AMENDED AND RESTATED
XXXXXXX XXXXXXXXX, XX.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of June 21, 1999,
between PHARMANEX, INC., a Delaware corporation ("Company"), and XXXXXXX
XXXXXXXXX, XX. ("Executive").
WHEREAS, the Company is a wholly owned subsidiary of Generation
Health Holdings, Inc.;
WHEREAS, in connection with the transactions contemplated by that
certain Agreement and Plan of Merger and Reorganization between Generation
Health Acquisitions, Corp., Nu Skin Enterprises, Inc. ("Parent") and Generation
Health Holdings, Inc., dated as of October 5, 1998 ("Merger Agreement"), the
Company became an indirect wholly owned subsidiary of the Parent;
WHEREAS, following the transactions contemplated by the Merger
Agreement, the Company wished to have the Executive continue to provide services
under the terms of an Employment Agreement dated October 5, 1999 (the " Original
Employment Agreement").
WHEREAS, the Company and Executive wish to amend and restate the
terms of the Original Employment Agreement,
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EFFECTIVENESS OF AGREEMENT
1.1. General. This Agreement shall become effective as of the date
hereof and shall replace in its entirety the Original Employment Agreement,
recognizing the effectiveness of the Original Employment Agreement from the date
of its execution until the date hereof.
2. EMPLOYMENT AND DUTIES
2.1. General. The Company hereby employs the Executive, and the
Executive agrees to serve, as President of the Company, upon the terms and
conditions herein contained. In such capacity, Executive shall report directly
to the Chief Executive Officer of the Parent. The Executive shall perform such
other duties and services for the Company and the Parent as may be reasonably
designated from time to time by the Parent and as are consistent with
Executive's title. The Executive agrees to serve the Company faithfully and to
the best of his ability under the direction of the Parent.
2.2. Exclusive Services. Except as may otherwise be approved in
advance by the Board of Directors of the Company ("Board"), and except during
vacation periods and reasonable periods of absence due to sickness, personal
injury or other disability, the Executive shall devote his full working time
throughout the Employment Term (as defined below) to the services required of
him hereunder. The Executive shall render his services exclusively to the
Company during the Employment Term, and shall use his best efforts, judgment and
energy to improve and advance the business and interests of the Company in a
manner consistent with the duties of his position. Executive may participate in
charitable and philanthropic activities so long as they don't interfere with his
duties hereunder.
2.3. Term of Employment. The Executive's employment under this
Agreement shall commence as of the Effective Time (as defined in the Merger
Agreement) and shall terminate on the earlier of (a) December 31, 2001, or (b)
the termination of the Executive's employment pursuant to this Agreement. The
period commencing as of the Effective Time and ending on December 31, 2001 or
such earlier date on which Executive's employment with the Company terminates,
is hereinafter referred to as the "Employment Term". Executive may terminate his
employment with the Company at any time and for any reason upon twelve (12)
months prior written notice to the Company.
2.4. Reimbursement of Expenses. The Company shall reimburse the
Executive for reasonable travel and other business expenses incurred by him in
the fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with the Parent's policies
and procedures.
2.5. Termination of Prior Agreements. Executive agrees and
acknowledges that, upon the Effective Time, all prior employment agreement,
compensation and incentive arrangements and rights to acquire equity of the
Company (except as provided expressly herein and except for options expressly
assumed by Parent in the Merger Agreement and except for the Indemnity Agreement
between Executive and Generation Health Holdings, Inc. (unless Executive and the
Company enter into a replacement Indemnification Agreement in form and substance
satisfactory to Executive)) are cancelled in their entirety and are of no
further force or effect.
3. SALARY
3.1. Base Salary. From the date hereof, the Executive shall be
entitled to receive a base salary ("Base Salary") at a rate of $260,000 per
annum, payable twice monthly in arrears in equal installments in accordance with
the Parent's payroll practices.
3.2. Annual Review. The Executive's Base Salary shall be reviewed
for potential increase by the Parent, based upon the Executive's performance,
not less often than annually. Any positive adjustments in Base Salary effected
as a result of such review shall be made by the Parent in its sole discretion;
provided, however, that during the three year period of the Employment Term
only, the Executive shall receive a minimum increase of ten percent (10%) per
annum.
