EXHIBIT 10.12
EMPLOYMENT AGREEMENT BETWEEN
n-GEN XXXXXXXXX.XXX, INC d/b/a LAB TECHNOLOGIES
AND XXXX X. XXXXX
This Employment Agreement (hereinafter referred to as the "Agreement")
is entered into in Denver, Colorado effective as of September 1, 1999, by
and between n-GEN XXXXXXXXX.XXX, INC. d/b/a LAB TECHNOLOGIES, a Delaware
corporation (hereinafter referred to as the "Company"), and XXXX X. XXXXX
(hereinafter referred to as "Employee").
RECITALS
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WHEREAS, the Company desires to employ Employee as Vice President of
Operations and Chief Technical Officer of the Company, and Employee is
willing and able to be so employed; and
WHEREAS, the parties desire to set forth the terms and conditions of
their employment relationship as provided herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties agree as
follows:
AGREEMENT
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SECTION I - EMPLOYMENT
The Company hereby employs Employee and Employee hereby accepts
employment from the Company as Vice President of Operations and Chief
Technical Officer of the Company, subject to the conditions and terms of
this Agreement. Employee shall have the responsibilities and authority
typical of a Vice President of Operations and Chief Technical Officer,
subject to the reasonable control and direction of the Company. During the
term of this Agreement, the Company shall ensure that Employee remains a
director of the Company.
SECTION II TERM
Subject to the provisions of Section V of this Agreement, the term of
this Agreement shall be for a period of three (3) years commencing on
October 1, 1999, and terminating on September 30, 2002. Thereafter, the
term of this Agreement shall be automatically renewed for successive one
(1) year periods unless prior written notice to the contrary is given by
the Company or the Employee to the other party at least thirty (30) days
prior to the expiration of the initial term or the renewal period, as the
case may be.
SECTION III - COMPENSATION.
A. BASE SALARY. During the first year of this Agreement, the
Company shall pay Employee an annual base gross salary of $92,000;
provided, however, that a portion of such base salary shall be deferred and
Employee shall be paid on the Company's standard payroll dates of the 5th
and the 20th of each month based on an annual base gross salary of $74,000
until the earlier of: (i) the end of six (6) months from the date of this
Agreement; (ii) the Initial Public Offering ("IPO"). At such time, the
deferred salary of $18,000 shall be paid to Employee, prorated to the date
of such event, and the Company shall commence to pay Employee, on the
Company's standard payroll dates of the 5th and the 20th of each month,
based on an annual base gross salary of $92,000. In each subsequent year
of this Agreement, Employee's annual base gross salary shall be increased
to account for cost of living increases and Employee's job performance and
professional growth, in a minimum amount of ten percent (10%) each year,
B. ANNUAL BONUSES. In addition to the annual base salary described
above and all other forms of compensation contemplated by this Agreement,
the Company shall pay Employee annual bonuses in accordance with the following:
1. At the beginning of each year of this Agreement, the Company
shall be required to establish Revenue Targets for the Company upon
which Employee's Annual Bonus shall be based. Employee shall receive
an Annual Bonus based on the percentage of the Revenue Target
achieved in accordance with the following:
Revenue Employee Bonus
------- --------------
Targets
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40% of target 3% of base salary
50% of target 5% of base salary
60% of target 7% of base salary
70% of target 9% of base salary
80% of target 12% of base salary
90% of target 15% of base salary
100% of target 18% of base salary
In the event that over 100% of the Revenue Target is achieved,
Employee shall receive an additional 0.5% of Employee's base salary
for each percentage point above 100% achieved.
2. Employee's Annual Bonus shall be paid on the last day of the
third month following the end of each year of this Agreement, unless
this Agreement is terminated or the parties otherwise agree. In the
event of termination, payment of
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Employee's Annual Bonus shall be governed by the terms of Section V.
In the event of termination, the Company shall not be entitled to
assert that Employee's Annual Bonus is not determinable or vested.
Employee's Annual Bonus shall not be subject to forfeiture under any
circumstances.
C. STOCK.
1. NUMBER AND VALUE OF SHARES. In addition to the base salary
and all other forms of compensation contemplated by this Agreement,
Employee shall receive a minimum of 100,000 shares of Company stock
upon the effective date of this Agreement. If the official nominal
share price at the commencement of the Company's IPO is less than the
anticipated $5.00 per share, then Company shall issue to Employee upon
the completion of the IPO such number of additional shares as may be
necessary in order that the total value of Employee's shares
(calculated using the nominal price per share at the commencement of
the IPO) shall be equal to $500,000. All shares issued to Employee
shall be deemed fully paid, non-assessable, and fully vested upon
issuance.
2. OTHER OFFERINGS OR ISSUANCE OF COMPANY SHARES; ANTI-DILUTION.
In the event that the Company issues, or commits to issue,
(whether by warrant, option, or otherwise) shares in addition to the
shares issued as of the effective date of this Agreement, and provided
that the IPO has not occurred as of the date of such issuance or
committment, the Company shall simultaneously with the issuance of
such other shares issue to Employee without additional consideration
such number of additional shares as may be necessary in order to
preserve Employee's percentage ownership of the Company as Employee
would have in the absence of such other issuance of shares. All shares
issued to Employee pursuant to this subsection shall be be deemed
fully paid, non-assessable, and fully vested upon issuance.
