EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") between NATURADE, INC., a
Delaware corporation ("Company"), and XXXX X. XXXXXXX, an individual
("Xxxxxxx").
PRELIMINARY STATEMENT
Company wishes to engage Xxxxxxx as its Chief Executive Officer and as
a member of its Board, and Xxxxxxx wishes to accept such engagement, in each
case on the terms and conditions set forth below. Company and Xxxxxxx have
discussed Company's need for new management and a reorganization of its
operations. Company endorses Xxxxxxx'x plans and proposals outlined by him to
Company in such regards. Such plans may include, without limitation, hiring a
new vice president of sales, outsourcing most or all manufacturing operations,
hiring both a new internal marketer and a marketing consultant to focus on mass
market projects, and relocating the Company's business within Southern
California in order to focus on marketing natural dietary supplements and herbal
health-related products.
In consideration of the mutual promises made herein, Company and
Xxxxxxx (collectively, the "Parties") hereby agree as follows:
1. Specified Term. Beginning March 2, 1998 (the "Effective Date") for a
period of 48 months or the earlier date of the termination of this Agreement
(the "Term"), in each case on the terms and subject to the conditions set forth
herein, Company hereby retains Xxxxxxx, and Xxxxxxx hereby accepts retention
with Company. Xxxxxxx shall commence performance of his offices hereunder at
Company's headquarters on the Effective Date.
2. Title and Description of Duties. Xxxxxxx shall serve as Chief
Executive Officer and member of Company's board of directors (the "Board") and
shall have such duties, rights, responsibilities, and privileges normally
associated with the positions he shall occupy. During the Term Xxxxxxx shall
report to the Chairman of the Board, comply with the directions and resolutions
of the Board, and diligently devote his full time, attention, and energies to
the business of Company.
3. Competitive Activities. During the Term Xxxxxxx shall not, directly
or indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with any business of Company or the dietary
supplements and natural health and beauty care business. The parties hereto
intend the terms of this Section 3 to be reasonable and in compliance with
applicable law and, in that regard, anything to the contrary appearing in this
Agreement notwithstanding, if a court shall determine that this Section 3 shall
be unenforceable, such court is hereby authorized and
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empowered to restrict the geographic area and the scope of activities to which
this Section 3 pertains to the minimum extent necessary so that this Section 3
as so restricted shall be rendered enforceable.
4. Confidential Information. Xxxxxxx agrees that he shall not disclose
any confidential information concerning the Company or its operations (including
any information constituting a trade secret under applicable law), or use any
such confidential information in any way, either during the Term or at any other
time thereafter, except as is required in the course of the discharge of his
duties hereunder. Upon termination of this Agreement, or when requested by the
Board, Xxxxxxx shall return or cause to be returned to Company all such
confidential information in his possession or disposal, without retaining any
copies thereof.
5. Indemnification of Losses of Xxxxxxx. Company shall indemnify
Xxxxxxx for all losses sustained by Xxxxxxx in direct consequence of the
discharge of his duties hereunder, except that Company shall not be liable
hereunder as to losses resulting from Xxxxxxx'x wilful misconduct, or matters in
respect of which Xxxxxxx acted with gross negligence or in bad faith.
6. Salary. (a) As compensation for the services to be rendered by
Xxxxxxx hereunder, during the Term Company shall pay Xxxxxxx an annual salary
(the "Salary") of $200,000. Salary shall be payable to Xxxxxxx at such times and
in a manner consistent with Company's then current payment practices.
(b) In addition to any amount of Salary payable under Section 6(a)
above and any other amount payable to Xxxxxxx hereunder, as additional
compensation to Xxxxxxx Company shall pay to Xxxxxxx the gross amount of $16,700
promptly upon Xxxxxxx'x purchase of a home in Southern California.
7. Tax Withholding. Company shall have the right to deduct or withhold
from the compensation due to Xxxxxxx hereunder any and all sums required for
federal income and Social Security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.
8. Bonus; Options.
(a) Bonus. Company shall pay to Xxxxxxx a bonus of $58,000 with respect
to the fiscal year ending September 30, 1998. In addition, Company and Xxxxxxx
shall use their respective good faith efforts to negotiate and agree to criteria
respecting a bonus for Xxxxxxx with respect to each fiscal year ending after
September 30, 1998 (collectively with the above bonus for 1998, the "Bonus") by
the end of the prior fiscal year. It is the expectation of each of the Parties
hereto that such criteria to be negotiated will provide that the target amount
of each annual Bonus will be one-half of Xxxxxxx'x aggregate Salary for such
fiscal year based on the Company achieving earnings and revenues objectives,
excluding the effects of acquisitions. Such target Bonus will
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not be limited, but shall contain provisions for higher bonus payments to reward
Xxxxxxx for exceeding such objectives. In addition, provision shall be made on a
case-by-case basis to address specifically earnings and revenues contributed by
acquisitions.
