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EXHIBIT 10.31
SABRATEK CORPORATION
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 15, 1996 between Xxxxx Xxxxxx (the
"Employee"), and Sabratek Corporation (the "Company").
WHEREAS, the parties wish to provide for the employment of the Employee
by the Company and the Employee, each intending to be legally bound, agree as
follows:
1. Employment. Subject to all of the terms and conditions of this
Agreement, the Company agrees to employ the Employee as the Chief Financial
Officer (the "CFO") and Senior Vice-President of the Company within the general
guidelines to be determined by the Company's Chief Executive Officer, (the
"CEO").
2. Duties. The Employee will devote substantially all of his business
hours to, and make the best use of his energy, knowledge and training in
carrying out all accounting functions of the Company, SEC, MIS, HR, treasury,
investor relations and some business development functions and will not be
actively engaged in other employment with any other entity or concern. The
Employee will diligently and conscientiously perform the duties of CFO and
Senior Vice-President of the Company within the general guidelines to be
determined by the Company's CEO with cross reporting to the Company's Chief
Operating Officer (the "COO").
3. Term. The Employee's employment shall commence on the date of this
Agreement and shall continue for a period of 17 months, subject to earlier
termination in accordance with Section 4 below. Thereafter, the term of this
Agreement shall be automatically extended without action by either the Company
or the Employee for consecutive one-year terms, unless either party gives
written notice to the other not to renew such employment within 120 days before
the expiration of the then current term.
4. Termination. Subject to the respective continuing obligations of
the Company and the Employee under Sections 7, 8, 9 and 10 below:
(a) This Agreement may be terminated by the Company
"for cause" effective immediately upon the giving of written notice
to the Employee (if termination results from actions described in
clauses (i) or (ii) of Section 4(d) below) or on 60 days' written
notice to the Employee (if termination results from actions
described in clauses (iii) or (iv) of Section 4(d) below), with the
basis for termination specified in such notice.
(b) This Agreement may be terminated upon the Employee's death
or in the event the Employee becomes totally disabled. For purpose of
this Agreement, "total disability" shall have the meaning defined in
the long-term disability plan of the Company then covering the
Employee or, if no such plan exists, shall mean a disability that
prevents the Employee from performing his duties under Section 2
of this Agreement and that can be expected to result in death or has
lasted or can be expected to last for a continuous period of not
less than 12 months.
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(c) This Agreement may be terminated by either the Company or
the Employee at any time upon 60 day's written notice to the Company or
the Employee, as the case may be.
(d) For purposes of this Agreement "for cause" shall mean (i)
dishonesty, fraud, misrepresentation, embezzlement or material and
deliberate injury or attempted injury, in each case, related to the
Company or its business, (ii) any unlawful or criminal activity of a
serious nature, (iii) any repeated and demonstrated failure on the
Employee's part to faithfully discharge the responsibilities of his
position for such a period of time that the CEO, in good faith
determines is extremely detrimental to the current and future interests
of the Company, or (iv) a material breach of any provision of the
Agreement.
5. Compensation.
(a) Base Salary. In consideration of the Employee's services
under this Agreement, the Company agrees to pay the Employee an annual
base salary of $140,000 (the "Base Salary"), payable in accordance with
the standard payroll practices of the Company with a guaranteed
increase on January 1, 1997, assuming continuing employment. On the
first business day of each consecutive employment year, the CEO shall
review the Base Salary, and, based upon this review the CEO may at his
sole discretion adjust it accordingly.
(b) Bonuses. In addition to the Base Salary, the Employee
shall be entitled to receive an annual incentive bonus (the "Incentive
Bonus"), based upon milestones mutually agreed to by the CEO and the
Employee annually.
For each future period, the milestones for earning the
Incentive Bonus shall be mutually agreed to by the CEO and the Employee
prior to the commencement of each period, the CEO shall review the
maximum annual amount of the Incentive Bonus, and, based upon this
review, the CEO may at his sole discretion increase or decrease such
maximum annual amount. In setting the maximum amount of future
Incentive Compensation and the milestones, the CEO shall consider
Operational requirements of the Company and the success of the Employee
in meeting those requirements.