3. RIGHTS AND PRIVILEGES OF OFFICERS AND DIRECTORS. Throughout
the term of this Agreement, Employee shall be entitled to receive and
the Company shall be obligated to provide, at Employee's option, the
same rights and privileges with respect to Employee's share ownership
in the Company as are provided to any other Officer or Director of the
Company, including but not limited to pre-emptive rights, registration
rights, anti-dilution protection, and disposition/sale rights.
4. REPURCHASE REQUIREMENT. In the event of expiration of this
Agreement after the initial term or upon non-renewal of this
Agreement, Employee may, at Employee's option, require that the
Company purchase all of the shares held by Employee at a cash price
per share equal to the book value of the shares (as determined by the
Company's regular certified public accountants) as of the effective
date of the expiration or non-renewal of this Agreement.
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D. PROFIT SHARING. In the event that there has not been an IPO
prior to the end of the first year of this Agreement, Employee shall
receive from the Company an amount equal to 3% of the Company's earnings
before income tax, depreciation, and amortization ("EBITDA") for the
Company's fiscal year in which the first year of this Agreement terminates.
In the event that there has not been an IPO prior to the end of the second
year of this Agreement, Employee shall receive from the Company an amount
equal to 5% of the Company's EBITDA for the Company's fiscal year in which
the second year of this Agreement terminates. In the event that there has
not been an IPO prior to the end of the third year of this Agreement,
Employee shall receive from the Company, an amount equal to 8% of the
Company's EBITDA for the Company's fiscal year in which the third year of
this Agreement terminates. Each profit sharing payment to Employee shall be
paid within sixty (60) days of the end of the Company's fiscal year.
E. BENEFITS. The Company shall provide the following benefits to
Employee throughout the term of this Agreement:
1. MEDICAL, DENTAL AND DISABILITY INSURANCE. The Company shall
provide reasonable medical, dental and disability insurance to
Employee and his family at no cost to Employee.
2. LIFE INSURANCE. The Company shall pay Employee's annual
life insurance annuity premium of $5,000; provided that Employee shall
be obligated to pay any income tax associated with the payment of such
premium by the Company.
3. 401(k) PLAN. The Company shall offer and Employee shall be
entitled to participate in a 401(k) plan.
4. VACATION LEAVE. Employee shall be entitled to 15 days of
paid vacation leave per year. Vacation leave will be increased at the
rate of five (5) days for each additional twelve-month term that this
Agreement is extended beyond the original three year term, up to a
maximum of twenty five (25) business days per year. Employee shall
also be paid for all legal holidays.
5. BUSINESS EXPENSES. The Company shall reimburse Employee for
all business-related expenses, including but not limited to travel and
other reasonable business development expenses.
6. PAYMENT OF LEGAL EXPENSES. The Company shall pay Employee's
reasonable legal expenses related to the preparation and negotiation
of this Agreement, as well as Employee's reasonable legal expenses
associated with any legal counsel necessary to advise Employee with
regard to stock-related matters such as the IPO, anti-dilution,
registration rights, sale/disposition rights, or other related matters.
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7. ADDITIONAL BENEFITS. Employee shall receive such additional
benefits as the Company shall establish from time to time for its
executives or management level employees.
SECTION IV - SALE PARTICIPATION RIGHTS.
A. SALE COMPENSATION. In the event that there is a sale of the
Company (as hereinafter defined) during the term of this Agreement, the
Company shall pay to Employee, as deferred compensation, an amount equal to
ten percent (10%) of his annual base gross salary for the year in which
such sale occurs. In addition, at the election of Employee, the Company
shall be obligated to purchase the outstanding shares of the Company issued
to Employee as of the date of the sale of the Company at a cash price per
share equal to the book value of the shares (as determined by the Company's
regular certified public accountants) as of the effective date of the sale.
As an alternative to the purchase of Employee's shares by the Company, in
the event that the sale of the Company involves a sale or exchange of stock
as contemplated in paragraphs B.3 and B.4 below, at Employee's election,
the Company shall ensure that the outstanding shares of the Company issued
to Employee as of the date of the sale of the Company are purchased or
exchanged on terms no less favorable than the terms upon which the other
shares of the Company are sold or exchanged, as determined in Employee's
reasonable discretion.
B. DEFINITION OF SALE. For the purposes of paragraph A above and
paragraph C below, a "sale of the Company" shall be defined as:
1. The sale of all or substantially all of the assets of the
Company;
2. The sale of an operating division or a separate and
identifiable profit-center of the Company to a third party;
3. The sale of more than fifty percent (50%) of the issued and
outstanding shares of the Company's common stock to a third
party; or
4. The exchange of more than fifty percent (50%) of the issued
and outstanding shares of the Company's common stock for other
securities in connection with a merger or other acquisition of
the Company by a third party.
