EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") dated December 15, 1997, by and
between PacificHealth Laboratories, Inc. (hereinafter the "Company"), a Delaware
corporation, and Xxxxxx Xxxxxxx (hereinafter "Employee").
WHEREAS, the Company desires to retain the services of Employee and
Employee desires to be employed upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. EMPLOYMENT: The Company shall employ Employee as its President and
Chief Executive Officer, and Employee shall accept employment and shall render
services in such capacities, under and subject to the conditions and terms set
forth herein. During the period of his employment, Employee shall devote his
full time, attention, energy, knowledge and skill to the business and interests
of the Company, from offices of the Company to be maintained in the Central New
Jersey area, and the Company shall be entitled to the profits and other benefits
arising from or incident to the work, services and advice of Employee.
2. TERM: The term of this Agreement, and the term of employment of
Employee hereunder, shall commence on January 1, 1998 (the Effective Date"), and
shall end on the day preceding the third anniversary date of the Effective Date,
i.e., December 30, 2000 (the "Scheduled Termination Date"), provided:
a. Employee shall have the right to terminate his employment
hereunder for cause, upon written notice to the Company referring to this
paragraph 2(a) and describing the condition relied upon by him in invoking the
provisions hereof, if, without Employee's written consent, (i) the Company fails
to pay Employee any salary or other compensation or benefit required to be paid
hereunder when due and for a period of thirty (30) days after demand therefor by
Employee; (ii) there occurs any substantial change in the authorities, powers,
functions or duties attached to Employee's positions; or (iii) Employee is
required by any directive from the Company to reside outside of the Central New
Jersey area; unless, in any such case, the Company, within thirty (30) days
after Employee's giving of notice hereunder, takes full and effective action to
eliminate the condition cited by Employee in his notice of termination as the
reason for his giving of such notice.
b. Employee shall have the right to terminate his employment
hereunder without cause at any time upon not less than thirty (30) days written
notice.
3. COMPENSATION:
a. Employee shall receive base salary which shall be paid in
equal, bi-weekly installments commencing with the first pay period immediately
following the Effective Date. Employee's salary shall be as follows:
i) For two full years following the Effective Date, Employee's
base salary shall be $150,000 per year, provided, however, that Employee's
salary shall be increased to $175,000 per year effective January 1, 1999, if the
Company's net pre-tax operating income for the year ended December 31, 1998,
exceeds $25,000.
ii) In the third year following the Effective Date, Employee's
base salary shall be determined by a Compensation Committee of the Board of
Directors of the Company, a majority of which shall be independent directors.
b. In addition to his base salary, Employee shall receive a bonus
equal to five percent (5%) of the amount, if any, by which the Company's pre-tax
operating income exceeds $1,000,000 in each of the fiscal years ending December
31, 1998 and 1999.
c. In addition to base salary and bonus payable pursuant to (a)
and (b) above, Employee shall have the right and option (the "Option") to
purchase 475,000 shares of the Company's Common Stock at a purchase price of
$6.00 per share, subject to the following terms and conditions:
i) The Option shall vest as to 158,334 shares on the first
anniversary of the Effective Date, as to 158,333 shares on the second
anniversary of the Effective Date, and as to 158,333 shares on the third
anniversary of the Effective Date, and shall not be exercisable by Employee
until and to the extent vested;
ii) To the extent not previously vested, the Options shall
terminate upon termination of Employee's employment by (A) Employee, without
cause, or (B) by the Company with cause.
iii) The Option shall vest in full immediately (A) if
Employee's employment is terminated by the Company without cause, (B) Employee's
employment is terminated by Employee with cause, (C) the Company should merge
with another corporation or entity and the Company is not the surviving
corporation, or (D) all or substantially all of the outstanding capital stock or
assets of the Company are acquired by another person or entity.
iv) To the extent not previously exercised, the Option shall
terminate upon the earlier of (A) the fifth anniversary of the Effective Date or
(B) six (6) months following the termination of Employee's employment by the
Company.
