EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 14th day of April 1997, by and between Derma
Sciences, Inc., a Pennsylvania corporation (hereinafter referred to as
"Employer") and Xxxxxxx Xxxx (hereinafter referred to as "Employee").
WHEREAS, Employer desires to employ Employee as the Vice President for
Marketing of Employer, and
WHEREAS, Employee desires to so act,
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, and intending to be legally bound, hereby agree
as follows:
1. Employment. Employer employs Employee, and Employee accepts employment,
as the Vice President for Marketing of Employer with powers and duties as may be
determined, from time to time, by the Office of the Chief Executive.
2. Term. The term of this Agreement shall begin on the date hereof and
shall terminate on the second anniversary hereof unless extended or sooner
terminated pursuant to the provisions hereof or by mutual consent of the parties
hereto (the "Term"). The Term hereof shall, from time to time and without
further action of the parties hereto, extend for one additional year if, not
later than ninety days prior to each anniversary hereof, Employer has not
notified Employee of its intention to terminate this Agreement upon the next
succeeding termination date.
3. Compensation. Employer shall pay Employee compensation under this
Agreement as set forth hereunder ("Compensation"):
(a) Signing Bonus. A signing bonus of $25,000 payable upon execution
hereof.
(b) Base Compensation. Base salary of $150,000 per year, payable
weekly ("Salary"); provided, however, Employer shall review Employee's
performance not later than six months from the date hereof and shall
consider increasing Employee's Salary if, in Employer's discretion, such
increase is warranted.
(c) Incentive Compensation. Incentive Compensation as may, from time
to time, be recommended by the Office of the Chief Executive and approved
by Employer's Board of Directors. Provided, however, such Incentive
Compensation, if any, shall be based upon, inter alia, the following
factors: (1) the extent to which Employer attains its objectives relative
to net sales, income from operations and net income, (2) the extent to
which Employee, by virtue of his responsibilities, is able to, and does,
influence the foregoing results, and (3) Employee's strategic contributions
to Employer. Provided further, that any such incentive compensation shall
not exceed Employee's Base Compensation in any year.
4. Stock Options. As additional compensation for services rendered,
Employer grants to Employee on the date hereof the right and option to purchase
all or any part of an aggregate of 150,000 shares of Employer's Common Stock
(the "Option"), subject to the vesting schedule set forth in subparagraph c
hereof and the adjustments set forth in subparagraph g hereof, which Option is a
nonqualified stock option. The Option is in all respects limited and conditioned
as provided hereunder.
(a) Purchase Price. Except as otherwise provided in subparagraph g
hereof, the purchase price (the "Option Price") of the shares covered by
the Option ("Option Shares") shall be the lower of the closing price of
Employer's Common Stock on the last day on which the Common Stock has
traded on the National Association of Securities Dealers Automated
Quotation System (Nasdaq) preceding the date of execution of this Agreement
or the price per share of the Common Stock offered in Employer's
contemplated private placement.
(b) Option Term. Except as otherwise provided herein, the Option shall
expire on the first to occur of: (i) Ninety (90) days following Employee's
termination of employment with Employer, or (ii) Ten (10) years from the
date of execution hereof.
(c) Exercise of Option. (i) Except as otherwise provided herein, the
right of Employee to exercise the Option is conditioned upon Employee being
in the employ of the Employer, whether pursuant to this Agreement or
otherwise. The Option shall become exercisable to the extent of 50%, 75%
and 100% upon completion by Employee of Six (6), Eighteen (18) and
Twenty-four (24) months of employment, respectively.
(ii) The Option may be exercised, in whole or in part, at any
time or times prior to the expiration or other termination thereof.
(iii) If this Agreement, and Employee's employment with Employer,
is terminated other than For Cause (as defined in paragraph 9) prior
to the expiration date of the Option, such Option may be exercised by
Employee, to the extent the Option is exercisable on the date of such
termination, or to any greater extent permitted by the Board of
Directors, at any time prior to the earlier of: (i) Three (3) months
after the date of termination, or (ii) the expiration date of such
Option. Provided, however, if this Agreement, and Employee's
employment, was terminated For Cause, Employee shall have no right to
exercise this Option on or after the date of such termination.
(iv) The Option shall accelerate and become 100% exercisable upon
the occurrence of the following: (A) Employee's Legal Disability; (B)
Employer's termination of this Agreement other than For Cause; (C)
"Change in Control" of Employer (as hereinafter defined) or (D)
termination of this Agreement by Employee for "Good Reason" (as
hereinafter defined).
