EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 30th day of July,
1996, by and between BAYWOOD INTERNATIONAL, INC., a Nevada corporation (the
"Corporation") and Xxxxxx Xxxxxx ("Xx. Xxxxxx").
A. The Corporation wishes to employ Xx. Xxxxxx as President and Chief
Executive Officer of the Corporation.
B. Xx. Xxxxxx is willing to be employed by the Corporation on the terms
and conditions set forth below.
The Corporation and Xx. Xxxxxx agree as follows:
1. Employment. The Corporation will employ Xx. Xxxxxx as the President
and Chief Executive Officer of the Corporation. Xx. Xxxxxx will perform such
further duties consistent with his status as President and Chief Executive
Officer as may be required of him by the Corporation under and subject to the
instruction, direction and control of the Board of Directors of the Corporation.
2. Devotion to Employment. Xx. Xxxxxx accepts employment with the
Corporation on the terms and conditions of this Agreement, and will devote all
of his business time and effort to perform his duties on behalf of the
Corporation in his position as set forth in paragraph 1, provided, however that
nothing herein shall be construed to prevent Xx. Xxxxxx from making and
supervising personal investments. During the term of this Agreement, Xx. Xxxxxx
shall not be actively engaged in any other business activity which will in any
way impair his ability to properly meet his obligations to the Corporation or
represent any activity competitive with the Corporation or detrimental to its
business. Xx. Xxxxxx agrees to comply with the reasonable policies, standards
and regulations of the Corporation from time to time established.
3. Compensation and Benefits. The Corporation agrees to pay Xx. Xxxxxx
compensation for his services as follows:
3.1 Base Salary. The Corporation will pay Xx. Xxxxxx an annual
base salary, subject to withholding taxes and other normal payroll deductions,
as follows:
Annual Base Salary Dates
------------------ -----
$108,000 through April 18, 1997
$125,000 April 19, 1997 through April 18, 1998
3.2 Bonuses. In addition to the Base Salary, Xx. Xxxxxx may
receive such bonuses and increases in Base Salary, if any, as may be awarded to
him from time to time by the Corporation's Board of Directors.
- 1 -
3.3 Benefits. Xx. Xxxxxx shall be entitled to such medical,
dental, disability, life insurance and other benefits and perquisites, if any,
no less favorable than such as are afforded to any other senior executive of the
Corporation, subject to applicable waiting periods and other conditions. Such
medical, dental and other health insurance shall also provide coverage for Xx.
Xxxxxx'x spouse and dependent children, if any. Xx. Xxxxxx shall be entitled to
four weeks of vacation in each employment year.
3.4 Business Expenses. The Corporation will pay or reimburse
Xx. Xxxxxx for all transportation, hotel and other expenses reasonably incurred
by Xx. Xxxxxx on business trips and for all other ordinary and reasonable
out-of-pocket expenses actually incurred by him in the conduct of the business
of the Corporation against itemized vouchers submitted with respect to any such
expenses approved in accordance with customary procedures. The Corporation shall
provide Xx. Xxxxxx with a corporate credit card from a major issuer to
facilitate payment of such expenses.
3.5 Automobile Allowance. The Corporation shall pay Xx. Xxxxxx
the sum of $12,000 per year as an automobile allowance for business use. Xx.
Xxxxxx shall provide his own automobile insurance satisfactory to the
Corporation.
3.6 Indemnification. The Corporation shall indemnify Xx.
Xxxxxx and hold Xx. Xxxxxx harmless to the fullest extent allowed by law with
respect to any claim brought against Xx. Xxxxxx as a result of or in connection
with his employment hereunder or other affiliation with the Company or its
Affiliates, and/or in connection with liabilities under the Securities Act of
1933, as amended, whether such claim arises from events occurring during, prior
to or after the term of this Agreement, including reasonable attorneys' fees,
settlement costs, and all other costs and expenses which may be incurred by Xx.
Xxxxxx in connection with the defense or settlement thereof which fees, costs
and expenses shall be paid on behalf of, or reimbursed to, Xx. Xxxxxx as they
are incurred, to the extent legally permissible. The Corporation's obligations
under this Section 3.6 shall survive the termination of this Agreement.