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v) All terms and conditions of the Company's 1995 Incentive
Stock Option Plan which are not inconsistent with the foregoing terms and
conditions shall apply to the Option.
4. OTHER BENEFITS:
a. The Company shall pay Employee for ordinary and reasonable
business expenses incurred by him in the performance of services pursuant to
this Agreement. In addition, the Company shall provide Employee with a
Company-owned or leased automobile for his use or reimburse Employee for his
costs in leasing such automobile. Employee shall keep such records and shall
render to the Company such accounts covering such expenses as the Company shall
reasonably require.
b. During the term of his employment and during any restricted
period during which Employee is entitled to receive payments pursuant to
subparagraph 5(c) below, Employee shall be entitled to participate in any
medical, health, disability and accident or other hospitalization or insurance
plan established by the Company for its employees generally.
c. During each full year of the term of Employment, Employee shall
be entitled to four (4) weeks paid vacation time.
5. COMPENSATION UPON TERMINATION: If Employee's employment is terminated at
any time during the term hereof, the following provisions shall apply:
a. If Employee's employment is terminated for any reason
whatsoever, except for termination by the Company with cause, as defined in
subparagraph (e) below, or by Employee without cause pursuant to subparagraph
2(b) above, the Company shall pay to Employee, (i) at the time of termination,
an amount equal to the base salary which would have been paid during a period
(the "Severance Period") beginning on the date of termination of employment and
ending on the earlier of (A) the Scheduled Termination Date, or (B) the first
anniversary of the termination date, and (ii) an amount equal to any bonus that
would have been payable to Employee pursuant to paragraph 3(b) above during the
Severance Period had Employee remained employed by the Company hereunder during
the Severance Period, payments shall be in lieu of any other severance or
post-employment benefits except as otherwise expressly provided for in this
Agreement.
b. If Employee's employment is terminated by his death, the
payments to Employee provided for in subparagraph (a) above shall be made to his
estate or to a beneficiary designated by him by notice to the Company, and shall
be reduced by an amount equal to life insurance proceeds, if any, paid to
beneficiaries designated by Employee under any life insurance policy owned by
the Company. The Company shall use its best efforts to obtain and maintain in
force key man insurance on Employee's life in the amount of $2,000,000.00 for
its benefit, which insurance proceeds may be used, in part, to fund the
aforementioned termination payment.
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c. If Employee's employment is terminated for any reason other
than Employee's death, the Company, at its election, by notice to Employee given
not later than ten (10) days after such termination and referring specifically
to this subparagraph, shall have the right to require for one (1) year from the
date of termination (the "restricted period") that Employee not become employed
by, become an officer, director, partner or agent of, or become an investor in,
any business engaged in the manufacture or sale of natural food products and/or
dietary supplements, provided that (i) the Company continues to pay to Employee
during the restricted period when payment of Employee's base salary would
otherwise be due and without interruption, an amount equal to one hundred (100%)
percent of Employee's base salary in effect immediately prior to termination
unless such termination is for "cause", as defined below, in which case no
payment shall be required, and (ii) the Company honors and timely performs its
obligations to Employee under subparagraph (a) above. Any failure by the Company
to make the payments required hereunder as and when due, or to honor and timely
perform its obligations to Employee under subparagraphs (a) or (b) above, shall
constitute a full and irrevocable waiver of the Company's rights under this
subparagraph (c). Payments, if any, to Employee hereunder shall be in addition
to any payments required under subparagraphs (a) or (b) above.
d. Nothing in subparagraph (c) above or elsewhere in this
Agreement shall prohibit Employee from acquiring a passive equity stake
representing less then one (1%) of any class of an issuer's outstanding
securities.
e. For the purposes of this Agreement, "cause" for termination of
Employee's employment shall exist only in the event of (i) Employee's gross
negligence or intentional malfeasance in the performance of his duties as an
officer of the Company which results in or creates a substantial risk of serious
financial injury to the Company, (ii) Employee's conviction of a felony or
misdemeanor involving fraud or theft provided that, if such conviction is
appealed by Employee, the conviction is upheld by the appellate courts, (iii)
any final determination by any governmental agency, court or securities exchange
or by The Nasdaq Stock Market, Inc. ("Nasdaq") that Employee has violated any
securities laws or exchange or Nasdaq rules, or (iv) Employee enters into a
consent order with respect thereto.
