Exhibit 10f.
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of December 9,
1998, is between MedCare Technologies, Inc., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx, an Illinois resident ("Executive").
RECITALS
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A. The Company desires to continue to employ Executive as its President
and Chief Executive Officer, on the terms set forth in this Agreement.
B. Executive desires to be so employed by Company.
AGREEMENTS
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In consideration of the foregoing recitals and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. EMPLOYMENT.
1.1. Term. The Company agrees to employ Executive as its President and Chief
Executive Officer, and Executive agrees to accept such employment, for the
period commencing on the date hereof and ending on the second anniversary of the
date hereof, unless earlier terminated pursuant to Section 3 (the "Term");
provided, however, that, except as otherwise provided in Section 3, the Term
shall be automatically extended for successive one-year periods commencing with
the second anniversary hereof, unless the Company or Executive delivers to the
other party written notice specifying such party's intent not to extend or re-
extend the Term for an additional one-year period, which notice shall be
delivered at least thirty (30) days prior to the expiration of the Term or any
one-year extension thereof, as applicable.
1.2. Duties. During the Term, Executive shall perform such duties and
functions as are customarily performed by the chief executive officer of a
company the size and nature of the Company, including the duties and functions
consistent with the positions of President and Chief Executive Officer as are
from time to time assigned to him by the Board of Directors of Company (the
"Board"). Executive shall have the powers necessary to perform his duties, and
shall be provided such supporting services, staff, secretarial and other
assistance, office space and accoutrements as shall be reasonably necessary and
appropriate in light of such duties.
1.3. Place of Performance. Executive shall perform his services hereunder at
the headquarters of the Company, except for travel reasonably required to
conduct Company business.
1.4. Vacations. Executive shall be entitled to such paid vacation time as the
Company customarily provides from time to time to its executives (but in no
event less than three (3) weeks per year), to be taken in accordance with its
then-current employment policy regarding such vacation time. Executive shall
also be entitled to all paid holidays given by the Company to its employees.
2. COMPENSATION.
2.1. Base Salary. As compensation for services rendered hereunder, Executive
shall receive an annual base salary ("Base Salary") of not less than One Hundred
Fifty Thousand Dollars ($150,000); provided however, that effective January 1,
1999, Executive shall receive an annual Base Salary of not less than Two Hundred
Thousand Dollars ($200,000), such Base Salary to (a) accrue on a daily basis
based on a three hundred sixty-five (365) day year, and (b) be paid in
accordance with the Company's customary payroll
practices but in no event less frequently than monthly. Such Base Salary shall
be reviewed by the Board no less frequently than semi-annually, beginning as of
January 1, 2000, with a view to making such increases as the board, in its
discretion, deems appropriate. any increase in base salary granted by the Board
shall in no way limit or reduce any other obligation of the Company hereunder.
2.2. Annual Bonuses. In addition to the Base Salary payable pursuant to
Section 2.1, Executive shall be eligible for an annual bonus ("Bonus") for each
Fiscal Year of the Company ("Fiscal Year") during the Term. The annual Bonus
shall be based on such performance standards as the Board or compensation
committee designated by the Board may establish, shall accrue one-half on the
last day of the sixth month and one-half on the last day of the twelfth month of
the Company's Fiscal Year, and shall be payable to Executive in accordance with
the Company's then-current bonus program applicable with respect to its
employees (but in all events no later than the date upon which the Company is
required to file its annual report with the United States Securities and
Exchange Commission).
2.3. Welfare and Retirement Benefits. In addition to the foregoing, the
Company shall pay one hundred percent (100%) of the premiums for medical, life
and dental insurance for Executive and Executive's dependents. In addition,
Executive shall be eligible to participate in any and all benefit plans
maintained by the Company for its employees in accordance with the terms of such
plans as from time to time in effect and applicable to employees of the Company.
2.4. Other Benefits. Executive will receive payment for all business related
organizational or association memberships designated by Executive, in accordance
with the Company's then current practices.
2.5. Auto Allowance. Executive shall receive monthly an automobile allowance
of five hundred ($500) per month, which allowance shall be includible in
Executive's compensation and subject to applicable federal and state withholding
taxes.