3.3. Bonus. During his employment under this Agreement, the
Executive shall be entitled to participate in Parent's Cash Incentive Plan
("Bonus Plan"), under which the Executive shall be entitled to participate at
the highest level available to executives of the Parent and to receive bonuses
of up to 190% of his Base Salary annually, based on his level of achievement of
the applicable performance criteria. During the Employment Term, however,
Executive's semi-annual bonuses shall not be less than $80,500, provided that
any bonus paid in September 1999 shall not be less than $54,000. Any bonus will
be paid in cash in accordance with of the terms and conditions of the Bonus
Plan. If Executive would have been entitled to a bonus under this Section for
any bonus period (January 1 to June 30, and July 1 to December 31) but for the
fact that he is no longer employed by the Company on a bonus payment date (March
15 or September 15), as opposed to during a bonus period, other than as a result
of a termination for Cause or Executive's resignation, then Executive shall
nonetheless be entitled to and be paid the applicable bonus.
4. LONG-TERM INCENTIVE COMPENSATION.
The Company will provide the Executive with the following long-term
incentive compensation arrangement in accordance with the terms of Parent's 1996
Incentive Stock Option Plan ("Stock Option Plan").
(a) As soon as practicable after the date hereof, Parent will
grant the Executive nonqualified stock options ("Options") to acquire 450,000
shares of Parent common stock ("Shares"); 120,000 of the Options will be
designated Series A Options ("Series A Options"), 150,000 of the Options will be
designated Series B Options ("Series B Options") and 180,000 of the Options will
be designated Series C Options ("Series C Options"), in each case with an
exercise price equal to $17.00 per share.
(b) For each of the three fiscal years of the Company
beginning with fiscal year 1999 ("Performance Period"), one-third of each of the
Series A, Series B and Series C Options will vest (and become exercisable) at
the end of each fiscal year if the following conditions are satisfied: (i) the
Pharmanex/IDN Gross Profit objectives for such fiscal year for such series and
set forth on Appendix A (which may be equitably adjusted from time to time, in
the sole determination of Parent's Board of Directors acting reasonably and in
good faith, to reflect significant changes and developments in the Company's
operations resulting from acquisitions or dispositions of other companies or
business) ("Gross Profit") are met or exceeded,and (ii) the Executive is
employed by the Company or an affiliate continuously until the last day of such
fiscal year. For purposes of this Agreement, Gross Profit of the Company shall
be calculated by the Parent=s independent certified public accountants in
accordance with generally accepted accounting principles. In the event that
Parent's Board of Directors determines that an increase in the Gross Profit
objectives is warranted in accordance with the foregoing, such objectives shall
be adjusted upward by an amount equal to the annualized gross profit results for
the acquired company in the year of acquisition, plus the lesser of (i) 10% ten
percent per annum to reflect a modest anticipated growth rate, or (ii) the
average historical growth rate in gross profit of the acquired company during
the acquired company's prior three fiscal years.
Moreover, if any one-third installment of such Options have not
become exercisable in accordance with the immediately preceding paragraph, such
Options shall become vested and exercisable at the earlier to occur, if any, of
the following dates or events:
(i) the end of any subsequent fiscal year in the Performance
Period if the cumulative Gross Profit objectives for the period ending
with the end of such fiscal year as set forth on Appendix A are met or
exceeded; provided that the Executive is employed by the Company
continuously until the last day of such fiscal year; or
(ii) the date which is seven years after the Effective Time;
provided the Executive is employed by the Company continuously until
such date.
Notwithstanding the foregoing, upon the occurrence of a change of
control of the Parent (as defined in the Stock Option Plan), all unvested
Options will become immediately vested and exercisable; provided the Executive
is employed by the Company or an affiliate on such date.
(c) Unless the Company determines otherwise, the Executive
shall forfeit all Options, whether or not vested, if the Executive's employment
with the Company or any of its affiliates is terminated for Cause or, if
following termination of the Executive's employment with the Company or any of
its affiliates for any other reason, the Company determines that, during the
period of the Executive's employment, circumstances existed which would have
entitled the Company or any such affiliate to terminate the Executive's
employment for Cause and the Company notifies Executive of such determination in
writing no later than ninety (90) days after termination of Executive's
employment with the Company.
(d) In connection with the grant of the Options, the Company
and the Executive shall enter into an award document which shall set forth the
term of the Options, the procedures for exercising the Options and such other
terms as the Company may determine, in its reasonable discretion, are necessary
and appropriate; provided, however, that notwithstanding the foregoing the
Options shall have the longest term permissible under the Stock Option Plan.