6. ASSIGNMENT: This Agreement is personal in its nature and neither of the
parties hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except that the Company may
assign or transfer this Agreement to a successor organization in the event of
merger, consolidation, or transfer of sale of all or substantially all of the
assets of the Company, in which case the term Company shall mean such successor,
provided that in the case of any such assignment or transfer, the obligations of
this Agreement are assumed by such successor or are binding upon and inure to
the benefit of such successor as a matter of law.
7. NOTICES: All notices hereunder shall be in writing and shall be deemed
to have been given at the time when mailed in any general or branch United
States Post Office
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enclosed in a certified post-paid envelope, addressed to the respective parties
stated below, or to such changed address as such party may fix by notice as
aforesaid:
To the Company:
Attn: Board of Directors
0000 Xxxxx 0 Xxxxx
Xxxxxxxxxx, XX 00000
with a copy to:
Xxxxxxxx Xxxxxxx Chicco
Foxman Engelmyer & Xxxxx
Attention: Xxxxxx Chicco
0000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
To Employee:
Xxxxxx Xxxxxxx
000 Xxxx Xxxx
Xxxxxxxxxxx, XX 00000
in each case with copies of such notice to each director of the Company then in
office.
8. GOVERNING LAW: This Agreement and all performance under this Agreement
shall be governed by the laws of the State of New Jersey.
9. WAIVER, MODIFICATION: No waiver or modification of this Agreement or of
any covenant, condition or limitation contained herein shall be valid or
effective unless it is in writing and duly executed by Employee and the Company.
10. RESOLUTION OF DISPUTES: Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, including without limitation a
claim for declaratory relief or relief which is equitable in nature, shall be
settled by arbitration in either Philadelphia, Pennsylvania or Newark, New
Jersey, by an arbitrator selected by Employee and the Company. If the Company
and Employee cannot agree on the appointment of an arbitrator within ten (10)
days after a request for arbitration, then such arbitrator shall be an
attorney-at-law with no prior professional association with any of the parties
or their affiliates who is selected in accordance with procedures established
and implemented by the American Arbitration Association. The arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association, except as otherwise provided in this paragraph 10. Except as
otherwise provided herein, all costs of the
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arbitration shall be borne by the Company. Judgment upon any award rendered by
the arbitrator may be entered in any court having jurisdiction over the parties.
Any award of the arbitrator shall include interest at a rate or rates considered
just under the circumstances by the arbitrator and may include, in the
discretion of the arbitrator, an award of legal expenses and costs to the
prevailing party.
11. TERMINATION OF PRIOR AGREEMENT AND PROGRAM: This Agreement supersedes
the Employment Agreement dated May 1, 1995, between Employer and Employee (the
"1995 Contract") and the Bonus Stock Option Award Program adopted by Employer in
July 1996 (the "Program") expressly for Employee. The 1995 Contract and Program
are terminated, and Employer and Employee release each other from any
obligations thereunder, effective as of the Effective Date.
IN WITNESS WHEREOF, Employee has signed his name and the Company, by the
signatures of its duly authorized officers, has executed this Agreement, as of
the date and year mentioned at the top of page one.
PACIFICHEALTH LABORATORIES, INC.
By: /s/ Xxxxxxxx X. Xxxx
--------------------------
Xxxxxxxx X. Xxxx
Executive Vice President
By: /s/ Xxxxxx Xxxxxxx
--------------------------
Xxxxxx Xxxxxxx
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