(b) Options. (i) As soon as practicable after the Effective Date,
Company shall grant to Xxxxxxx, pursuant to a qualified stock option plan (the
"Plan") to be instituted by Company, options ("Options") to acquire 255,000
shares of common stock of Company ("Common Stock"), at a price per share
("Exercise Price") equal to the fair market price (as reasonably determined by
Company) of Company's publicly trading shares on the Effective Date (such price
being the "Fair Market Price" of the Common Stock as of any date of
determination). The Options will vest in four equal portions on each of the
first four anniversaries of the Effective Date, subject to any limitations on
exercise contained in the Plan; provided, the Term shall not have ended prior to
such anniversary. Notwithstanding the foregoing, in the event of any sale
(including, without limitation, pursuant to either a tender offer or a merger of
Company which results in the shareholders of the Company holding less than fifty
per cent (50%) of the stock of the surviving corporation) of Company during the
Term, subject to any limitations on exercise contained in the Plan, all of the
Options not then vested shall immediately vest.
(ii) Additional options to acquire shares of Common Stock will become
available to Xxxxxxx on an annual basis determined by the Board. Additional
options to acquire shares of Common Stock will be made available to selected key
employees nominated and awarded by Xxxxxxx (such shares to be used as leverage
for initial hire and annual award against performance), in each case on a basis
determined by the Board.
(c) Dilution.
(1) Reorganizations. In the event the Common Stock is subject to
a stock split, stock dividend, or the like, or any consolidation of the
outstanding shares of Common Stock into a smaller number of shares is effected
(any such event being herein called a "Common Stock Reorganization"), then (i)
the Exercise Price shall be adjusted, effective immediately after the effective
date of such Common Stock Reorganization, to a price determined by multiplying
the Exercise Price in effect immediately prior to such effective date by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding on such effective date before giving effect to such Common Stock
Reorganization and the denominator of which shall be the number of shares of
Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (ii) the number of shares of Common Stock subject to
purchase upon exercise of the Options shall be adjusted, effective at such time,
to a number determined by multiplying the number of shares of Common Stock
subject to purchase immediately before such Common Stock Reorganization by a
fraction, the numerator of which shall be the number of shares outstanding after
giving effect to such Common Stock Reorganization and the denominator of which
shall be the number of shares of
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Common Stock outstanding immediately before giving effect to such Common Stock
Reorganization. In the event of any merger in which Company is not the surviving
corporation, the Options shall immediately vest (as provided above) and shall
become options to purchase the kind and amount of shares of stock and other
securities and property which Xxxxxxx would have been entitled to receive
pursuant to such merger if the Options had been exercised immediately prior to
the effective date thereof, and the Exercise Price shall be adjusted
accordingly. Any adjustment of Exercise Price under this Section 8, and the
number of shares of Common Stock purchasable upon exercise of the Options, shall
not be applicable to any portion of the Options exercised prior to such
adjustment.
(2) Dilutive Issuances.
(i) Upon each issuance (or deemed issuance as provided below)
by the Company of any shares of Common Stock (the "Additional Stock")
after the date hereof, other than "Excluded Stock" (as defined below),
for a consideration per share less than the Exercise Price in effect
immediately prior to the issuance, the Exercise Price in effect
immediately prior to each issuance shall forthwith be adjusted to a
price determined by multiplying the Exercise Price by a fraction, (x)
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such Additional Stock
plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of shares of
Additional Stock so issued would purchase at the Exercise Price in
effect immediately prior to such issuance, and (y) the denominator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance of Additional Stock plus the number
of shares of such Additional Stock so issued. For the purpose of the
above calculation, the number of shares of Common Stock outstanding
immediately prior to such issuance of Additional Stock shall be
calculated on a fully diluted basis, as if all convertible securities
had been fully converted into shares of Common Stock immediately prior
to such issuance, and any outstanding options, warrants or other rights
for the purchase of shares of stock or convertible securities had been
fully exercised immediately prior to such issuance, and any outstanding
options, warrants or other rights for the purchase of shares of stock
or convertible securities had been fully exercised immediately prior to
such issuance (and the resulting securities fully converted into shares
of Common Stock if so convertible) as of such date, but not including
in such calculation any additional shares of Common Stock issuable with
respect to convertible securities, or outstanding options, warrants or
other rights for the purchase of shares of stock or convertible
securities, solely as a result of the adjustment of the respective
conversion or exercise prices (or other conversion ratios) resulting
from the issuance of the Additional Stock causing the adjustment in
questions.