The Employee's Incentive Bonus target will be 20% of Base
Salary in previous fiscal year for hitting 80% of plan, 30% for hitting
plan and 40% for hitting 120% of plan. Measurement of performance
against plan is 50% against top-line and 50% against bottom line. (For
1996, bonus would be pro-rated based on 6 months of employment).
(c) Stock Options.
(i) The Employee shall receive 55,000 shares of common
stock out of the employee option pool at the strike price of
$8.375. The stock will vest as follows: 25% upon joining the
company, 25% on January 1, 1997 and the balance in 3 equal
annual installments of 16.6667% on January 1 of the following 3
years. All options will vest immediately in the case of the
sale of the company.
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The company shall keep available such number of shares
of Common Stock as will be sufficient to satisfy the
requirements of this Agreement and shall pay all original issue
and transfer taxes (if any) with respect to the issue and
transfer of such shares. In the event that the outstanding
shares of the Common Stock of the Company are changed into or
exchanged for a different number of kind of shares or other
securities of the Company or of another corporation by reason
of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination of shares, or
dividends payable in capital stock, appropriate adjustments
shall be made in the number and kind of shares as to which the
grants set forth herein shall be made.
(ii) The Employee shall be eligible for participation
in additional options if such options become available for
senior management.
(d) Benefit Plans. The Employee shall be entitled to the
benefits set forth on Exhibit A attached hereto.
(e) Expenses. The Company shall pay or reimburse the Employee
for all reasonable expenses (including, without limitation, expenses
for entertainment, travel, meals and hotel accommodations) that the
Employee incurs while performing his duties under this Agreement,
provided that the Employee accounts properly for such expenses to the
Company in accordance with Company policies.
6. Payment Upon Termination. Upon the termination of the Employee's
employment with the Company, the Employee shall be entitled to receive the
amounts described below and Exhibit A and no other amounts. The ability of the
employee to exercise any stock options following such termination shall be
governed by and subject to the terms and conditions of the Plan and the stock
option agreements entered into between the Company and the Employee.
(a) If the Employee is terminated pursuant to Section 4(a)
(for cause) subsection (d)(i), (ii) or (iv) of this Agreement, the
Employee shall be paid (i) the Base Salary through the date of
termination, (ii) benefits payable to the Employee pursuant to the
terms and conditions of any benefit plan and stock option plan in which
the Employee participated during the term of his employment, the right
to which had vested on the date of his termination under the terms and
conditions of such plans, and (iii) any unpaid expense reimbursement.
The Employee will have ninety (90) days to exercise all vested options.
(b) If the Employee is terminated pursuant to Section
4(d)(iii) (performance related), the Employee shall be paid the base
salary through a period six (6) months after the date of termination
and the benfits listed in 6(a)(ii) and (iii) above.
(c) If the Employee is terminated pursuant to Section 4(b)
(death or disability) of this Agreement, the Employee shall be paid (i)
the Base Salary through the end of the month following his death or
termination as a result of total disability, (ii) the Incentive Bonus
to which the Employee would have been entitled (as determined in good
faith by the CEO) for the year in which his death or termination for
total disability occur, (iii)
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benefits payable to the Employee pursuant to the terms and conditions of any
benefit plan in which the Employee participated during the term of his
employment, the right to which had accrued on the date of his death or
termination under the terms and conditions of such plans, (iv) any unpaid
expense reimbursement and (v) the right to exercise all vested and unvested
options granted pursuant to paragraph 5(c)(i) or granted under 5(c)(ii) within
90 days of such termination.
(d) If this Agreement is terminated by the Company pursuant to
Section 4(c) of this Agreement, (i) Employee shall receive from the Company
an amount equal to 6 months salary until January 1, 1998, 12 months salary
thereafter. (ii) The Company shall provide the Employee continued participation
by Employee (and Employee's dependents) in the benefits set forth in paragraph
5(d) for twelve (12) months following termination; provided, that such benefits
may be terminated by the Company at such time Employee obtains other
substantially similar employment. Employee shall promptly inform the Company
when he obtains other employment. (iii) Employee shall be permitted to
immediately exercise all vested options granted based upon vesting outlined in
Exhibit A pursuant to paragraph 5(c)(i) and 5(c)(ii) within ninety (90) days of
such termination. (iv) Employee shall be entitled to outplacement services or
$20,000.