4. Stock Options. In consideration of Xx. Xxxxxx'x employment
hereunder, the Corporation and Xx. Xxxxxx are simultaneously executing a Stock
Option Agreement pursuant to which Corporation is granting Xx. Xxxxxx the option
to purchase 200,000 shares of the Corporation's Common Shares as follows:
subject to shareholder approval and subject to his continued employment until
April 19, 1997, when the Second Option vests, Xx. Xxxxxx has the option to
purchase 100,000 shares of Common Shares at a purchase price of $0.52 per share
exercisable immediately and until April 18, 2006 and 100,000 shares of Common
Shares at a purchase price of $0.52 per share exercisable on April 19, 1997 and
until April 18, 2007. The grant of options in the Stock Option Agreement are
subject to shareholder approval at the Corporation's 1996 Annual Meeting.
Failing shareholder approval of the options at the Annual Meeting, the Stock
Option Agreement will be voided, and thereupon the Corporation and Xx. Xxxxxx
will negotiate alternative compensation of equivalent value to him.
- 2 -
5. Term. The term of this Agreement shall be deemed to be effective as
of the date hereof, and shall continue for a term of two (2) years from Xx.
Xxxxxx'x appointment as President and Chief Executive Officer, continuing until
April 18, 1998, unless sooner terminated as provided herein.
6. Termination. This Agreement shall terminate:
6.1 Death or Disability. (a) Upon the death of Xx. Xxxxxx, or
(b) upon notice by the Corporation, if Xx. Xxxxxx fails, because of illness or
incapacity, to render the services contemplated by this Agreement for a period
of six consecutive months. If termination occurs under this paragraph 6.1, the
Corporation shall pay to Xx. Xxxxxx (or his estate, as the case may be), an
amount equal to his then-current compensation, including salary and bonuses, for
90 days following termination.
6.2 Termination by Corporation for Cause. For cause, upon
notice to Xx. Xxxxxx by the Corporation. As used herein, "cause" shall mean: (a)
the refusal or failure by Xx. Xxxxxx to carry out specific directions of the
Chief Executive Officer or the Board which are of a material nature and
consistent with his status as President and Chief Executive Officer, the refusal
or failure by Xx. Xxxxxx to perform a material part of his duties hereunder, or
a breach of any of Xx. Xxxxxx'x fiduciary duties to the Corporation; (b)
fraudulent or dishonest action by Xx. Xxxxxx in his relations with Corporation
or any of its Affiliates, or with any customer or business contact of the
Corporation or any of its Affiliates ("dishonest" for those purposes shall mean
Xx. Xxxxxx'x knowingly or recklessly making of a material misstatement or
omission for his personal benefit); or (c) the conviction of Xx. Xxxxxx of any
crime involving an act of moral turpitude. Notwithstanding the foregoing, no
"cause" for termination shall be deemed to exist with respect to Xx. Xxxxxx'x
acts described in clause (a) above unless the Corporation shall have given
written notice to Xx. Xxxxxx specifying the "cause" with reasonable
particularity and, within five business days after such notice Xx. Xxxxxx shall
not have cured or eliminated the problem or thing giving rise to such "cause."
If termination occurs under this paragraph 6.2, Xx. Xxxxxx shall not receive any
salary, bonuses or other compensation relative to his termination or after his
termination. Salary or bonuses accrued prior to such termination shall not be
affected.
6.3 Termination by Xx. Xxxxxx. Upon not less than 10 days'
written notice by Xx. Xxxxxx to the Corporation. If termination occurs under
this paragraph 6.3, Xx. Xxxxxx shall not receive any salary, bonuses or other
compensation relative to his termination or after his termination. Salary or
bonuses accrued prior to such termination shall not be affected.
6.4 Termination Without Cause. The Board of Directors may
terminate Xx. Xxxxxx at any time without cause. If the Corporation terminates
Xx. Xxxxxx without cause, the Corporation will, upon termination, pay Xx. Xxxxxx
a lump sum equal to the amount of his salary, bonuses or other compensation
which he would have received for 12 months. For purposes of determining the
amount of the lump sum payment salary shall be set at the rates set
- 3 -
forth in Section 3.1 hereof as if Xx. Xxxxxx continued his employment with the
Corporation for the period in question.
7. Resignation as Director. If, for any reason, (a) Xx. Xxxxxx
terminates his employment with the Corporation, or (b) the Corporation
terminates Xx. Xxxxxx'x employment under the terms of this Agreement, or (c)
this Agreement expires without being renewed or extended, then Xx. Xxxxxx will
resign as a director, effective upon the occurrence of such termination or
expiration, whichever is applicable.