(ii) The term "Excluded Stock" shall mean:
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(A) shares of Common Stock issued or issuable in a
public offering registered under the Securities Act of 1933,
as amended;
(B) shares of Common Stock or related options
exercisable for such Common Stock issued to employees,
officers, and directors of, and consultants, customers, and
vendors to, the Company, pursuant to an arrangement approved
by the Board of the Company; and
(C) shares of Common Stock issued or issuable in
connection with the acquisition by the Company of all of the
outstanding voting stock or substantially all of the assets of
another entity.
9. Life Insurance. During the Term, Company agrees to provide and pay
for a twenty-year term life insurance policy for Xxxxxxx in the amount of
$250,000; provided, that Company shall be obligated to provide such insurance
only if it may be obtained by Company for Xxxxxxx on commercially reasonable
terms and for reasonable premiums not substantially greater than would be
payable for such coverage with respect to an average man of Xxxxxxx'x age (as
reasonably determined by Company), and subject to Xxxxxxx submitting to and
satisfying the health and physical examination criteria of the insurer. Xxxxxxx
agrees to cooperate in all reasonable respects with Company and the insurer to
provide the coverage described in this Section 9, including without limitation
by submitting to such physical examinations as shall be required by such
insurer. Company shall continue payment of premium thru life of policy
regardless of employment status.
10. Group Medical Insurance. Company agrees to include Xxxxxxx and
Xxxxxxx'x spouse under Company's group medical insurance coverage, if any, which
Company provides to all employees.
11. Vacation. Xxxxxxx shall be allowed four weeks of paid vacation per
year.
12. Expenses.
(a) During the Term the Company shall reimburse Xxxxxxx for lease of an
automobile at the rate of $1,250 per month. Xxxxxxx'x gasoline charges shall be
payable under and pursuant to the Company's then-current travel and
entertainment policy. Xxxxxxx will pay for repairs and maintenance costs
relating to such automobile.
(b) Company shall reimburse Xxxxxxx for all out-of-pocket travel
expenses incurred by him in connection with Company's business and in compliance
with Company's reimbursement policies.
(c) Company shall reimburse Xxxxxxx for all of his reasonable
out-of-pocket moving expenses, not to exceed $33,000, incurred in connection
with his moving his household to Southern California from Memphis, Tennessee. In
addition, Company shall reimburse Xxxxxxx for normal and customary selling
expenses, not to exceed $40,000, incurred by him in connection
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with the sale of his home in Memphis, Tennessee, including (but not limited to):
licensed real estate broker's commission, normal closing costs which are the
responsibility of the seller and attorneys fees, not to exceed realtor's
commissions. In the event Xxxxxxx is unable to sell his Memphis home within 180
days of the Effective Date, Company shall purchase from Xxxxxxx such home at a
price equal to the average of two appraisals by appraisers reasonably acceptable
to Xxxxxxx and Company. Company further agrees to provide grossed up tax
allowance resulting from applicable Company-paid taxable moving expenses shown
as income on Xxxxxxx'x W-2 form.
(d) Company shall reimburse Xxxxxxx for fees and expenses (including
"points") paid by him to obtain a purchase money loan for his acquisition of a
primary residence in Southern California, which fees and expenses are paid by
Xxxxxxx on or before the date such loan is made; provided, that Company's total
obligations under this Section 12(d) shall not exceed $15,000.
(e) Company shall lend up to $600,000 to Xxxxxxx for the purpose of
purchasing a residence in Southern California if such purchase occurs prior to
the sale of his Memphis residence. The loan shall be at zero interest, and shall
be secured by a deed of trust on the residence purchased. The loan shall be due
and payable upon the earlier of (i) sale of Xxxxxxx'x Memphis residence or (ii)
180 days following the Effective Date.
(f) Company shall reimburse Xxxxxxx for all of his reasonable
out-of-pocket expenses, incurred by him to obtain temporary housing for himself
and his household in Los Angeles, California prior to his purchase of a primary
residence.
(g) Company shall reimburse Xxxxxxx for expenses for up to three (3)
house hunting trips for spouse, to include round trip airfare, lodging, meals
and rental car.