2.6. Disability Insurance. The Company shall maintain, and pay the premiums
of, a long-term disability insurance policy for the benefit of Executive (the
"Disability Policy") which provides Executive, in the event of his disability,
an annual amount equal to at least seventy percent (70%) of this then-current
compensation (including for such purposes an amount equal to his bonus for the
immediately preceding Fiscal Year). The amount of such policy shall be reviewed
by the Board no less frequently than bi-annually, beginning on the second
anniversary hereof, with a view to making such increases in the amount of such
policy as are required to comply with this Section 2.6. The Disability Policy
shall, by its terms, permit the Company to assign to Executive (or permit
Executive otherwise to continue) such policy following the termination of his
employment with the Company for any reason. The Company shall take all actions
necessary to assign the Disability Policy to Executive upon the termination of
Executive's employment with the Company.
2.7. Expenses. The Company shall reimburse Executive promptly for all ordinary
and necessary travel and other business expenses incurred by him in connection
with his duties hereunder (including reimbursement for business use of his home
telephone, home facsimile and cellular telephone), provided that Executive
properly accounts therefor in accordance with Company policy.
3. TERMINATION.
3.1. Death. Unless Executive's employment has terminated sooner pursuant to
Section 3, Executive's employment shall terminate on the date of his death.
3.2. Termination by the Company for Cause. The Company may terminate
Executive's employment for cause. for purposes hereof, "cause" shall mean (i)
Executive's conviction of, guilty plea concerning, or written or video-taped
confession of fraud, theft, embezzlement or similar malfeasance, (ii)
Executive's commission of embezzlement of Company funds (provided that the
Company has substantial proof of such embezzlement) or (iii) a material breach
of Executive's obligations under this Agreement. Notwithstanding
the foregoing, the Company's right to terminate Executive's employment for cause
is conditioned upon (a) a majority vote of the Board, after reasonable
investigation and deliberation, to terminate Executive's employment for Cause
and (b) thirty (30) days' prior written notice of the Company's intention to
terminate Executive, which notice sets forth that or those conditions
constituting Cause for termination. Executive shall have thirty (30) days
following his receipt of such notice to eliminate the basis for Cause to the
reasonable satisfaction of the Board. If Executive does not so eliminate the
basis for Cause, the Company may terminate Executive's employment hereunder upon
notice to Executive specifying the Date of Termination (as hereinafter defined),
which date shall be no earlier than three (3) days from the date of such notice.
3.3. Termination by the Company Without Cause. The Company may terminate
Executive's employment at any time without Cause by providing notice of such
intention which notice specifies the Date of Termination.
3.4. Termination by Executive for Good Reason. Executive shall be entitled to
terminate his employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean the occurrence of any of the following circumstances (without
the prior written consent of Executive):
(a) the requirement that Executive report to any officer, consultant or
committee other than the Board, it being the intent of the parties that
Executive shall never be required to report to anyone other than the Board
or a formal committee thereof;
(b) the removal of any of Executive's titles specified in Section 1.1;
(c) a redelegation of any of Executive's material duties to other Company
officers, employees, consultants or committees;
(d) the failure of the Company to maintain and to continue Executive's
participation in its benefit plans as in effect from time to time on a
basis substantially equivalent to that level of participation applicable to
other senior employees of the Company;
(e) a material breach of the Company's obligations under this Agreement or
any written agreement to which Executive and the Company are a party;
(f) the removal of, or failure to elect or re-elect, Executive as a
director of the Company; or
(g) a Change of Control (as hereinafter defined).
For purposes of this Agreement, a "Change of Control" shall be deemed to
have occurred if, at any time after the date hereof, any of the following
occurs:
A. the Company sells or otherwise disposes of all or substantially
all of its assets, other than to Executive;
B. the Company participates in a merger or consolidation and,
immediately following the consummation of such merger or
consolidation, the Company's stockholders prior to such merger or
consolidation do not own fifty percent (50%) or more of the voting
shares of stock of the surviving or successor corporation, unless more
than fifty percent (50%) of the voting shares of stock of the
surviving or successor corporation are owned by Executive; or
C. any person or entity, including a "person" as such term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(but excluding Executive or other current officers or directors of
the Company) becomes the beneficial owner of fifty (50%) or more of
the combined voting power of the Company's voting securities.
In connection with the termination of his employment for good reason, Executive
shall give the Company prior written notice of the occurrences or events giving
rise to such Good Reason, which written notice shall set forth a Date of
Termination not earlier than thirty (30) days subsequent to the date of such
notice; provided, that prior to the Date of Termination, the Company may
(except in the case of termination for Good Reason due to a Change of Control)
eliminate, to the reasonable satisfaction of Executive, the occurrences or
events giving rise to Executive's Good Reason. Notwithstanding the foregoing,
Executive shall have the right to terminate his employment for Good Reason (a)
in the case of a Change of Control, for the one (1) year period following such
Change of Control, and (b) in the case of Good Reason other than a Change of
Control, for the six (6) month period following the events giving rise to such
Good Reason.
