EMPLOYMENT AGREEMENT
This Agreement is entered into this 5th day of May, 1997 by and between
Electroscope, Inc., a Colorado corporation with its principal offices located at
0000 Xxxxxxxx Xxxxx, Xxxxxxx XX 00000 (hereinafter the "Company") and Xxxxxxx
Xxxxx residing at 0000 Xxxxxx Xxxxx., Xxxxxxx XX 00000 (hereinafter the
"Officer").
The Company manufactures and markets a line of proprietary electrosurgical
products that are designed to provide greater safety to patients who undergo
minimally invasive electrosurgery (the "Business"). The Company desires to
secure and retain the services of Officer and such services are considered by
the Company to be valuable with regard to the Business. The Company, through
its Board of Directors, agrees to employ the Officer in the office of President
and Chief Executive Officer of the Company for the Term, and Officer agrees to
accept such employment and office upon the terms and conditions set forth
herein.
1. TERM. Subject to the provisions for renewal and termination as hereinafter
provided, the term of this Agreement shall commence on May 5, 1997 and
terminate on April 30, 1998. Officer shall be employed on a part-time basis
based upon time worked until May 18, 1997. This Agreement will be renewed
automatically, upon the same terms and conditions, for successive periods
of one year each, until either party at least sixty days prior to the
expiration of the original term or any extended term, shall give written
notice to the other of its intention not to renew such employment. Officer
shall remain an employee during the sixty day notice period. Any election
not to renew or to terminate by the Company shall be effected by a duly
adopted resolution of the Company's Board of Directors. Unless otherwise
stated, any notice of nonrenewal shall be treated as a termination without
cause. The obligations of the Officer under Sections 9 and 10 shall survive
termination or expiration of this Agreement. The obligations of the
Company under the Agreement that by their terms are to be paid or to
continue after termination of the Agreement, shall also survive such
termination or expiration.
2. DUTIES. The Company agrees to employ the Officer as President and Chief
Executive Officer of the Company and agrees to elect the Officer as a
member of the Board of Directors as of the date of this Agreement and for
so long as he is so employed. The responsibilities of the Officer shall be
as set forth in the Company's Bylaws attached hereto as Exhibit A, as
otherwise directed by the Company's Board of Directors and as more
specifically set forth in Section 3 of this Agreement. The Officer shall
report to the Board of Directors and all other officers of the Company
shall report to him or as he shall direct. The Officer shall have primary
accountability for the performance of the Company. He shall be responsible
for the overall revenue and profit of the Company; establishing short-term
and long-range objectives, plans and policies subject to the approval of
the Board of Directors. He shall be responsible for representing the
organization with major customers, the financial community, and the public.
If the overall revenue and profit of the Company is not satisfactory, as
determined by the Board of Directors, in no event shall this occurrence
give rise to justification for termination of the Officer for cause.
3. OUTSIDE COMMITMENTS. The Officer shall not be constrained from
continuation of limited outside business commitments so long as such
commitments do not interfere or conflict with the performance of his duties
as President and Chief Executive Officer of the Company. It is recognized
that the Officer currently serves as a member of the Board of Directors of
Staodyn, Inc., a publicly traded company based in Longmont, CO. A prior
commitment exists to serve as a Board Member for a private company based in
Redwood City, California. Any additional outside business activities which
involve remuneration to the Officer, shall require the prior approval of
the Board of Directors. Such approval shall not be unreasonably withheld
so long as the outside commitment does not conflict with the Officer's
responsibilities to the Company.
4. COMPENSATION. For all services rendered by the Officer under this
Agreement, the Company shall pay to the Officer base cash compensation of
$150,000 for the first 12 month period. Beyond May 5, 1998 compensation is
subject to such increases as may be granted from time to time by the Board
of Directors, but in no event shall such increase be less than the average
percentage increase granted to the top ten salaried employees of the
Company, unless mutually agreed upon by Officer and the Company. Such
compensation shall be payable biweekly in equal installments. The Company
will provide life insurance of $300,000 payable to a beneficiary of the
Officer's choice, provided that Officer passes the physical examination
required for said insurance and the annual premium cost for said insurance
is less than $1,500. The Officer will be eligible for participation,
according to the eligibility requirements of the plans, for participation
in all other employee benefit programs including, but not limited to,
medical, dental, workers compensation and disability insurance, as well as
any 401(k) plan and existing or future pension or other employee benefits.
Any additional benefits desired by the Officer may be, at the Officer's
discretion, deducted from the base compensation in lieu of payment by the
Officer thereof.