5. EMPLOYEE BENEFITS
The Executive shall, during his employment under this Agreement, be
included to the extent eligible thereunder in all employee benefit plans,
programs or arrangements (including, without limitation, any plans, programs or
arrangements providing for retirement benefits, profit sharing, disability
benefits, health and life insurance, or vacation and paid holidays) that shall
be established or adopted by the Company or the Parent for, or made available
to, the Company's or the Parent's senior executives. In addition, the Company
shall furnish the Executive with the following benefits during his employment
under this Agreement:
(a) reimburse up to $6,500 per annum for expenses with
respect to his participation in the Young President=s
Organization ("YPO"). In addition, every year
Executive shall be entitled to attend one YPO
University one week session and receive reimbursement
therefor; and
(b) the payment of Executive's reasonable relocation
expenses incurred in connection with any move of the
Company's principal headquarters at any time during
the term of this Agreement in accordance with the
policies of the Parent; and
(c) Four (4) weeks vacation per annum; and
(d) at the Company's expense, maintain an executive
quality apartment or condominium in Provo, Utah for
use in connection with Company business.
6. TERMINATION OF EMPLOYMENT
6.1. Termination Without Cause.
6.1.1. General. Subject to the provisions of Sections 6.1.3 and
6.1.4, if, prior to the expiration of the Employment Term, the Executive's
employment is terminated by the Company without Cause (as defined below), the
Company shall continue to pay the Executive the Base Salary (at the rate in
effect on the date of such termination) for twelve (12) months (such period
being referred to hereinafter as the "Severance Period"), at such intervals as
the same would have been paid had the Executive remained in the active service
of the Company. The Executive shall have no further right to receive any other
compensation or benefits after such termination or resignation of employment,
except as determined in accordance with the terms of the employee benefit plans
or programs of the Company or as provided in this Agreement. In addition, the
Executive may, but only within twelve (12) months after he ceases to be an
employee, exercise his Options to the extent they have vested. To the extent
that the Executive is not otherwise entitled to exercise the Options at the date
of such termination, or if he fails to exercise the Options within the time
specified in the preceding sentence, such Options will terminate.
6.1.2 To the extent that any of the Options would have vested at
the end of the fiscal year in which Executive is terminated under Section 4 of
this Agreement but for the termination of the Executive without Cause, then
notwithstanding Section 6.1.1 hereof, such Options shall vest when the necessary
calculations under Section 4 have been completed, and Executive shall have
twelve (12) months from such determination date to exercise the Options. The
Company shall notify Executive within ten days after the necessary calculations
under Section 4 have been completed (which calculations shall be made no later
than ninety (90) days after the fiscal year in question) as to whether any of
the Options have vested. This provision shall survive termination of the
Agreement.
6.1.3. Conditions Applicable to the Severance Period. If, during
the Severance Period, the Executive breaches any of his obligations under
Section 8, the Company may, upon written notice to the Executive, terminate the
Severance Period and cease to make any further payments or provide any benefits
described in Section 6.1.1.
6.1.4. Death During Severance Period. In the event of the
Executive's death during the Severance Period, payments of Base Salary under
Section 6.1.1 shall continue to be made during the remainder of the Severance
Period to the beneficiary designated in writing for this purpose by the
Executive or, if no such beneficiary is specifically designated, to the
Executive's estate.
6.1.5. Date of Termination. The date of termination of
employment without Cause shall be the date specified in a written notice of
termination to the Executive as the last day of the Executive's employment.
6.1.6. Constructive Termination. The term "Constructive
Termination" means:
(a) the continued assignment to Executive of any duties or
the continued material reduction in Executive's duties,
either of which is materially inconsistent with
Executive's position with the Company, for thirty (30)
calendar days after Executive's delivery of written
notice to the Company objecting to such assignment or
reduction; or
(b) the relocation of the principal place for the rendering
of Executive's services hereunder to a location more
than twenty (20) miles from Los Angeles or the Company's
initial business offices in the San Francisco Area; or
(c) a material reduction in compensation and benefits under
this Agreement, which remains in effect for thirty (30)
calendar days after Executive delivers written notice to
the company of such material reduction.
None of the foregoing will constitute a Constructive Termination to the
extent mutually agreed upon in advance of the occurrence thereof by the
Executive and the Company. A Constructive Termination will be treated as a
termination of the Executive by the Company without Cause.