(v) For purposes of this Agreement the following definitions
apply:
(A) "Legal Disability" shall mean either Employee has been unable
to substantially perform his duties hereunder by reason of illness,
accident or other physical or mental disability for a continuous
period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period, or that in the opinion of the Board of
Directors, such opinion to be derived from the reports of three (3)
physicians of its choosing, Employee will be unable to substantially
perform his duties hereunder by reason of illness, accident or other
physical or mental disability for a continuous period of 180 days or
an aggregate period of 270 days during any continuous twelve-month
period.
(B) "Good Reason" shall mean a breach by Employer of its
obligations under this Agreement.
(C) "Change in Control" shall mean: (1) the sale by Employer of
all or substantially all of its assets to any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), the consolidation of Employer with any person, or the merger of
Employer with any person as a result of which merger Employer is not
the surviving entity, or if the surviving entity, Employer is owned by
a parent company; or (2) the sale or transfer by one or more of
Employer's shareholders in one or more transactions, related or
unrelated, to one or more persons under circumstances whereby any
person and its "affiliates" (as defined herein) shall own, as a result
of such sale or transfer thereafter, at least Fifty percent (50%) of
the outstanding shares of Employer. An "affiliate" shall mean any
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, any other person.
(d) Method of Exercising Option. (i) The Option may be exercised by
giving written notice, in form substantially as set forth in Exhibit 1
hereof, to Employer at its principal office, specifying the number of
Option Shares to be purchased and accompanied by payment in full of the
aggregate purchase price for the Shares. Only full Shares shall be
delivered and any fractional share which might otherwise be deliverable
upon exercise of an Option granted hereunder shall be forfeited.
(ii) The purchase price shall be payable in cash or its
equivalent.
(iii) Upon receipt of such notice and payment, Employer, within
three (3) business days after Exercise, shall deliver or cause to be
delivered a certificate or certificates representing the Shares with
respect to which the Option is exercised. The certificate or
certificates for such Shares shall be registered in the name of the
person exercising the Option (or, if Employee shall so request in the
notice exercising the Option, in the name of Employee and his spouse,
jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person exercising
the Option. In the event the Option is exercised by any person after
the death or Legal Disability of Employee, such notice shall be
accompanied by appropriate proof of the right of such person to
exercise the Option. All shares purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable by
Employer.
(e) Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by Employee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of Employee,
the Option shall be exercisable only by Employee or, in the event of his
Legal Disability, by his legal representative.
(f) Withholding of Taxes. The obligation of Employer to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
(g) Adjustments. The number of Option Shares and the Option Price
shall be adjusted as set forth herein:
(i) In the event that a stock dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Option Shares
shall be adjusted by adding to each Option Share the number of shares
which would be distributable thereon if such Option Share had been
outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend.
(ii) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of Employer whether through
recapitalization, stock split, combination of shares, or otherwise,
then there shall be substituted for each Option Share the number and
kind of shares of stock or the securities into which each outstanding
share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
(iii) In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for shares of stock or other
securities of another corporation, whether through reorganization,
sale of assets, merger or consolidation in which Employer is the
surviving corporation, then there shall be substituted for each Option
Share the number and kind of shares of stock or the securities into
which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(h) Share Ownership. Neither Employee nor Employee's legal
representatives nor the executors or administrators of his estate shall be
or be deemed to be the holder of any share of Common Stock covered by an
Option unless and until a certificate for such share shall have been
issued.
5. Time and Efforts. Employee shall devote all of his business time and
efforts to the affairs of Employer save as specifically otherwise authorized by
the Board of Directors.
6. Disclosure of Information. Employee recognizes and acknowledges that he
will have access to certain confidential information of Employer and that such
information constitutes valuable, special and unique property of Employer.
Employee will not, during or after the term of his employment, disclose any of
such confidential information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever unless ordered to do so by a
court or other tribunal or government agency with jurisdiction over the subject
matter and Employee. In the event of a breach or threatened breach by Employee
of the provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee from disclosing, in whole or in part, confidential
information of Employer, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such confidential information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting Employer from pursuing any
other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
7. Expenses. Employee may incur reasonable expenses for promoting
Employer's business, including expenses for entertainment, travel, and similar
items. Employer will reimburse Employee for all such expenses in accordance with
Employer's applicable policies, rules and regulations as from time to time
issued and amended.