STOCK OPTIONS. The Officer is hereby granted Incentive Stock Options to
purchase 330,000 shares of the Company's Common Stock. Of this amount,
Incentive Stock Options to purchase 130,000 shares will be subject to
shareholder approval of an increase in the Company's Stock Option Plan at
the annual shareholder's meeting to be held in 1997. In the event
shareholder approval of the increase in the Company's Stock Option Plan is
not obtained in 1997, the Incentive Stock Option to purchase 130,000 shares
will automatically convert into a Non-Statutory Stock Option to purchase
130,000 shares on the same terms and conditions. As long as the Officer is
employed by the Company, the options shall vest in three equal annual
increments commencing one year from the date of grant and shall expire
seven years from the date of initial grant. The option price shall be set
at the Fair Market Value of the Company's Common Stock on May 5, 1997.
Fair Market Value shall be defined as the closing bid price of the
Company's Common Stock.
STARTUP EXPENSES. In recognition of certain expenses associated with the
onset of this Agreement, the Officer shall receive a one time payment of
$40,000 on May 5, 1997. The Officer, at his sole discretion, may elect to
receive equivalent amounts of restricted shares of the Company's Common
Stock at 80% of Fair Market Value in lieu of cash compensation for this
payment.
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STOCK BONUS PLAN. The Officer is hereby granted two Incentive Stock
Options to purchase 100,000 shares each. The option grants are subject to
upon shareholder approval of an increase in the Company's Stock Option Plan
at the annual shareholder meeting to be held in 1997. In the event
shareholder approval of the increase in the Company's Stock Option Plan is
not obtained in 1997, the Incentive Stock Options will automatically
convert into Non-Statutory Stock Options and the performance criteria will
be waived. As long as the Officer is an employee, the options shall vest
as follows: linearly from 70,000 to 100,000 shares if the Company's gross
revenues exceed from $2.1 million to $3.0 million for the period July 1,
1997, through June 30, 1998; linearly from 70,000 to 100,000 shares if the
Company's gross revenues exceed from $3.85 million to $5.5 million for the
period July 1, 1998 through June 30, 1999. The calculation of gross
revenues for the periods shall be determined by the Company's auditors
according to GAAP.
DILUTION. If the Board of Directors sells additional shares of Common
Stock beyond those issued and outstanding as of April 30, 1997, other than
shares issued pursuant to the exercise of options granted under the
Company's Stock Option Plan, the Officer shall have the right, at his sole
discretion, to purchase his pro rata share of the newly issued shares at
the price as the newly offered shares. The intent of this provision is to
allow the Officer to maintain ownership, or an option position, on a
minimum percentage of the Company's common stock.
5. EXPENSES. The Officer shall be entitled to reimbursement for all
reasonable expenses including travel, entertainment and similar items which
may be incurred in connection with performance of his duties. Expenses
incurred by the Officer pursuant to this section will be reimbursed by the
Company upon presentation by the Officer from time to time of an itemized
account of such expenditures in a form reasonably acceptable to the
Company's chief financial officer or accounting manager. The Board of
Directors has the right to review these expenses at any time.
6. WORKING FACILITIES. The Officer shall be furnished with all such
facilities and services suitable to his position and adequate for the
performance of his duties at the Company's executive offices in Boulder,
Colorado. The Officer's principal business activities shall be at such
office or other location within 25 miles of Boulder, CO.
7. VACATION. The Officer shall be entitled each year to a vacation of four
weeks (20 days) per year, during which time his compensation will be paid
in full. Vacation shall accrue at a rate of 6.15 hours per payroll from
the date of hire. Unused vacation may carry over for one additional year,
but in no case shall the Officer have vacation accrued in excess of eight
weeks.
8. TERMINATION.
a) The Company may terminate this Agreement for cause at any time on 30
days written notice to the other party thereof. In any termination
for cause by the Company, "cause" shall mean: (i) gross misconduct,
such as, but not limited to dishonesty, theft or embezzlement with
regard to material property of the Company; (ii) excessive
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unauthorized absenteeism, after written notification from the Board of
Directors of such absenteeism, and the Officer's failure to cure the
problem; (iii) any of the following acts which have a material,
negative impact on the financial condition of the Company: (a) actual
fraud or other material acts of dishonesty in conducting the Company's
business or in the fulfillment by the Officer or his assigned
responsibilities; (b) the destruction of any material amount of the
Company's property willfully or through the Officer's gross neglect;
(c) the unauthorized willful disclosure of any Proprietary Information
of the Company to any person, business or entity in violation of this
Agreement or (d) a violation of internal controls or procedures. If
the Officer is terminated for cause as defined in this section, all
benefits and entitlements provided under this Agreement, including but
not limited to, the vesting of options and payment of compensation,
shall terminate as of the date of notification of termination for
cause.