6.2. Termination for Cause; Resignation.
6.2.1. General. If, prior to the expiration of the Employment
Term, the Executive's employment is terminated by the Company for Cause, or the
Executive resigns from his employment hereunder, the Executive shall be entitled
only to payment of his Base Salary as then in effect through and including the
date of termination or resignation. In the event the Executive resigns Executive
may, but only within twelve (12) months after he ceases to be an employee,
exercise his Options to the extent they have vested. The Executive shall have no
further right to receive any other compensation or benefits after such
termination or resignation of employment, except as determined in accordance
with the terms of the employee benefit plans or programs of the Company or as
provided in this Agreement.
6.2.2. Date of Termination. The date of termination for Cause
shall be the date specified in a written notice of termination to the Executive
as the last day of the Executive's employment. The date of resignation shall be
the date specified in the written notice of resignation from the Executive to
the Company as the last day of the Executive's employment, or if no date is
specified therein, twelve (12) months after receipt by the Company of written
notice of resignation from the Executive.
6.3. Cause. Termination for "Cause" shall mean termination of the Executive's
employment because of:
(a) any act or omission that constitutes a material breach by
the Executive of any of his obligations under this Agreement, which
breach is materially injurious to the Company;
(b) the willful and continued failure or refusal of the
Executive to substantially perform the duties required of him in his
position with the Company, which failure is not cured within twenty
(20) days following written notice of such failure;
(c) any willful violation by the Executive of any material law
or regulation applicable to the business of the Company or any of its
subsidiaries or affiliates, or the Executive's conviction of, or a plea
of nolo contendre to, a felony, or any willful perpetration by the
Executive of a common law fraud; or
(d) any other willful misconduct by the Executive that is
materially injurious to the financial condition or business reputation
of, or is otherwise materially injurious to, the Company or any of its
subsidiaries or affiliates.
7. DEATH OR DISABILITY
In the event of termination of employment by reason of death or
Disability (as hereinafter defined), the Executive (or his estate, as
applicable) shall be entitled to Base Salary through the date of termination.
Other benefits shall be determined in accordance with the terms of the benefit
plans maintained by the Company, and the Company shall have no further
obligation hereunder. In addition, the Executive (or his estate or the person or
persons to whom the Options may have been transferred by will or by the laws of
decent and distribution, as applicable) may, but only within twelve months after
Executive ceases to be an employee, exercise Executive's Options to the extent
Executive was entitled to exercise such Options on the date of his death or on
the date he is terminated by the Company by reason of Disability (all of which
shall be terminations without Cause). To the extent that the Executive was not
otherwise entitled to exercise the Options on such date, or if he (or his estate
or the person or persons to whom the Options may have been transferred by will
or by the laws of decent and distribution, as applicable) fails to exercise the
Options within the time specified in the preceding sentence, such Options will
terminate. For purposes of this Agreement, "Disability" means a physical or
mental disability or infirmity of the Executive, as determined by a physician of
recognized standing selected by the Company, that prevents (or, in the opinion
of such physician, is reasonably expected to prevent) the normal performance of
his duties as an employee of the Company for any continuous period of 180 days,
or for 180 days during any one 12-month period.
8. CONFIDENTIALITY; NONCOMPETITION; NONSOLICITATION
8.1. Key-Employee Covenants. The Executive agrees to perform his
obligations and duties and to be bound by the terms of the Key-Employee
Covenants attached hereto as Appendix B which are incorporated by reference and
which shall be in force unless otherwise expressly modified by this Agreement.
(a) Executive agrees that the period of non-competition set
forth in Section 8 of the Key-Employee Covenants is lengthened from six
months to one year. The Company, or the Parent may extend the period of
non-competition set forth in Section 8 of the Key-Employee Covenants
for up to an additional two (2) years thereafter, provided that (i)
where Executive has either voluntarily resigned his employment with the
Company or his employment is terminated for Cause, within thirty (30)
days of the termination of the applicable non-competition period the
Company or the Parent notifies the Executive in writing that it wishes
to so extend the period of non-competition for an additional one-year
period, (ii) where Executive's employment with the Company is
terminated without Cause or as a result of the expiration of the term
of this Agreement (where Executive does not continue in the employ of
the Company), the Company notifies the Executive in writing within
sixty (60) days of the termination of Executive's employment hereunder,
that it wishes to so extend the period of non-competition and specifies
therein whether such extension shall be for a one (1) or two (2) year
period, and (iii) the Company pays Executive for each year that it
decides to extend the period of non-competition an amount equal to
fifty percent (50%) of Executive's most recent Base Salary, which
amount shall be payable by the Company twice monthly over the period in
question.