8. Insurance. During the term of this Agreement, Employee will be covered
under Employer's Directors' and Officers' liability insurance to the same extent
Employer's directors and officers are covered.
9. Termination of Agreement.
(a) This Agreement may be terminated by Employer "For Cause". "For
Cause" has the following meaning: If Employee willfully breaches or
habitually neglects or fails to perform the duties which he is required to
perform under the terms of this Agreement, materially fails to follow the
reasonable directives or policies established by or at the direction of the
Board of Directors, or conducts himself in a manner materially detrimental
to the interests of Employer and such breach or failure of performance is
not cured within Thirty (30) days of the delivery to Employee of written
notice thereof, which notice shall have been approved by a majority of
Employer's Board of Directors, Employer may terminate this Agreement and
Employee's employment For Cause.
(b) This Agreement may be terminated by Employee for: (i) Good Reason
(as defined in paragraph 4(c)(v)(B)) if Employer fails to cure its breach
of obligation within Thirty (30) days of the delivery to Employer of
written notice of such breach, or (ii) upon a Change in Control of
Employer.
(c) This Agreement, and therefore Employee's employment with Employer,
shall terminate automatically upon Employee's death. If Employee has been
unable to substantially perform his duties hereunder by virtue of his Legal
Disability (as defined in paragraph 4(c)(vi)(A)), and Employee has not
resumed his duties to the satisfaction of the Board of Directors within
Thirty (30) days of the delivery to Employee of written notice thereof,
which notice shall have been approved by a majority of Employer's Board of
Directors, Employer may terminate this Agreement and Employee's employment.
10. Payments on Termination.
(a) If, prior to the expiration of this Agreement, Employee's
employment is terminated by Employee by reason of a Change in Control of
Employer, or by Employer other than For Cause, Employer shall pay to
Employee: (i) Employee's full Salary through the date of his termination,
and (ii) an amount equal to the greater of the aggregate Salary payments
which Employee would have received during the balance of the Term if such
termination had not occurred, or $150,000. All such Salary payments shall
be made not later than the fifth business day following the date of his
termination.
(b) During the Term, if Employee's employment is terminated For Cause,
Employee shall receive, on the next normal pay date following the date of
his termination, the Salary to which he is entitled through the date of his
termination. Provided, however, Employee shall not be denied the benefits
of paragraph 10.(a) and those set forth in paragraph 4.(c)(iv) unless the
cause for termination is one of willful breach rather than neglect of
duties as set forth in this Agreement.
(c) Employee shall not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor
shall the amount of any payment provided for herein be reduced by any
compensation or retirement benefits heretofore or hereafter earned by
Employee as the result of employment by any other person, firm or
corporation.
11. Restrictive Covenant. For a period of One (1) year after the
termination by Employer For Cause or by Employee other than for Good Reason or
pursuant to a Change in Control or expiration of this Agreement, Employee will
not, within the greater of the currently existing marketing area of Employer or
any future marketing area of Employer established during Employee's employment
under the terms of this Agreement, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business related to wound
care therapeutics or otherwise similar to the type of business conducted by
Employer at the time of the termination or expiration of this Agreement.
Provided, however, the aforementioned restrictions shall not be applicable to
activities in which Employee was, and continued to be, engaged in on the date of
this Agreement. In the event of Employee's actual or threatened breach of the
provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee therefrom. Nothing herein shall be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from Employee.
12. Outplacement Assistance. In the event this Agreement is terminated or
not renewed by Employer other than For Cause, Employer shall render to Employee
reasonable and appropriate outplacement assistance.
13. Waiver of Breach. The waiver by Employer of a breach of any provision
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in a writing
signed by an authorized officer of Employer and approved by an absolute majority
of Employer's board of directors.
14. Assignment. Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Employee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Employer under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
15. Entire Agreement. This Agreement contains this entire understanding of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought to be charged.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
EMPLOYER
DERMA SCIENCES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx, Chairman
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------
Xxxx X. Xxxxxxxxx, President
EMPLOYEE
By: /s/ Xxxxxxx Xxxx
----------------
Xxxxxxx Xxxx
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise the nonqualified stock options granted to me as of
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased: ________________
Option price per Share: ________________
Total option price: ________________
Enclosed is my check in the amount of $_________. Please have the
certificate or certificates representing the purchased Shares registered in the
following name(s)1 ______________________________________and sent to
_________________________________.
DATED: ______________, ____.
OPTIONEE
__________________________________
--------------------------
1Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