8. Protection of Confidential Information; Non-Competition.
8.1 Confidential Information. Xx. Xxxxxx warrants that he is
not subject to any restriction on his executing and performing this Agreement,
and acknowledges that:
(a) As a result of his employment by the Corporation, Xx.
Xxxxxx will obtain secret and confidential information concerning the
business of the Corporation and its Affiliates, including, without
limitation, financial information, patents and other proprietary
rights, trade secrets and "know-how," customers, and certain business
methodologies ("Confidential Information").
(b) The Corporation and its Affiliates will suffer substantial
damage which will be difficult to compute if, during the period of his
employment with the Corporation or thereafter, Xx. Xxxxxx should
divulge Confidential Information or, thereafter, Xx. Xxxxxx should
enter a business competitive with those of the Corporation.
(c) The provisions of this Agreement are reasonable and
necessary for the protection of the business of the Corporation and its
Affiliates.
8.2 Maintain Confidentiality. Xx. Xxxxxx agrees that he will
not at any time, either during the term of this Agreement or thereafter, divulge
to any person or entity any Confidential Information obtained or learned by him
as a result of his employment with the Corporation or any of its Affiliates,
except (a) in the course of performing his duties hereunder, (b) with the
Corporation's express written consent; (c) to the extent that any such
information is in the public domain other than as a result of Xx. Xxxxxx'x
breach of any of his obligations hereunder; or (d) where required to be
disclosed by court order subpoena or other government process. If Xx. Xxxxxx
shall be required to make disclosure pursuant to the provisions of clause (d) of
the preceding sentence, Xx. Xxxxxx promptly, but in no event more than 72 hours
after learning of such subpoena, court order, or other government process, shall
notify, by personal delivery or by electronic means, confirmed by mail, the
Corporation and, at the Corporation's expense, Xx. Xxxxxx shall: (i) take all
reasonably necessary steps required by the Corporation to defend against the
enforcement of such subpoena, court order or other government process, and (ii)
permit the Corporation to intervene and participate with counsel of its choice
in any proceeding relating to the enforcement thereof.
- 4 -
8.3 Records. Upon termination of his employment with the
Corporation, Xx. Xxxxxx will promptly deliver to the Company all original
memoranda, notes, records, reports, manuals, drawings, blueprints, formula and
other documents relating to the business of the Corporation and its Affiliates
and all property associated therewith, which he may then possess or have under
his control; provided, however, that Xx. Xxxxxx shall be entitled to retain
copies of such documents reasonably necessary to document his financial
relationship (both past and future) with the Corporation.
8.4 Non-Compete. During the 12-month period following the
termination of Xx. Xxxxxx'x employment with the Corporation under the terms of
this Agreement, Xx. Xxxxxx, without the prior written permission of the
Corporation, shall not, anywhere in the United States of America, directly or
indirectly, (a) enter into the employ of or render any services to any person,
firm or corporation engaged in any business which is a "Competitive Business"
(as defined below); (b) engage in any Competitive Business for his own account;
(c) become associated with or interested in any Competitive Business as an
individual, partner, shareholder, creditor, director, officer, principal, agent,
employee, trustee, consultant, advisor or in any other relationship or capacity;
(d) employ or retain, or have or cause any other person or entity to employ or
retain, any person who was employed or retained by the Corporation in the
six-month period prior to the termination of Xx. Xxxxxx'x employment; or (e)
solicit, interfere with, or endeavor to entice away from the Corporation, for
the benefit of a Competitive Business, any of its customers or other persons
with whom the Corporation has a contractual relationship. However, nothing in
this Agreement shall preclude Xx. Xxxxxx from investing his personal assets in
the securities of any corporation or other business entity which is engaged in a
Competitive Business if such securities are traded on a national stock exchange
or in the over-the-counter market and if such investment does not result in his
beneficially owning, at any time, more than 1% of the publicly-traded equity
securities of such Competitive Business.
8.5 Injunctive Relief. If Xx. Xxxxxx breaches, or threatens to
breach, any of the provisions of Sections 8.2, 8.3 or 8.4, the Corporation shall
have the right and remedy to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed by Xx. Xxxxxx that the services being rendered hereunder to the
Corporation are of a special, unique and extraordinary character and that any
such breach or threatened breach will cause irreparable injury to the
Corporation and that money damages will not provide an adequate remedy in the
Corporation.