b) If the Officer voluntarily terminates before May 5, 1998, the Officer
will be required to reimburse the Company the amount of $40,000. If
the Officer terminates this Agreement without cause at any time after
May 5, 1998, he shall provide 30 days notice to the Company and shall
be entitled to accrued salary, benefits through the notice period and
optional COBRA coverage as authorized by current law but he shall in
no event be entitled to severance pay or bonus compensation for the
period through the date of termination.
c) In the event of a change in control of the Company, regardless of
whether such control has received the endorsement or recommendation of
the Board of Directors of the Company, the Officer shall be paid
compensation as set forth in the Change of Control Agreement attached
to this Agreement as Exhibit B.
d) If the Company terminates the Officer without cause, the Officer shall
receive 24 months salary if such termination occurs prior to May 5,
1998. If such termination occurs subsequent to May 5, 1998, the
Officer shall receive no less than 12 months salary. Stock options to
purchase 330,000 shares will continue to vest during the 24 or 12
month period as defined above. The Officer shall have the option of
selecting regular biweekly payments or a lump sum payment within 30
days of the notice of termination without cause. Should the Officer
be terminated without cause prior to June 30, 1999, the 200,000 stock
options granted in Section 4 under Stock Bonus Plan will vest
contingent on Company performance for the period from July 1 to the
end of any interim quarterly period immediately prior to the date of
termination as reported to the Securities and Exchange Commission.
The Officer will be entitled to a prorated amount of options based
upon meeting a prorated gross earnings level for the period. For
example, should termination occur on or after April 2, 1999, options
will be granted to purchase 75,000 shares if the Company's gross
revenues exceed $4,125,000 for the nine month period ended March 31,
1999. Likewise, should termination occur on or after October 1, 1998,
options will be granted to purchase 50,000 shares if the Company's
gross revenues exceed $1,375,000 for the quarter ended September 30,
1998.
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9. NONCOMPETITION AGREEMENT. Officer acknowledges that the Company has trade
secrets and confidential information that, as President and Chief Executive
Officer, he will have access to all such trade secrets and confidential
information. Therefore, in consideration for the severance benefits set
forth above, the Officer agrees that for a period of the greater of (i) six
months subsequent to the Termination Date or (ii) the severance pay period
provided for in Section 8d), the Officer will not, directly or indirectly:
a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of
diverting, taking away business of, or selling products or services
competitive with significant products or services provided by the
Company on the Termination Date.
b) Alone or in any capacity solicit or in any manner to solicit or induce
any persons or persons employed by the Company within one year prior
to the Termination Date to leave such employment.
c) Within the United States of America, either as an employee, employer,
consultant, agent, principal, partner, more that 5% shareholders,
corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that
designs, develops, manufactures or markets electrosurgical products,
electrosurgical instruments, laser surgical products or instruments,
or the harmonic scalpel, or that is in competition in any significant
manner with any Material Business conducted by the Company subsequent
to the date of this Agreement and in which the Company is involved on
the Termination Date. Material Business shall be defined as that
business which comprises in excess of 20% of the Company's revenue for
the prior 12-month period.
10. NONDISCLOSURE OF PROPRIETARY INFORMATION. In view of the fact that
Officer's employment by the Company will bring him into contact with
certain confidential matters of the Company, its customers and suppliers,
including, without limitation, matters of a technical nature (such as
information about costs, profits, markets, price lists, sales, data files,
mailing lists and lists of customers) and any other information of a
similar nature to the extent not available to the public (the "Confidential
Matters"), Officer agrees not to disclose, either during his employment or
for a period of three years thereafter, any Confidential Matters of the
Company, whether or not developed, to any person except with the Company's
prior written consent and then only after such person has signed an
agreement similar to this Agreement, or an agreement approved by the
Company prior to such disclosure. In the event that the Board of Directors
determines that the Officer possesses a significant Confidential Matter in
the nature of a trade secret or other proprietary information that will not
be in the public domain at the end of the three year period, upon written
notification from the Board of Directors prior to the end of the three year
period, the Officer agrees to keep that matter confidential indefinitely.
In the event Officer has some question as to whether or not certain
information is covered by this paragraph, Officer shall treat the
information as within this paragraph until told otherwise by the Company,
in writing. Officer further agrees to deliver to the Company, on the date
of termination of his employment, for whatever reason, all
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memoranda, notes, records, reports, manuals, drawings, sketches,
blueprints, bulletins, writings, proposals, notebooks, manuals and other
documents containing confidential information of the Company, including
all copies or summaries thereof, which Officer may possess or have in his
control.