3.5. Termination Upon Disability. The Company may terminate Executive's
employment by reason of disability. For purposes of this Agreement,
"Disability" shall mean Executive's inability, as determined by a physician
mutually agreed to by Executive and the Company, to perform, on a full-time
basis, the duties of the President and Chief Executive Officer due to his
physical or mental illness, accident or injury, which condition shall exist for
sixty (60) or more business days within five (5) consecutive months. If the
Company elects to terminate Executive's employment for Disability, it shall give
Executive written notice thereof setting forth that election and the date of
termination.
3.6. Notice and Date of Termination. Any termination of the Executive's
employment hereunder by the Company or Executive shall be communicated by
written notice of termination to the other party hereto in accordance with
Section 7.4 hereof. as used herein, the term "Date of Termination" shall mean
the date specified in the notice of termination (which shall be not less than
thirty (30) days from the date such notice of termination is given unless
otherwise expressly provided herein).
4. PAYMENTS UPON OR AFTER TERMINATION.
4.1. Accrued Compensation. Upon the termination of his employment with the
Company for any reason, Executive shall receive any and all compensation
remaining accrued and unpaid as of the Date of Termination, including Base
Salary and Bonus through the Date of Termination. The Company shall provide
Executive with all profit-sharing, pension, life, disability, accident, health
insurance, and other employee benefit and fringe benefit plans and programs
through the Date of Termination in accordance with the terms and provisions of
such plans and programs as are in effect as of the date that any notice of
termination is given.
4.2. Termination Upon Death. In addition to the Company's obligations under
Section 4.1 hereof, if, at the time of Executive's death, Company maintains
health insurance for members of Executive's immediate family, the Company shall
maintain such health insurance in full force and effect for a period of at least
one (1) year from the date of Executive's death (which shall not reduce the
minimum length of time that the Company is obligated to provide health insurance
to Executive's immediate family under Section 4980(b) of the Internal Revenue
Code of 1986, as amended (the "Code")).
4.3. Termination for Cause. Except with respect to the Company's obligations
under Section 4.1 hereof, if Executive's employment with the Company is
terminated for Cause, the Company shall have no further obligations to Executive
under this Agreement.
4.4. Termination by Company Without Cause, Termination at Disability or
Termination by Executive for Good Reason. In addition to the Company's
obligations under Section 4.1 hereof, in the event that either (a) Executive's
employment is terminated by the Company and such termination is not in
accordance with Section 3.2 hereof or (b) Executive's employment is terminated
by reason of Disability or for Good Reason, the Company shall pay Executive,
within thirty (30) days of the Date of Termination, an amount equal to the sum
of (i) two (2) years Base Salary at his then-current annual Base Salary plus
(ii) two (2) times the average of the two (2) most recent Bonuses paid to
Executive. In addition, for the two (2) year period following the Date of
Termination, the Company shall pay, or reimburse Executive for, (i) any and all
the premiums necessary to maintain in full force and effect health insurance for
the benefit of Executive and members of his immediate family (which payment
shall not reduce the minimum length of time that the
Company is obligated to provide health insurance to Executive and Executive's
immediate family under Code Section 4980(B)) and (ii) any and all premiums
necessary to maintain in full force and effect the Disability Policy. In the
event that Executive shall terminate his employment for Good Reason based on a
Change of Control, then in addition to the Company's obligations under this
Section 4.4, the Company shall, notwithstanding any agreement or plan to the
contrary, fully vest and remove all conditional obligations to receive, all
options or other equity-based awards granted Executive by the Company. If it is
determined, in the opinion of the Company's independent accountants, in
consultation with the Company's independent counsel, that any amounts payable to
Executive by the Company under this Agreement, or any other plan or Agreement
under which Executive participates or is a party, would constitute an "Excess
Parachute Payment" within the meaning of Code Section 280G and be subject to the
excise tax imposed by Code Section 4999 (the "Excise Tax"), the Company shall,
on the Date of Termination, pay to Executive an amount equal to the amount of
such Excise Tax, all federal, state and local income or other taxes payable by
Executive thereon (the "Tax Amount"), plus an additional amount equal to the
additional federal, state and local taxes applicable as a result of the payment
of the tax amount to Executive. If at a later date, the Internal Revenue Service
assesses a deficiency against Executive for Excise Tax which is greater than
that which was determined at the time such amounts were paid, the Company shall
pay to Executive the amount of such unreimbursed Excise Tax plus any interest,
penalties and professional fees or expenses, incurred by Executive as a result
of such assessment, including all additional taxes (as determined upon a
"grossed up" basis) with respect to any such additional amount. In making the
foregoing determinations, the Company shall use the highest marginal federal and
state tax rates applicable to individuals residing in the state in which the
Company's principal place of business is located. Further, the Company shall
withhold from any amounts paid under this Agreement the amount of any Excise Tax
or other federal, state or local taxes then required to be withheld.