8.2. Certain Remedies. Without intending to limit the remedies
available to the Company, the Executive agrees that a breach of any of the
covenants contained in the Key-Employee Covenants may result in material and
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to seek a temporary restraining
order or a preliminary or permanent injunction, or both, without bond or other
security, restraining the Executive from engaging in activities prohibited by
the Key-Employee Covenants or such other relief as may be required specifically
to enforce any of the covenants in the Key-Employee Covenants. Such injunctive
relief in any court shall be available to the Company in lieu of, or prior to or
pending determination in, any arbitration proceeding.
9. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration pursuant to the rules of the American
Arbitration Association in Salt Lake City, Utah before three arbitrators of
exemplary qualifications and stature. Each party hereto shall choose an
independent arbitrator meeting such qualifications within ten (10) business days
after demand for arbitration is made and such independent arbitrators shall
mutually agree as to the third arbitrator meeting such qualifications within
twenty (20) business days after demand for arbitration is made. If such
arbitrators cannot come to an agreement as to the third arbitrator by such date,
the American Arbitration Association shall appoint the third arbitrator in
accordance with its rules and the qualification requirements set forth in this
section. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The parties hereby agree that the arbitrators shall be empowered
to enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The party that prevails in any arbitration hereunder shall be
reimbursed by the other party hereto for any reasonable legal fees and
out-of-pocket expenses directly attributable to such arbitration, and such other
party shall bear all expenses of the arbitrators. Upon the request of a party,
the arbitration award shall specify the factual and legal basis for the award.
10. MISCELLANEOUS
10.1. Communications. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or on the fifth business day after mailed
if delivered personally or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the party at the following addresses (or
at such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
(a) if to the Company:
c/o Nu Skin Enterprises, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxx, Esq.
with copies to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Executive:
000 Xxxxxx Xxxxxxxxx
Xxx Xxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
10.2. Waiver of Breach; Severability.
(a) The waiver by the Executive or the Company of a breach of
any provision of this Agreement by the other party hereto shall not operate or
be construed as a waiver or any subsequent breach by either party.
(b) The parties hereto recognize that the laws and public
policies of various jurisdictions may differ as to the validity and
enforceability of covenants similar to those set forth herein. It is the
intention of the parties that the provisions hereof be enforced to the fullest
extent permissible under the laws and policies of each jurisdiction in which
enforcement may be sought, and that the unenforceability (or the modification to
conform to such laws or policies) of any provisions hereof shall not render
unenforceable, or impair, the remainder of the provisions hereof. Accordingly,
if at the time of enforcement of any provision hereof, a court of competent
jurisdiction holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope, or geographic area reasonable under such circumstances will be
substituted for the stated period, scope or geographical area and that such
court shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and geographical area permitted by law.
10.3. Assignment; Successors. No right, benefit or interest
hereunder shall be assigned, encumbered, charged, pledged, hypothecated or be
subject to any setoff or recoupment by the Executive. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the Company;
provided, however that the Company may not assign this Agreement without
Executive's consent.
10.4. Entire Agreement. This Agreement and the Appendices
attached hereto, which are incorporated herein by this reference, contain the
entire agreement of the parties with respect to the subject matter hereof, and
on and after the Effective Time, and except as otherwise set forth herein,
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral, with respect to the subject matter hereof.
10.5. Cancellation of Options. As consideration for entering
into this Agreement, the Executive agrees to cancel and waive all rights and
interest that he may have to the options described in Appendix C effective as of
the Effective Time.
10.6. Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's employee benefit plans,
if any.
10.7. Governing Law. This Agreement shall be governed by, and
construed with, the law of the
State of Utah.
10.8. Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe any of its
provisions.
10.9. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed, the Parent has agreed and accepted terms hereof, and the
Executive has hereunto set his hand, as of the day and year first above written.
PHARMANEX, INC.
By:
Name:
Title:
Agreed and accepted as to its duties pursuant to this Agreement:
NU SKIN ENTERPRISES, INC.
By:
Name:
Title:
