered for sale to the public in the
IPO. Subject to the provisions of the Plan, the Stock Option Agreement, and
Section 9 hereof, the Option will vest (as proportionately adjusted in the event
the Company at any time after the date hereof splits, subdivides or combines its
Common Stock) and become exercisable according to the following schedule:
On the Effective Date: 12,500 shares shall be purchasable.
The balance of 37,500 shares shall be purchasable at the rate of 12,500
shares on each anniversary of the Effective Date until the Option is fully
vested.
7. Expenses. The Company will reimburse you for all reasonable and
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necessary business, entertainment and travel expenses in accordance with its
uniformly applied Company policies.
8. Vacation. You will be entitled to up to three (3) weeks paid vacation
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during each calendar year, or such greater period as the Board of Directors
shall approve. Any vacation not used in one year may not be carried over to the
next year; provided, in no event shall accrued but unused vacation time exceed
three (3) weeks or such greater period as the Board of Directors shall approve.
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9. Termination of Employment.
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(a) Termination By Company For Cause: For purposes hereof, "cause"
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shall mean any one or more of the following:
(i) A conviction of you for commission of a felony;
(ii) Commission by you of an act of theft, embezzlement, fraud,
dishonesty or a breach by you of your fiduciary duty to the
Company or its subsidiaries;
(iii) A material breach by you of a material term of this
Agreement;
(iv) A failure or refusal by you to comply in any material
respect with the reasonable policies, standards or
regulations of the Company if, after the Company has
provided you written notice of such failure or refusal,
such failure or refusal continues; and
(v) Any gross negligence or willful misconduct by you in the
performance of your duties which results in material
detriment to the Company or its subsidiaries.
The Company shall have the right to terminate your employment at any time
for cause, the determination of which shall be made in good faith by the
Company, effective upon providing you written notice of such termination. Upon
the effective date of such termination, (i) your salary, payments and benefits
under this Agreement shall terminate; (ii) the Option shall cease to vest and to
the extent the Option has not vested, it shall terminate; and (iii) you may
exercise the Option, to the extent the Option has vested, has not been exercised
and the Option Term is not exceeded, for a period of fifteen (15) days following
the date of your employment termination, and at the end of such fifteen day
period, the Option shall terminate.
(b) Termination by Company Upon Death or Disability of Employee: The
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Company shall have the right to terminate your employment at any time upon your
death or disability, whether temporary or permanent, partial or total, within
the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended, as determined by the Committee (as such term is defined in the Plan),
effective upon providing you (or your legal representative in the case of your
death) written notice of such termination. Upon the effective date of such
termination, (i) the Company shall pay to you (or your legal representative in
the case of your death), at the times otherwise due to you, all the salary
otherwise due to you under Section 3 hereof during the period beginning on the
date of such termination and ending six months thereafter, but all other
payments or benefits otherwise due to you hereunder shall terminate; (ii) the
Option will be deemed to be immediately vested for the full number of shares
that would have otherwise been purchasable under the Option if it had continued
to vest pursuant to the schedule set forth in Section 6(b) during that six month
period and, to the extent the Option is not
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deemed to be so vested, it shall terminate; (iii) you (or your legal
representative in the case of your death) may exercise the Option, to the extent
the Option has vested, has not been exercised and the Option Term is not
exceeded, during that six month period; (iv) upon termination of that six month
period, your salary, payments and benefits under this Agreement and the Option
shall terminate.
(c) Termination By Company Without Cause: In addition to the
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Company's rights set forth in Sections 9(a) and 9(b) above, the Company shall
have the right to terminate your employment at any time for any reason other
than pursuant to Sections 9(a) or 9(b) above effective upon providing you
written notice of such termination. Upon the effective date of such
termination, (i) the Company shall pay to you, at the times otherwise due to
you, all the salary, payments and benefits otherwise due to you under Sections 3
and 4 hereof during the period (the "Severance Period") beginning on the date of
such termination and ending on the earlier of (A) 18 months thereafter and (B)
the end of the Term, but in no event less than 6 months immediately following
such termination; (ii) the Option will be deemed to be immediately vested for
the full number of shares that would have otherwise been purchasable under the
Option if it had continued to vest pursuant to the schedule set forth in Section
6(b) during the Severance Period and, to the extent the Option is not deemed to
be so vested, it shall terminate; (iii) you may exercise the Option, to the
extent the Option has vested, has not been exercised and the Option Term is not
exceeded, during the Severance Period; (iv) upon termination of the Severance
Period, your salary, payments and benefits under this Agreement and the Option
shall terminate.