8.6 Modification of Scope. If any provision of Section 8.2 or
8.4 is held to be unenforceable because of the scope, duration or area of its
applicability, the tribunal making such determination shall have the power to
modify such scope, duration, or area, or all of them, and such provision or
provisions shall then be applicable in such modified form.
9. Definitions. As used in this Agreement:
9.1 "Affiliate" shall mean any entity that, directly or
indirectly, is controlled by, controlling, or under common control with the
Corporation.
- 5 -
9.2 "Competitive Business" shall mean a business which is
directly competitive with any business engaged in by the Corporation which
accounted for more than 10% of the Corporation's gross revenues for its last
completed fiscal year.
10. Notices. All notices provided for by this Agreement shall be made
in writing and shall be deemed given when (a) personally delivered to the party
entitled to receive it; (b) transmitted by electronic means; or (c) mailed first
class mail, by certified mail, return receipt requested, addressed to the person
entitled to it at the address set forth below (or at such other address as may
have been designated by written notice). The notice shall be deemed to be
received on the date of its actual delivery or electronic transmission to the
party entitled thereto, or three days after mailing. If sent to the Corporation,
notices shall be delivered to:
Baywood International, Inc.
00000 Xxxxx 00xx Xxxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
with copies to:
Xxx X. Xxxxx
Xxxxx, Xxxxxxxxx & Xxxxx, P.C.
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx Centre, Suite B-252
Xxxxxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
and, if sent to Xx. Xxxxxx, notices shall be delivered to:
Xxxxxx Xxxxxx
8046 East Via De La Escuela
Xxxxxxxxxx, Xxxxxxx 00000
Marked "Personal and Confidential"
11. Assignment. The rights and benefits of the Corporation under this
Agreement shall be transferable, and all covenants and agreements hereunder
shall inure to the benefit of and be enforceable by, its successors and assigns.
Xx. Xxxxxx may not assign this Agreement, but it shall inure to the benefit of
and be binding upon his heirs and legal representatives.
12. Arbitration. In the event of any dispute between the parties as to
the interpretation of any of the terms and provisions of this agreement, the
matter shall be submitted to arbitration in the following manner:
Either party shall serve written notice upon the other party
that they desire to submit the dispute to arbitration and within fifteen (15)
days of the date of any such written
- 6 -
notice each party shall appoint an arbitrator within ten (10) days thereafter
the two arbitrators so selected shall appoint a third. In the event either party
shall fail to appoint an arbitrator within such fifteen-day period or if the two
arbitrators so appointed shall fail to select a third within such ten-day
period, then a judge of the Superior Court of Maricopa County or such other
court as may have jurisdiction thereover shall appoint such arbitrator. The
three arbitrators shall determine the controversy in accordance with the Rules
of the American Arbitration Association and a decision of the majority of the
arbitrators shall bind and be conclusive upon the parties. The parties shall pay
the expense of arbitration in the manner determined by the arbitrators and
judgment upon the award rendered by the arbitrators may, if permissible, be
entered in any court having jurisdiction.
13. Miscellaneous.
13.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
13.2 Waiver. No waiver or modification of this Agreement shall
be valid unless in writing and duly executed by the party to be charged
therewith. Waiver by either party hereto of any breach or default by the other
party of any of the terms and provisions of this Agreement shall not operate as
a waiver of any other breach or default, whether similar to or different from
the breach or default waiver.
13.3 Severability. All agreements, provisions,
representations, warranties and covenants contained herein are severable, and in
the event that any one or more of them shall be held to be invalid, illegal or
unenforceable in any respect by any court of competent jurisdiction, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected thereby, and this Agreement shall be
interpreted as if such invalid, illegal or unenforceable agreements, provisions
or covenants were not contained herein.
13.4 Entire Agreement. This Agreement, together with the Stock
Option Agreement being executed between the parties, constitutes and embodies
the full and complete understanding and agreement of the parties hereto
provided, and supersedes all prior under standings or agreements, whether oral
or in writing.
The parties have executed this Agreement the day and year first
above-written.
BAYWOOD INTERNATIONAL, INC. "Xx. Xxxxxx"
By: /s/ Xxxxxxx Xxxxxxx /s/ Xxxxxx Xxxxxx
------------------------ ---------------------------
Xxxxxx Xxxxxx
Its Secretary
-----------------------
- 7 -