(e) Benefits Upon Change in Control.
(i) In the event that a Change in Control occurs, Employee
shall be permitted to immediately exercise all vested and
unvested options granted pursuant to paragraphs 5(c)(i), or any other
options granted by the Company within ninety (90) days of such event,
in either case regardless of whether any time or other criteria has
been satisfied; provided, that Employee pays the exercise price per
share for any unexercised options he wishes to exercise.
(ii) If the Employee voluntarily terminates his employment,
it shall be treated as a termination for cause, with the
payment mechanism described in 6(b).
(f) Change in Control. For purposes of this Agreement, a "Change
in Control" of the Company shall mean any of the following:
(i) A Change in Control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement.
(ii) Any person or group acquires beneficial ownership of
80% or more of the Company's voting shares.
(iii) The Company's stockholders approve any merger,
consolidation, combination of the Company, any sale, transfer
or encumbrance of substantially all of the assets or business of the
Company.
(iv) The Company enters into an agreement or the CEO and the
Board of Directors of the Company adopts a resolution, the
effect of consummation of
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which would result in the occurrence of a "Change in
Control" of the Company as set forth in subparagraphs (i),
(ii), (iii) or (iv).
(v) A change in control shall not be a condition
whereby (i) above may technically occur, or where the change in
control is due to an acquisition by the Company, but when the
CEO and Board retain their position in the new entity.
7. Inventions.
(a) "Inventions", as used in this Section 7, means any
discoveries, improvements and ideas (whether or not they are in writing
or reduced to practice) or works of authorship (whether or not they can
be patented or copyrighted) that the Employee makes, authors or
conceives (either alone or with others) and that:
(i) concern directly the Company's business or the
Company's present or possible future research or development;
(ii) result from any work the Employee performs for
the Company;
(iii) use the Company's equipment, supplies,
facilities, or trade secret information; or
(iv) the Employee develops during any such time that
Section 2 above obligates him to perform his employment duties.
(b) The Employee agrees that all Inventions he makes during or
within six months after the term of this Agreement will be the
Company's sole and exclusive property. The Employee will, with respect
to any such Invention:
(i) keep current, accurate, and complete records,
which will belong to the Company and be kept and stored on the
Company's premises while the Employee is employed by the
Company;
(ii) promptly and fully disclose the existence and
describe the nature of the Invention to the Company in writing
(and without request);
(iii) assign (and the Employee does hereby assign) to
the Company all of his rights to the Invention, any
applications he makes for patent or copyrights in any country,
and any patents or copyrights granted to him in any country;
and
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(iv) acknowledge and deliver promptly to the
Company any written instruments, and perform any other
acts necessary in the Company's opinion to preserve property
rights in the Invention against forfeiture, abandonment, or
loss and to obtain and maintain letters, patents and/or
copyrights on the Invention and to vest the entire right and
title to the Invention in the Company.
The requirements of this subsection 7(b) do not apply to an
Invention for which no equipment, supplies, facility or trade secret
information of the Company was used and which was developed entirely
on the Employee's own time and (x) which does not relate directly to
the Company's business or to the Company's actual or demonstrably
anticipated research or development, or (y) which does not result from
any work the Employee performed for the Company. Except as previously
disclosed to the Company in Inventions as having been made, conceived,
authorized or acquired by the Employee prior to his employment by the
Company.
8. Confidential
(a) "Confidential Information", as used in this Section 8
means information that is not generally known and that is proprietary
to the Company or that the Company is obligated to treat as
proprietary. This information includes, without limitation:
(i) trade secret information about the Company and
its products;
(ii) "Inventions", as defined in Section 7(a) above;
(iii) information concerning the Company's business,
as the Company has conducted it during the last five years or
as it may conduct it in the future; and
(iv) information concerning any of the Company's
past, current or possible future products, including (without
limitation) information about the Company's research,
development, engineering, purchasing, manufacturing,
accounting, marketing, selling or leasing.