It is agreed that Officer's services to the Company and his knowledge of
the Company's activities are unique in that any breach or threatened breach
by Officer of this Section cannot be remedied solely by damages.
Accordingly, the breach of, or threatened breach by, Officer of the
provisions of this Section shall allow the Company to seek injunctive
relief restraining the Officer and any business, firm, partnership, or
corporation from participating in such breach or anticipated breach, or
engaging in any activity which shall constitute a breach of the provisions
of this Section. The Company shall also have the right to bring an action
to obtain monetary damages to which it may be entitled from Officer or any
party who is involved in the use or dissemination of such confidential
information.
11. OFFICER INDEMNIFICATION. Attached hereto as Exhibit C is an agreement to
hold harmless and to indemnify the Officer from claims made by third
parties or by shareholders on behalf of the Company against the Officer
and/or the Company to the fullest extent allowable under Colorado law for
all actions or omissions by the Officer in his position with the Company.
The Company agrees to reimburse Officer up to $1,500 annually for the
premium cost of any umbrella liability insurance policy purchased by the
Officer which covers any such claims which may be made against him in
connection with his positions with the Company.
12. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given or delivered if (i)
delivered personally; (ii) mailed by certified mail, return receipt
requested, with property postage prepaid; or (iii) delivered by recognized
courier contracting for same day or next day delivery with signed receipt
acknowledgment to the Company or the Officer.
If to the Company: Board of Directors
Electroscope, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
If to the Officer: Xxxxxxx Xxxxx
4453 Rustic Tr.
Xxxxxxx, XX. 00000
or at such other address as either party may specify from time to time in
writing to the other.
13. ASSIGNMENT OF INVENTIONS. The Officer agrees to assign patent rights
related to medical products developed during the term of this Agreement to
the Company. Should the Company, by agreement of the Board of Directors,
waive their right to assignment of any given patent, the Officer will
retain ownership of said intellectual property.
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14. ARBITRATION. Except as provided below, any and all disputes arising under
or related to this Agreement which cannot be resolved through negotiations
between the parties shall be submitted to binding arbitration. If the
parties fail to reach a settlement of their dispute within fifteen (15)
days after the earliest date upon which one of the parties notified the
other(s) of its desire to attempt to resolve the dispute, then the dispute
shall be promptly submitted to arbitration by a single arbitrator through
the Judicial Arbiter Group ("JAG"), any successor of the JAG, or any
similar arbitration provider who can provide a former judge to conduct such
arbitration if JAG is no longer in existence. The arbiter shall be
selected by JAG on the basis, if possible, of his or her expertise in the
subject matter(s) of the dispute. The decision of the arbitrator shall be
final, nonappealable and binding upon the parties, and it may be entered in
any court of competent jurisdiction. The arbitration shall take place in
Boulder, Colorado. The arbitrator shall be bound by the laws of the State
of Colorado applicable to the issues involved in the arbitration and all
Colorado rules relating to the admissibility of evidence, including,
without limitation, all relevant privileges and the attorney work product
doctrine. All discovery shall be completed in accordance with the time
limitations prescribed in the Colorado rules of civil procedure, unless
otherwise agreed by the parties or ordered by the arbitrator on the basis
of strict necessity adequately demonstrated by the party requesting an
extension of time. The arbitrator shall have the power to grant equitable
relief where applicable under Colorado law, and shall be entitled to make
an award of punitive damages when applicable under Colorado law. The
arbitrator shall issue a written opinion setting forth his or her decision
and the reasons therefor within thirty (30) days after the arbitration
proceeding is concluded. The obligation of the parties to submit any
dispute arising under or related to this Agreement to arbitration as
provided in this Section shall survive the expiration or earlier
termination of this Agreement. Notwithstanding the foregoing, either party
may seek and obtain an injunction or other appropriate relief from a court
to preserve or protect trademarks, trade names, copyrights, patents, trade
secrets or other intellectual property or confidential information or to
preserve the status quo with respect to any matter pending conclusion of
the arbitration proceeding, but no such application to a court shall in any
way be permitted to stay or otherwise impede the progress of the
arbitration proceeding.
In the event of any arbitration or litigation being filed or instituted
between the parties concerning this Agreement, the prevailing party will be
entitled to receive from the other party or parties its attorneys' fees,
witness fees, costs and expenses, court costs and other reasonable
expenses, whether or not such controversy, claim or action is prosecuted to
judgment or other form of relief.
15. GENERAL PROVISIONS. This Agreement shall be governed by and construed
under the laws of the state of Colorado, withing giving effect to its
conflict of law principles. The terms of this Agreement shall be binding
upon and inure to the benefit of the Company and its successors and
assigns. Neither party may assign his or its obligations under this
Agreement to any other party.