(d) Termination By Employee: You shall have the right to terminate
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your employment at any time for any reason effective upon providing the Company
written notice of such termination. Upon the effective date of such
termination, (i) your salary, payments and benefits under this Agreement will
terminate; (ii) the Option shall cease to vest and to the extent the Option has
not vested, it shall terminate; and (iii) you may exercise the Option, to the
extent the Option has vested, has not been exercised and the Option Term is not
exceeded, for a period of thirty (30) days following the date of such
termination, and at the end of such thirty day period, the Option shall
terminate.
10. Company Property and Confidentiality.
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During the course of your employment you will or may become informed as to
many of the Company's procedural, commercial and technical needs, problems,
developments and projects, as well as activities directed thereto.
In consideration of your employment being given or continued and the
compensation herein, you hereby agree, for yourself and your heirs, executors,
administrators and representative as follows:
(a) To irrevocably assign, transfer and set over to the Company, its
successors and assigns, all your rights, title and interest, including all
worldwide patents, patent applications, copyrights, mask works, trade secrets
and other intellectual property and all "Moral Rights" (as defined below), in
any and all creations, products, technologies, treatments, compounds,
formulations, devices, designs, methods, ideas, inventions, improvements, and
writings and other
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works of authorship, and any other subject matter which is or may become legally
protectable or recognized as a form of property (collectively, the "Company
Property"), which you, either solely or jointly with others, have conceived,
made or suggested, or may hereafter conceive, make or suggest, during the period
of your employment by Company or its successors and the six-month period next
following the termination of such employment, and which in any way relate
directly or indirectly to the Company's business, procedural, technical or
commercial needs, problems, developments or projects or to its production,
research or experimental developments and projects of every name and nature
under consideration and/or being carried on by or for Company prior to
termination of your employment or which in any way are likely to be of benefit
to the Company; provided, that such Company Property is originated, created,
developed or perfected (a) in the performance of the general duties of which you
are employed, or (b) with the use of any time, material, or facilities of the
Company, or (c) which directly relate to any products, technologies, treatments,
compounds, formulations, devices, designs, ideas, inventions, methods,
composition, process or articles of manufacture or method of doing business
within the scope of the Company's field of activity or of the same general
character during your employment. "Moral Rights" mean any rights to claim
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authorship of any Company Property or to restrain or object to any modification
of any Company Property, and any similar right, existing under judicial or
statutory law of any country in the world, or under any treaty, regardless of
whether or not such right is denominated or generally referred to as a "moral
right".
(b) To execute, acknowledge, make and deliver to the Company or its
attorneys without additional compensation but without expense to you, any and
all instruments, including United States and foreign patent applications,
copyright and trademark applications, of securing, protecting or registering any
rights embraced within this Agreement, powers of attorney, assignments, oaths or
affirmations, supplemental oaths and sworn statements, and to do any and all
lawful acts which in the judgment of the Company or its attorneys may be
necessary or desirable to vest in or secure for or maintain for the benefit of
the Company adequate patent and other rights in the United States and all
foreign countries with respect to any Company Property, whether published or
unpublished and whether or not the subject of statutory industrial property or
copyright protection.
(c) To disclose promptly to the Company or its attorneys, any and all
Company Property when conceived or made by you and to report promptly to the
Company all information of which you may become aware during your employment and
which may be of benefit to the Company or which may prevent or minimize loss by
the Company and of which the Company may not otherwise then have knowledge.
(d) You understand that as part of your employment, you will have
access to confidential and proprietary information respecting the Company. You
agree to keep confidential and not to disclose, during or subsequent to your
employment, any information of an unpublished, or confidential, or proprietary
nature. You further agree not to use any information of an unpublished, or
confidential, or proprietary nature which you have learned during your
employment by the Company, for any subsequent employer or for your own benefit
after termination of your employment by the Company. You shall keep
confidential and not make any unauthorized use or disclosure, during or
subsequent to your employment by the Company of any knowledge or information of
an unpublished, or confidential or proprietary nature generated or
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otherwise acquired by you during the course of your employment by the Company,
relating to the business, research, or engineering activities of the Company, or
to its manufacturing processes or trade secrets, or to its sources of supply or
lists of customers, or to marketing or product plans or contemplated actions of
the Company, provided nothing herein shall be construed to prevent you from
using your general knowledge and skill after termination of this Agreement
whether acquired prior to or during your employment by the Company.