Computations with respect to the amounts payable under this subparagraph shall
be made by the Company's independent accountants, in consultation with the
Company's independent legal counsel. The Company shall pay all accounting and
legal counsel fees and expenses related to the determination of any such
amounts.
4.5. Other Termination by Executive. If Executive shall terminate his
employment for any reason other than Good Reason, the Company shall have no
further obligations to Executive under this Agreement (other than the Company's
obligations under Section 4.1 hereof).
4.6. Disclaimer of Mitigation Duty. Executive shall not be required to
mitigate the amount of any payment provided for or referred to in this Section 4
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for or referred to in this Section 4 be reduced by any
compensation earned by Executive as a result of employment by another employer,
by retirement benefits, or be offset against any amount claimed to be owed by
Executive to the Company or otherwise.
4.7. Other Benefits. In addition to all other amounts payable to Executive
under this Section 4, Executive shall be entitled to receive all benefits
payable to Executive under any plans or agreements relating to retirement or
other benefits in accordance with the terms and provisions thereof.
5. STOCK OPTIONS.
5.1. Stock Options. As of the date hereof, the Company has granted Executive
the following stock options (a) an option to purchase 500,000 shares at $6.50
per share, 300,000 of which options are vested as of the date hereof and (b) an
additional option to purchase 100,000 shares at $6.00, all of which options are
vested as of the date hereof.
5.2. Sale of Company Shares. So long as Executive is employed by the Company
the Executive agrees that, without the written consent of the Company (which
consent shall not be unreasonably withheld), Executive shall not sell Common
Stock of the Company which stock represents more than one and a half percent
(1.5%) of the outstanding shares (on a fully diluted basis) of Common Stock of
the Company during any fiscal quarter of the Company; provided however, to the
extent that Executive does not, during any fiscal quarter, sell one and a half
percent (1.5%) of the outstanding Common Stock of the Company, then, in addition
to any shares that Executive may otherwise sell pursuant to the foregoing,
Executive may, in subsequent fiscal quarters, sell Common Stock of the Company
representing at least that number of shares of Company Common Stock equal to
such shortfall.
6. BOARD OF DIRECTORS.
(a) The Company agrees that at all times during the term, the Company shall
slate Executive for election as a member of the Board.
(b) In the event that at any time, or from time to time, during the Term,
the Board establishes an executive or similar committee of the Board, the
Company agrees that such committee will not have more than three members
and Executive will be a member of such committee.
(c) In the event that at any time, or from time to time, during the term,
the Board establishes a nominating or similar committee of the board, the
Company agrees that Executive will be a member of such committee.
7. MISCELLANEOUS.
7.1. Successors and Assigns: Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform this Agreement if no such
succession had occurred.
(b) This Agreement and all rights of Executive hereunder shall inure to the
benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die while any
amounts remain unpaid hereunder, including any amounts which would be
payable to him hereunder if he had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's spouse or if Executive does not have
a living spouse at such time, to Executive's estate.
(c) This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors and assigns; provided, however, that the duties of Executive
hereunder are personal to Executive and may not be delegated by him.
7.2. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
7.3. Waivers. The waiver by either party hereto of any right hereunder or of
any failure to perform or other breach by the other party hereto shall not be
deemed a waiver of any other right hereunder or of any other failure or breach
by the other party hereto, whether of the same or a similar nature or otherwise.
no waiver shall be deemed to have occurred unless set forth in a writing
executed by or on behalf of the waiving party. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically so waived.
7.4. Notices. All notices and communications that are required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally, upon mailing by registered or certified mail,
postage prepaid, return receipt requested, or upon delivery to a reputable
overnight courier as follows:
If to the Company, to: MedCare Technologies, Inc.