Any information that the Employee reasonably considers Confidential
Information, or that the Company treats as Confidential Information,
will be presumed to be Confidential Information (whether the Employee
or others originated it and regardless of how he obtained it.)
(b) Except as required in his duties to the Company, that
Employee will never, either during or after his employment by the
Company, use or disclose Confidential Information to any person not
authorized by the Company to receive it. When the Employee's
employment with the Company ends, he will promptly turn over to the
Company all records and any compositions, articles, devices, apparatus
and other items that disclose, describe or embody Confidential
Information, including all copies, reproductions and specimens of the
Confidential Information in his possession, regardless of who prepared
them.
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9. Competitive Activities. The Employee agrees that during his
employment with the Company and for a period of the longer of 6 months
or the term of the contract after his employment with the Company ends:
(a) He will not alone, or in any capacity with another
firm,
(i) directly or indirectly engage in any commercial
activity that competes with the Company's business, as the Company has
conducted it during the five (5) years before the Employee's employment
with the Company ends, within any state in the United States or within
any country in which the Company directly or indirectly markets or
services products or provides services,
(ii) in any way interfere or attempt to
interfere with the Company's relationships with any of its current or
potential customers, or
(iii) employ or attempt to employ any of the
Company's then employees on behalf of any other entity
competing with the Company.
(b) He will, prior to accepting employment with any
new employer, inform that employer of this Agreement and provide that
employer with a copy of this Agreement.
10. Conflicting Business. The Employee agrees that he
will not transact business with the Company personally, or as agent, owner,
partner, or shareholder of any other entity; provided, however, that the
Employee may enter into any business transaction that is, in the opinion of the
CEO, reasonable, prudent or necessary to the Company, so long as any such
business transaction is at arms length as though between independent and prudent
individuals.
11. Miscellaneous
(a) Successors and Assigns. This Agreement may not be
assigned without the Employee's consent, which consent shall not be
unreasonably withheld.
(b) Modification. This Agreement may be modified or
amended only by a writing signed by each of the parties
hereto.
(c) Governing Law. The laws of the State of Illinois shall
govern the validity, construction, and performance of the Agreement.
Any legal proceeding related to this Agreement shall be brought in an
appropriate Illinois court, and each of the parties hereto hereby
consents to the exclusive jurisdiction of that court for this purpose.
(d) Construction. Wherever possible, each provision of
this Agreement shall be interpreted so that it is valid under
applicable law. If any provision of this Agreement is to any extent
invalid under applicable law in any jurisdiction, that provision shall
still be effective to the extent it remains valid. The remainder of
this Agreement also shall continue to be valid, and the entire
Agreement shall continue to be valid in other jurisdictions.
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(e) Non-Waiver. No failure or delay by either
the Company or the Employee in exercising any right or remedy under this
Agreement shall waive any provision of the Agreement. Nor will any
single or partial exercise by either the Company or the Employee of any
right or remedy under this Agreement preclude either of them from
otherwise or further exercising these rights or remedies, or any other
rights or remedies granted by any law or any related document.
(f) Captions. The headings in this Agreement are for
convenience only and do not affect the interpretation of this Agreement.
(g) Entire Agreement. This Agreement supersedes all
previous and contemporaneous oral negotiations, commitments, writings,
and understandings among the parties hereto concerning the matters in
this Agreement, including, without limitation, any policy or personnel
manuals of the Company or any of its subsidiaries or affiliates.
(h) Notices. All notices and other communications
required or permitted under this Agreement shall be in writing and hand
delivered or sent by registered first-class mail, postage prepaid, and
shall be effective upon receipt if hand delivered, and five (5)
business days after mailing if sent by mail, to the following addresses
or such other addresses as either party shall have notified the other
party.