C. RIGHT TO CONTINUE EMPLOYMENT. In the event of any sale of the
Company, at Employee's election, the Company shall ensure that Employee may
remain employed by the purchaser of the Company for the balance of the term
of this Agreement upon terms no less favorable than those set forth herein,
as determined in Employee's reasonable discretion. Under such
circumstances, the Company may assign this Agreement to the purchaser;
provided however, that prior to any such assignment, Employee must provide
his written consent, which shall be given or withheld in Employee's sole
discretion.
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SECTION V - TERMINATION OF AGREEMENT.
A. TERMINATION OF AGREEMENT. Either party may terminate this
Agreement, for any reason, by providing sixty (60) days' prior written
notice to the other party; provided that the same shall have the effect
described in paragraphs B and C below.
B. TERMINATION BY COMPANY. Upon termination of this Agreement for
any reason whatsoever by the Company, the Company shall pay to Employee at
such termination (i) any amount of compensation deferred pursuant to the
terms hereof; (ii) an amount equal to six (6) months' base gross salary for
the year in which the termination occurs; and (iii) a Bonus amount equal to
nine percent (9%) of Employee's annual base gross salary for such year. In
addition, Employee shall be entitled to retain all shares issued to
Employee, and Employee shall receive from the Company a profit sharing
amount equal to eight percent (8%) of the Company's EBITDA for the
Company's fiscal year in which the termination occurs in the event that
there has not been an IPO prior to the termination of this Agreement by the
Company. Such profit sharing amount shall be payable within sixty (60)
days after the end of the Company's fiscal year in which the Employee's
termination occurs. In addition, upon termination of this Agreement for
any reason whatsoever by the Company, at the written election of Employee,
the Company shall be immediately obligated to re-purchase the shares in the
Company issued to Employee. If, prior to Employee's termination, the
Company's stock is traded publicly, the cash purchase price for such stock
shall be the trading price as of the day of termination, but no less than
$5.00 per share. However, if prior to Employee's termination, the
Company's stock is not publicly traded, the cash purchase price for
Employee's shares shall be the book value of the shares (as determined by
the Company's regular certified public accountants) as of the effective
date of the termination of this Agreement. Further, upon termination of
this Agreement for any reason whatsoever by the Company, the Company shall
be required, within sixty (60) days of the effective date of the
termination, to reimburse Employee for any fees or penalties incurred
related to Employee's 401K account, including any and all such fees or
penalties associated with transferring, maintaining, or terminating such
account. Finally, upon termination of this Agreement for any reason
whatsoever by the Company, the Company shall also immediately pay to
Employee an amount equal to the value of any and all earned and/or vested
benefits.
C. TERMINATION BY EMPLOYEE. Upon termination of this Agreement by
Employee, Employee shall retain and/or be paid by the Company all forms of
compensation earned and/or vested as of the date of termination, including
but not limited Employee's salary, deferred compensation, bonuses, stock,
profit sharing, and benefits. Upon termination of this Agreement for any
reason whatsoever by Employee, Employee shall be entitled to no further
compensation from the Company; provided however, that the parties may
nevertheless endeavor to negotiate an agreement for the purchase of the
outstanding shares in the Company issued to Employee as of the effective
date of the termination of this Agreement.
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SECTION VI - GOVERNING LAW; DISPUTE RESOLUTION; ATTORNEYS' FEES.
This Agreement has been made and entered into in the State of Colorado
and shall be governed and construed in accordance with the laws of the
State of Colorado without regard to the conflicts of laws or principles
thereof. All disputes arising under this Agreement or involving this
Agreement shall be brought and maintained in the Xxxxxxxx Xxxxx, Xxxx xxx
Xxxxxx xx Xxxxxx, Xxxxxxxx. The Parties hereby irrevocably waive any other
venue to which they may be entitled by virtue of domicile, habitual
residence or otherwise. In the event either party to this Agreement
commences any action or proceeding against another party to enforce or
interpret this Agreement or to recover damages resulting from the breach of
this Agreement, the prevailing party, shall be awarded all costs and fees,
including but not limited to reasonable attorneys' fees. Prior to
commencing an action to enforce or interpret this Agreement, the parties
agree to undertake reasonable efforts to mediate the dispute.
SECTION VII - SEVERABILITY.
In case any one or more of the provisions contained herein shall, for
any reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect
any other provisions of this Agreement. Such provision shall be deemed
amended to conform to the requirements of the law so as to be valid and
enforceable in light of the parties' apparent intent as evidenced by this
Agreement.
SECTION VIII - COMPLETE AGREEMENT AND MODIFICATION.
This Agreement contains the full and complete agreement between the
parties concerning the employment of Employee. It supercedes all prior
statements, agreements, understandings and representations with respect to
the employment. This Agreement may be modified only by written amendment,
signed by Employee and an officer of The Company.
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement as of the effective date specified above.
THE COMPANY: EMPLOYEE:
n-GEN XXXXXXXXX.XXX, INC.
D/B/A LAB TECHNOLOGIES
a Delaware corporation
By:_________________________ By: __________________________
XXXX X. XXXXX
_________________________
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