13. Termination for Cause. Company reserves the right to terminate this
Agreement if Xxxxxxx (1) wilfully or habitually breaches or neglects the duties
which he is required to perform under the terms of this Agreement; (2) commits a
felony or act of dishonesty, fraud, misrepresentation, or other acts of moral
turpitude or (3) refuses to comply materially with reasonable directives of the
Board (each of the foregoing circumstances being "Cause").
14. Termination Without Cause.
a. This Agreement shall be terminated upon the death or
disability of Xxxxxxx such that he cannot fulfill his responsibilities
under this Agreement.
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b. Termination under this Section 14 shall not be considered
"for Cause" for the purpose of this Agreement.
15. Effect of Termination Upon Compensation.
(a) Termination for Cause or Upon Resignation. In the event that this
Agreement is terminated prior to the completion of the entire forty-eight month
Term contemplated hereby "for Cause" by Company, or by resignation by Xxxxxxx,
Xxxxxxx shall be entitled to the compensation earned by and vested in him prior
to the date of termination as provided for in this Agreement or Company's stock
option plan, computed pro rata up to and including that date, excluding any
Bonus, and the vesting of Options shall cease. In such events, except as
expressly provided in this Section 15(a) above and by the terms of any agreement
between the Parties pertaining to the grant of additional compensation to
Xxxxxxx, Company shall have no obligations under this Agreement, including,
without limitation, any obligation thereunder to pay Salary or additional
compensation or to provide other benefits, in each case except to the extent
otherwise provided by law.
(b) Termination Other than for Cause or Upon Resignation, Death or
Disability. In the event that this Agreement is terminated prior to the
completion of the entire forty-eight month Term contemplated hereby other than
"for Cause" by Company or by resignation, death or disability by or of Xxxxxxx,
Xxxxxxx shall be entitled to (i) the compensation earned by and vested in him
prior to the date of termination as provided for in this Agreement (including
Bonus) and Company's stock option plan, in each case computed pro rata up to and
including that date, and (ii) payment of his Salary, average Bonus, and
continuation of medical benefits and payment of automobile lease under Section
12(a) above, in each case through the later of (a) 24 months following the
Effective Date or (b) 12 months following termination, at such times and in such
manner as such Salary or other amount was paid or provided prior to such
termination. In such events, except as expressly provided in this Section 15(b)
above and by the terms of any agreement between the Parties pertaining to the
grant of additional compensation to Xxxxxxx, Company shall have no obligations
under this Agreement, including, without limitation, any obligation thereunder
to pay Salary or additional compensation or to provide other benefits, in each
case except to the extent otherwise provided by law.
16. Notices. Any and all notices or other communications required or
permitted to be given by either Party to the other shall be in writing and may
be transmitted either by personal delivery or by mail, registered or certified
postage prepaid, with return receipt requested. Notices shall be deemed duly
served and given when personally delivered to the Party to whom directed or any
of its officers or, in lieu of such personal service, when deposited in the
United States mail, first class postage prepaid, addressed as follows:
To Company: Naturade, Inc.
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0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chairman of the Board
Telephone: (000) 000-0000
To Xxxxxxx: Xxxx X. Xxxxxxx
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
17. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the Parties hereto with respect
to the retention of Xxxxxxx by Company, and contains all of the covenants and
agreements between the Parties with respect to that retention in any manner
whatsoever. Each Party acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any Party, or
anyone acting on behalf of any Party, which are not embodied herein, and that no
other agreement, statement, or promise not contained in this Agreement shall be
valid or binding. Without limitation to the foregoing, this Agreement shall
supersede and replace all provisions of any prior agreement pertaining to
retention by Company of Xxxxxxx.
18. Modifications. Any modification of this Agreement will be effective
only if it is in writing signed by the Party to be charged.
19. Effect or Waiver. The failure of either Party to insist on strict
compliance with any of the terms, covenants, or conditions of this Agreement by
the other Party shall not be deemed a waiver of that term, covenants or
condition, nor shall any waiver or relinquishment of any right or power at any
one time or times be deemed a waiver or relinquishment of that right or power
for all or any other times.
20. Partial Invalidity. If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
21. Law Governing Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
22. Sums Due Deceased Xxxxxxx. If Xxxxxxx dies during the Term, any
sums that may be due him from Company under this Agreement as of the date of
death shall be paid to Xxxxxxx'x executors, administrators, heirs, personal
representatives, successors and assigns.
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Executed effective February 18, 1998, at Los Angeles, California.
COMPANY
NATURADE, INC.,
a Delaware corporation
By /s/ XXXXXXX X. XXXXX
-------------------------
Title: Director
Xxxxxxx
/s/ XXXX X. XXXXXXX
---------------------------
XXXX X. XXXXXXX
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