0000 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxxx, XX 00000
Attention: Chairman
If to Executive, to: Xx. Xxxxxxx X. Xxxxxx
0000 X. Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000
or to such other address as may be specified in a notice given by one party to
the other party hereunder.
7.5. Severability. If, for any reason, any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature.
7.6. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute but one and the same instrument.
7.7. Legal Fees and Expenses. It is the intent of the Company that Executive
shall not be required to incur any expenses associated with the enforcement of
his rights under this Agreement by litigation, or other legal action because the
cost and expense thereof would substantially detract from the benefits intended
to be extended to executive hereunder. Accordingly, if the Company has failed
to comply with any of its obligations under this Agreement, or in the event that
the Company or any other person takes any action to declare this agreement void
or unenforceable, in whole or in part, or institutes any litigation designed to
deny, or to recover from, Executive any benefits intended to be provided to
Executive hereunder, the Company irrevocably authorizes Executive from time to
time to retain counsel of his choice, at the expense of the Company as
hereinafter provided, to represent Executive in connection with the initiation
or defense of any litigation, arbitration or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. The Company shall advance to
Executive within thirty (30) days after each written request therefor any and
all attorneys' and related fees and expenses actually incurred by Executive in
any such proceeding or otherwise as a result of the Company's failure to perform
this Agreement or any provision hereof or as a result of the Company or any
other person contesting the validity or reasonableness of this Agreement.
Without limiting the generality of the foregoing, if any amount is not paid by
the Company hereunder when due, including, but not limited to, any amount of
salary, bonus, fees or expenses, the amount thereof shall bear interest from the
due date thereof until paid in full at ten percent (10%) per annum. Executive
agrees that he will reimburse the Company for all attorneys' and related fees
and expenses received by Executive from the Company under the provisions of this
Section 7.7 in the event and only to the extent that it shall be ultimately
determined that the Company has not failed to comply with any of its obligations
under this Agreement, and each amount to be reimbursed hereunder shall bear
interest from the date of receipt by Executive thereof until paid to the Company
in full at ten percent (10%) per annum.
7.8. INDEMNIFICATION.
(a) The Company shall provide, at its expense, the Executive (including his
heirs, personal representatives, executors and administrators) with
coverage under a standard directors' and officers' liability insurance
policy which policy covers any and all claims against Executive arising
from or out of the period which includes the Term.
(b) In addition to the insurance coverage provided for in paragraph (a) of
this Section 7.8, the Company shall hold harmless and indemnify the
Executive (and his heirs, executors and administrators) to the fullest
extent permitted under applicable law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action,
suit or proceeding in which he may be involved by reason of his having been
an officer of the Company (whether or not he continues to be an officer at
the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but not be limited
to, judgments, court costs and attorneys' fees and the cost of reasonable
settlements.
(c) In the event that the Executive becomes a party, or is threatened to be
made a party, to any action, suit or proceeding for which the Company has
agreed to provide insurance coverage or indemnification under this Section
7.8, the Company shall, to the fullest extent permitted under applicable
law, advance all expenses (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement (collectively "expenses")
incurred by the Executive in connection with the investigation, defense,
settlement, or appeal of any threatened, pending or completed action, suit
or proceeding, subject to receipt by the Company of a written undertaking
from the Executive (i) to reimburse the Company for all expenses actually
paid by the Company to or on behalf of the Executive in the event it shall
be ultimately determined that the Executive is not entitled to
indemnification by the Company for such expenses and (ii) to assign to the
Company all rights of the Executive to indemnification, under any policy of
directors' and officers' liability insurance or otherwise, to the extent of
the amount of expenses actually paid by the Company to or on behalf of the
Executive.
7.9. Amendment: Survival. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as Executive lives, no person, other than the parties hereto, shall have
any rights under or interest in this Agreement or the subject matter hereof.
the provisions of Sections 4 and 7 survive the termination or expiration of this
Agreement.
7.10. Entire Agreement. This Agreement, constitutes the entire agreement
between the parties respecting his employment with the Company and supersedes
all prior oral or written understandings between the parties relating to
Executive's employment, including the June 26, 1997 employment agreement between
the parties; provided, however, that this Agreement shall not supersede any
prior written agreement between the parties concerning any equity-based award
made by the Company to Executive.
7.11. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
The parties hereto have executed this Agreement on the date and year first
above written.
MEDCARE TECHNOLOGIES, INC.,
a Delaware corporation
By:
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Title: Xxxxxxx X. Xxxxxx
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