11. Restrictive Covenant. You will not engage in any capacity with a
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business that develops and markets products directly competitive with the
products developed and marketed by the Company while in the employ of the
Company. In the event you voluntarily terminate your employment or the Company
terminates your employment for cause, during the twelve months or the maximum
period permitted by applicable law (whichever is shorter) following the
termination of your employment with the Company, you hereby agree not to (i)
engage in any capacity in any business that develops and markets products
directly competitive with the products developed and marketed by the Company or
its affiliates, (ii) persuade or attempt to persuade any supplier, distributor,
manufacturer, consultant or customer of the Company or its affiliates not to do
business, or to reduce the amount of business it does, with the Company or its
affiliates, (iii) persuade or attempt to persuade any person who then is an
employee of the Company or any of its affiliates to leave the Company's or
affiliate's employ or to become employed by any person other than the Company
or the affiliate directly or indirectly. These restrictions shall not apply if
the termination of your employment by the Company is without cause. These
undertakings shall be enforceable by injunction.
12. Assignment. You shall not have the right to assign any of your rights
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under this Agreement (except those under the Company's fringe benefit and stock
option plans referred to herein if such plans so permit) without the prior
written consent of the Company. The Company shall have the right without your
consent to authorize the exercise of any of its rights under this Agreement by
any person, firm or corporation that directly or indirectly controls, is
controlled by, or is subject to common ownership or control with the Company or
to assign this Agreement as part of the sale of its entire business.
13. Notice. Any notice, request, demand or other communication required
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or permitted hereunder shall be in writing and shall be deemed effective when
personally served or upon receipt if deposited in the United States mail,
postage prepaid, certified or registered return receipt requested, addressed to
the party to be notified at the address provided above or at such other address
as either party may hereafter designate by appropriate notice.
14. Entire Agreement. You agree with and acknowledge to the Company that
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you are not entitled to any additional benefits not expressly set forth herein,
except as provided under the several benefit plans herein before referred to.
This Agreement contains all of the agreements, understandings, conditions,
representations, warranties and covenants made by the parties hereto relating to
the subject matter hereof and merges all prior written or oral communications
between the parties on such subject and none of such other oral or written
communications shall be binding upon either of the parties. This Agreement may
not be modified or amended except in writing executed by all parties.
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15. Waiver. No waiver by either party hereto of any breach of this
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Agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provision hereof. The exercise of any right granted to
either party hereunder shall not operate as a waiver. The termination of this
Agreement or your employment shall not relieve either party of its respective
obligations accruing prior thereto, nor impair or prejudice the respective
rights of either party against the other, which rights by their nature survive
such termination, including, without limitation each party's obligations under
Sections 9(c), 10, 11, 12 and 18 hereof.
16. Enforceability. Should any provision of this Agreement or the
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application thereof, to any extent, be held invalid or unenforceable, the
remainder of this Agreement and the application thereof, other than those
provisions held invalid or enforceable, shall not be affected thereby and shall
continue to be valid and enforceable to the fullest extent permitted by law or
equity.
17. Governing Law, Jurisdiction. This Agreement shall be construed and
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interpreted pursuant to the laws of the State of Colorado applicable to
agreements made and to be performed entirely therein and the parties hereto
submit and consent to the sole jurisdiction of the courts of the State of
Colorado, including Federal Courts located therein, should Federal jurisdiction
requirements exist, in any action brought to enforce (or otherwise relating to)
this contract, provided that nothing contained in this paragraph 17 shall effect
the requirement that any dispute relating to this Agreement be submitted to
arbitration pursuant to paragraph 18 hereof.
18. Resolution of Disputes; Arbitration.
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(a) In the event of a dispute between the Company and you regarding
this Agreement, the interpretation thereof or performance thereunder, counsel
for the Company and your counsel shall attempt in good faith to resolve such
dispute.
(b) In the event such dispute cannot be resolved in accordance with
paragraph 18(a), either the Company or you may submit the dispute to arbitration
in Denver, Colorado, in accordance with the Commercial Arbitration Rules then
obtaining of the American Arbitration Association (the "rules"). Each party
shall appoint an arbitrator; the two arbitrators so appointed shall select a
neutral third arbitrator from the American Arbitration Association panel as
provided in the Rules.
(c) The award of the arbitrators shall be final and binding, shall be
the sole remedy of the parties for such dispute and may be enforced by a court
of competent jurisdiction.
(d) Unless the arbitrators find that exceptional circumstances
require otherwise, the arbitrators will grant the prevailing party in
arbitration its costs of arbitration and reasonable attorneys' fees as part of
the arbitration award.
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If you are in agreement with the foregoing, please indicate so in the space
provided below whereupon this shall constitute the full agreement between us.
OSMOTICS CORPORATION
By:
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Agreed and accepted:
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Xxxxxxxx X. Xxxxxx
Date:__________________, 1997
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