If to the Company: 0000 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
If to the Employee: 0000 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
IN WITNESS WHEREOF the Company and the Employee have executed this
Agreement as of the date first above written.
XXXXX XXXXXX
By: /s/ Xxxxx Xxxxxx 8/15/96
-------------------------------
Title: CFO and SVP
--------------------------
SABRATEK CORPORATION
By [SIG]
--------------------------------
Title: CEO
----------------------------
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EXHIBIT A
Additional Benefits: Health Insurance.
Standard coverage for all employees,
which means 80% contribution by Sabratek for
employee coverage only. Insurance provided by
Blue Cross Blue Shield of Illinois. Coverage
for other family members can be purchased at
the Sabratek rate.
Membership Dues:
Payment for annual dues for CPA societies.
Vacation:
(1) Four (4) weeks per calendar year.
(2) Standard sick days and personal days.
(Approximately 10 working days per
year.)
Other Issues:
Dismissal for no cause entitles Employee to
the following:
Accelerated vesting of stock to the
next milestone date (i.e., if dismissal
occurred on June 1, 1997, 50% of stock options
would have already vested and Employee
would have an additional 16.667% vest
immediately. If it were to happen
on June 1, 1988, 66.667% of
stock options would have already vested and an
additional 16.6667% would vest immediately).
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SABRATEK .(R)
POSITION: Chief Financial Officer and Senior Vice-President.
RESPONSIBILITY: Report directly to the CEO for CFO and business
development function, cross reporting to COO
for operational issues. Responsibility for all
Accounting, SEC, MIS, HR, Treasury, Investor Relations,
and some Business Development functions (shared with
CEO).
BASE SALARY: 140K/yr. Guaranteed salary increase on
January 1, 1997 assuming continuing employment.
Annual salary review on the 1st of every year
thereafter.
CASH BONUS: 20% of base compensation in previous fiscal year for
hitting 80% of plan, 30% for hitting plan, 40% for
hitting 120% of plan. Measurement of performance
against plan is 50% against top-line, 50% against
bottom line. (For 1996, bonus would be pro-rated based
on 6 months of employment.
OPTIONS: 55,000 shares of common stock out of the
employee option pool at the strike price as reflected
by the stocks closing price at the end of the previous
day of trading, from the day the offer is made and
accepted (must be same day). For point of reference
this shall be the price quoted in the following days
Wall Street Journal. The stock would vest as follows:
25% upon joining the company, 25% on January 1, 1997
and the balance in 3 equal annual installments of
16.667% on January 1 of the following 3 years.
All options will vest immediately in the case
of sale of the company.
Eligible for participation in additional
options if such options become available
for senior management.
ADDITIONAL BENEFITS: Health Insurance.
Participation in whatever the prevailing standard
coverage for all employees is, which
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SABRATEK .(R)
currently means 80% contribution by Sabratek for
employee coverage only. Insurance provided by
Blue Cross/Blue Shield of Illinois. Coverage for other
family members can be purchased at the Sabratek rate.
Membership dues
Payment for annual dues for CPA societies.
VACATION: 1.) 4 weeks per calendar year.
2.) Standard sick days and personal days.
(About total of 10 working days/year).
SEVERANCE AND
OTHER ISSUES: 1.) Non-compete for 6 months.
2.) Dismissal for cause, no severance benefits.
3.) Dismissal for no cause entitles you to
the following:
A) 6 months salary until January 1, 1998, One
year salary thereafter.
B) Accelerated vesting
of stock to the next milestone date. For
example: If it were to happen on June 1, 1997,
50% of stock options would have an
additional 16.667% vest immediately. If it
were to happen on June 1, 1998, 66.667% of
stock options would have already vested and an
additional 16.667% would vest immediately.
c) Outplacement services or $20,000.
START DATE: August 15, 1996. Full employment contract to
be signed before start date.
/s/ Xxxx Xxxxx /s/ Xxxxx Xxxxxx
------------------------ -----------------------------
Xxxx Xxxxx Xxxxx Xxxxxx
Chairman of the Board and CEO
Date: August 12, 1996 Date: August 12, 1996