16. SEVERABILITY. If any provision of this Agreement is held to be invalid or
unenforceable by any court of competent jurisdiction, such holdings shall
not affect the enforceability of any other provision of this Agreement, and
all other provisions shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
The Officer: The Company:
Electroscope, Inc.
/s/ XXXXXXX XXXXX By: /s/ XX. XXXXXX X. XXXXXX
----------------------------------- ------------------------------
Xxxxxxx Xxxxx Xx. Xxxxxx X. Xxxxxx
Management Committee Member
By: /s/ XXXXX XXXXX
------------------------------
Xxxxx Xxxxx
Management Committee Member
By: /s/ XX. XXXXX X. XXXXXXX
------------------------------
Xx. Xxxxx X. Xxxxxxx
Management Committee Member
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CONFIDENTIAL
DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made effective as of May 5th, 1997, between Electroscope,
Inc., a Colorado corporation ("THE CORPORATION") and Xxxxxxx Xxxxx
("INDEMNITEE").
WITNESSETH THAT:
WHEREAS, Indemnitee is a Director, officer, employee or agent of the
Corporation and/or is serving in such a capacity with another enterprise at the
request of the Corporation, and in each such capacity is performing a valuable
service from which the Corporation receives a benefit;
WHEREAS, the Board of Directors of the Corporation have adopted Bylaws (the
"BYLAWS") providing for the indemnification of the officers, directors, agents,
and employees of the Corporation and those who serve in such capacities with
other enterprises to the maximum extent authorized by the Colorado Business
Corporation Act, as amended to date or hereafter amended, and any successor or
similar statute concerning the indemnification of indemnitees (the "STATE
STATUTE"); and
WHEREAS, the Articles of Incorporation of the Corporation, (the
"CERTIFICATE") as in effect on the date hereof, do not prohibit any form of
Indemnification.
WHEREAS, such Bylaws, and the State Statute as in effective on the date
hereof, specifically provide that they are not exclusive in at least certain
respects, and thereby contemplate that contracts may be entered into between the
Corporation and the members of its Board of Directors and/or Officers with
respect to indemnification of such persons; and
WHEREAS, although authorized to do so by the State Statute as in effect on
the date hereof, the Corporation has not purchased, does not presently maintain
and does not presently intend to purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O INSURANCE") due to the
restrictive terms and difficulty in offering suitable D & O Insurance; and
WHEREAS, the Corporation is concerned about recent developments with
respect to the application, amendment and enforcement of statutory and bylaw
indemnification provisions, all of which generally have raised questions
concerning the adequacy and reliability of the protection afforded to
indemnitees thereby; and
WHEREAS, in order to resolve such questions and thereby induce Indemnitee
to continue to serve in one or more of the above described capacities, the
Corporation has determined and agreed to enter into this contract with
Indemnitee;
NOW THEREFORE, in consideration of Indemnitees continued service as a
Director and/or officer after the date hereof, the parties agree as follows:
1. INDEMNITY OF INDEMNITEE. The Corporation hereby agrees to defend,
hold harmless and indemnify (collectively "INDEMNIFY") Indemnitee to the full
extent authorized or permitted by the provisions of the State Statute, or other
state, federal or other statutory, or regulatory provisions from time to time in
effect authorizing or permitting such indemnification (collectively "OTHER
LAWS"), or any provision in the Articles as in effect from time to time, or the
Bylaws. Provided, however, that an amendment to State Statute (except as
specifically mandated by such amendment), Other Laws (except as specifically
mandated by such amendment), the Articles, or the Bylaws, shall not: (i) reduce
any rights or benefits of Indemnitee existing under this Agreement; or (ii)
reduce any rights or benefits of Indemnitee concerning indemnification in any
State Statute, Other Laws, Certificate or Bylaws, as in effect after the date of
this Agreement but before the particular amendment.
2. INSURANCE AND SELF INSURANCE.
(a) The Corporation represents that it presently does not have in
force and effect policies of D & 0 Insurance because of the disproportionate
cost and limited benefits of such insurance coverage.
(b) The Corporation shall inform Indemnitee of the terms of any such
insurance acquired in the future and endeavor to provide Indemnitee at least
fifteen (15) days advance notice of any change in, or termination of, such
insurance (if any).
3. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 4 hereof, the Corporation hereby further agrees to indemnify Indemnitee:
(a) Against: (i) Expenses (as defined below); and (ii) judgments,
fines (including an excise tax assessed with respect to an employee benefit
plan) and amounts paid in settlement (collectively "LIABILITIES"), actually
incurred by Indemnitee in connection with any threatened, pending or completed
action, suit, arbitration, mediation, or proceeding, whether civil, criminal,
administrative or investigative, whether formal or informal (including an action
by or in the right of the Corporation) (collectively "CLAIM") to which
Indemnitee is, was or at any time becomes, a party, or is threatened to be made
a party, by reason of the fact that Indemnitee is, was or at any time becomes a
director, officer, employee, fiduciary, trustee, or agent of the Corporation or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, partner, employee, fiduciary, trustee, or agent of any other
foreign or domestic corporation, or any partnership, joint venture, trust,
limited liability company, other enterprise or employee benefit plan; and
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(b) Otherwise to the fullest extent as may be provided to Indemnitee
by the Corporation under the nonexclusivity provisions of the Bylaws, pursuant
to the non-exclusivity provisions in the Articles, and under the State Statute
and Other Laws.
(c) Indemnitee shall also be entitled to payment (subject to any tax
or other governmental or benefit plan withholding requirements) at his or her
normal equivalent rate of compensation for all time spent in preparing for the
defense of or in defending, or in connection with preparation in anticipation
of, a claim, or in connection with discovery (as a witness or otherwise),
concerning any Claim, including but not limited to any deposition, interrogatory
or discovery request, unless Indemnitee is otherwise being compensated as a full
time employee of the Corporation. In any event, however, such compensation
shall be at a rate of not less than $15.00 per hour or more than $100.00 per
hour.
(d) Expenses incurred by Indemnitee which are indemnifiable by the
Corporation, shall be advanced by the Corporation to Indemnitee upon: (i)
execution of an undertaking by Indemnitee to the Corporation to repay such
advances if he is found not to be entitled to indemnification of Expenses, which
undertaking shall include an representation that he believes he is entitled to
indemnification under the terms hereof and applicable law; and (ii) presentation
of proper invoices (including requests for retainers not yet paid) to be paid by
the Corporation. Provided, however, that the repayment obligation in this
subparagraph shall apply only as to the specific amounts for which
indemnification is found improper.
(e) Amounts to be indemnified hereunder include all interest,
assessments and other charges paid or payable in connection with, or in respect
of, Expenses and other Liabilities. Amounts advanced by the Corporation shall
include reasonable retainers and other prepayments required by third parties.
(f) "EXPENSES" include any and all actually and reasonably incurred
expenses (including attorneys and expert witness fees and expenses, bonding
costs, telephone, travel and delivery fees, witness fees, transcript and court
costs, and other costs) concerning or related to a Claim, including in
preparation of the defense of anticipated Claims not yet asserted, of a type
typically or reasonably incurred in proceedings or events similar to those of
the nature of the Claim.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) In respect to remuneration paid to Indemnitee if it shall be
determined by a final judgment, or other final adjudication that such
remuneration was in violation of law (the inability of the Corporation to deduct
the remuneration from its Federal or any state or other taxable income or other
tax effect, shall not be considered a violation of law for purposes of this
provision);
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(b) On account of any suit in which judgment is rendered against a
Indemnitee for an accounting of profits made from the purchase or sale by
Indemnitee of securities of the corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local law;
(c) On account of Indemnitee's conduct which is finally adjudged to
have been knowingly fraudulent, deliberately dishonest or knowingly willful
grossly inappropriate misconduct; or
(d) If a final decision by a Court or arbitration body under this
Agreement having jurisdiction in the matter shall determine that such
indemnification is not lawful.
5. PROCEDURE FOR SEEKING INDEMNIFICATION.
(a) The Corporation shall indemnify Indemnitee as soon as possible
after a written demand is properly presented by Indemnitee to the Corporation,
but in any event within thirty (30) days of such demand.
(b) Notwithstanding the foregoing, the Corporation shall reimburse or
advance all Expenses within ten (10) days after written demand is properly
presented by Indemnitee to the Corporation.
(c) All decisions as to indemnification shall be made by the
Reviewing Party (as defined below) except that (i) this provision does not
permit the Corporation to not comply with any indemnification obligation more
favorable to Indemnitee which it may have by State Statue, Other Laws, By-law or
the Articles, and (ii) the Chief Financial Officer or Company controller shall
be entitled to authorize the Corporation to make indemnification payments
(including advances of Expenses) other than to himself or herself of up to
$10,000 in the aggregate to Indemnitee without action of Reviewing Party,
provided, however, that such amount shall be immediately repaid by Indemnitee if
Reviewing Party determines such amount should not have been so paid.
(d) Nothing herein prohibits Indemnitee from applying for
indemnification with a Court or arbitration body.
6. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation to Indemnitee in any capacity contained herein shall continue during
the period Indemnitee holds the position for which he or she would be entitled
to indemnification hereunder and shall continue thereafter so long as Indemnitee
shall be subject to any possible Claim by reason of the fact that Indemnitee was
a director and/or officer of the Corporation or served in any other capacity
referred to herein as entitling such person to indemnification hereunder.
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PROVIDED, HOWEVER, THAT THE CORPORATION MAY TERMINATE THIS AGREEMENT
ON A DATE (THE "TERMINATION DATE") NOT LESS THAN TEN (10) DAYS AFTER NOTICE OF
TERMINATION IS GIVEN TO THE INDEMNITEE, AS TO EVENTS WHICH FIRST OCCUR AND AS TO
WHICH NO CLAIM MAY BE MADE FOR ANY TIME PRIOR TO THE "TERMINATION DATE" IN THE
FOLLOWING FASHION: (1) If Indemnitee is not a Director of the Corporation, the
Corporation may terminate this Agreement with the above affect by notice to the
Indemnitee; (2) If Indemnitee is a Director of the Corporation, the Corporation
may terminate this Agreement with the above affect by notice to the Indemnitee
IF all other Directors of the Corporation are similarly no longer entitled to
rights of indemnification as a matter of agreement with the Corporation or its
affiliates or all Directors of the Corporation are offered the same new or
restated rights of indemnification from the Corporation.
7. NOTIFICATION AND DEFENSE OF CLAIM. Within fifteen (15) calendar days
after receipt by Indemnitee of notice of the commencement of any action, suit or
proceeding, Indemnitee will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve the
Corporation from any liability which it may have to Indemnitee otherwise than
under this Agreement. With respect to any such action, suit or proceeding as to
which Indemnitee notifies the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense; and
(b) Except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Indemnitee. Indemnitee will not unreasonably withhold its
acceptance of any such counsel. After notice from the Corporation to Indemnitee
of its election so to assume the defense thereof, the Corporation will not be
liable to Indemnitee under this Agreement for any legal expenses or legal fees
subsequently incurred by Indemnitee in connection with the defense thereof other
than reasonable costs and fees of investigation and monitoring of the
proceedings or as otherwise provided below. Indemnitee shall have the right to
employ its own counsel in such action, suit or proceeding, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Indemnitee unless:
(i) the employment of counsel by Indemnitee has been authorized by the
Corporation; or (ii) Indemnitee shall at any time have reasonably concluded that
there may be a conflict of interest between the Corporation and Indemnitee in
the conduct of the defense of such action; or (iii) the Corporation shall not in
fact have employed counsel to assume the defense of such action; in each of
which cases the fees and expenses of counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Indemnitee shall have made the conclusion provided for in (ii) above.
5
(c) The Corporation shall not be required to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any Claim effected
without the Corporations' written consent. The Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Corporation nor
Indemnitee will unreasonably withhold their consent to any proposed settlement.
If the Corporation refuses its consent for a settlement, and the ultimate
judgment or settlement is less advantageous to Indemnitee, as an obligation
separate from any other obligation herein the Corporation shall promptly pay the
difference in value to Indemnitee.
8. REPAYMENT OF EXPENSES. Indemnitee will reimburse the Corporation for
all reasonable expenses paid by the Corporation in defending any civil or
criminal action, suit or proceeding against Indemnitee in the event and only to
the extent that it shall be ultimately determined that Indemnitee is not
entitled to be indemnified by the Corporation for such expenses.
9. INDUCEMENT TO SERVE. The Corporation expressly confirms and agrees
that it has entered into this Agreement and assumed the obligations imposed on
the Corporation hereby in order to induce Indemnitee to continue as a director
and/or officer of the Corporation, or in such other capacity as Indemnitee is
entitled to indemnification hereunder, and acknowledges that Indemnitee is
relying upon this Agreement in continuing such capacity.
10. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereof.
11. INTEREST. Any amounts owed hereunder by the Corporation to Indemnitee
shall bear simple interest from the date the request for reimbursement in a
specific amount was properly submitted to the Corporation by Indemnitee to the
date reimbursement is made. The rate of such interest shall be the "Prime Rate"
as reported in the Money Rates section of the Wall Street Journal, or, if such
rate is not available, the "Base Rate" reported by Bank One, Boulder, CO, in
each case being adjusted on the first calendar day of each calendar month to the
rate as in effect on the preceding business day. Provided, however, that no
interest shall be owing on principal amounts of $100,000 or less that are
outstanding for less than thirty (30) days.
12. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
(a) The Corporation shall indemnify Indemnitee against any and all
expenses (including attorneys' and expert witness fees and expenses) and, if
requested by Indemnitee, shall (within five (5) business days of such request)
advance such expenses to Indemnitee, which are reasonably incurred by Indemnitee
in connection with any claim asserted or action brought by Indemnitee for
recovery under any D & 0 Insurance maintained by the corporation, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense
6
payment or insurance recovery, as the case may be, unless and to the extent a
court or arbitration body determines such claim was frivolous.
(b) In the sole and absolute discretion of the Reviewing Party which
is not Independent Counsel, the Corporation may provide contribution to
Indemnitee in any circumstance set forth in any portion of this Agreement in
which the Corporation would be prohibited from providing indemnification.
(c) No provision herein permits the Corporation to deny contribution
to which Indemnitee may otherwise be entitled.
13. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for a portion of the
Expenses or other indemnification, but not, however, for all of the total
thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any or all Claims or in defense of any
issue or matter therein, including dismissal without prejudice, Indemnitee shall
be indemnified, to the extent permitted by law, against all Expenses incurred in
connection with such Claim.
14. BURDEN OF PROOF. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder the burden of proof shall be on the Corporation to
establish that Indemnitee is not so entitled.
15. NO PRESUMPTION. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, whether civil or criminal, by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contenders, or its equivalent, is not of itself
determinative, and shall not create a presumption, that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a court
or other body has determined that indemnification is not permitted by applicable
law.
16. NONEXCLUSIVITY, ETC. The rights of the Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Bylaws, the
Articles, State Statute, Other Laws or otherwise. To the extent that a change
in applicable law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the Bylaws,
Articles, Other Laws, State Statute and this Agreement, it is the intent of the
parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
17. LIABILITY INSURANCE. If the Indemnitee is an Officer or Director of
the Corporation, to the extent the Corporation maintains D & 0 Insurance,
Indemnitee shall be provided coverage by such policy or policies, in accordance
with its or their terms, to the maximum extent
7
reasonably possible, at least equal to the coverage provided to any other
Director or Officer of the Corporation.
18. SUBROGATION. In the event of payment under this Agreement to
Indemnitee, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute all papers
required and shall do everything that may be necessary to secure such rights,
including the execution of such documents necessary to enable the Corporation
effectively to bring suit to enforce such rights. The Corporation shall pay
over to Indemnitee any recovery under its subrogation rights (whether under this
Agreement or otherwise) to the extent Indemnitee does not fully recover all sums
to which it is entitled in respect of the matters from which the subrogation
claim arose. It is the intent of this Section that Indemnitee receive a
recovery of all his or her Expenses and Liabilities before the Corporation
receives any recovery in respect of its subrogation rights.
19. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received and is
entitled to retain full payment (under any insurance policy, By-law, Articles,
State Statute, Other Laws or otherwise) of the amounts otherwise indemnifiable
hereunder.
20. SPECIFIC PERFORMANCE. The parties recognize that if any provision of
this Agreement is violated by the Corporation Indemnitee may be without an
adequate remedy at law. Accordingly, in the event of any such violation,
Indemnitee shall be entitled, if Indemnitee so elects, to institute proceedings,
in law, at equity or otherwise, to obtain damages, to enforce specific
performance, to enjoin such violation, or to obtain any other relief or any
combination of the foregoing as Indemnitee may elect to pursue.
21. COOPERATION. Except to the extent such action would not be in the
best interest of Indemnitee, Indemnitee shall cooperate with the Corporation in
the defense of Claims asserted by persons other than the Corporation or its
affiliates or associates.
22. NO AMENDMENT OF ARTICLES OR BYLAWS. No amendment to the Articles or
Bylaws shall be effective to reduce the rights or benefits of Indemnitee herein,
and the Corporation hereby agrees not to adopt any amendment to its Articles or
Bylaws to attempt to reduce such rights or benefits. The Corporation will not
avoid or reduce the effectiveness of this provision by merging, consolidating or
otherwise adopting governing documents with such effect, provided, however, that
the only remedy of an Indemnitee for a breach of this sentence shall be a claim
for damages and Indemnitee shall have no claim to specific performance or to
enjoin such corporate event described in this sentence.
8
23. GOVERNING LAWS: BINDING EFFECT: AMENDMENT AND TERMINATION;
DEFINITIONS; GOOD FAITH; INTERPRETATION; NOTICE.
(a) THIS AGREEMENT SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS ENTERED INTO IN
THAT STATE BETWEEN RESIDENTS OF THAT STATE, WHICH IS TO BE WHOLLY PERFORMED IN
THAT STATE. The parties recognize the importance and reasonableness of this
provision as the Corporation is a Colorado corporation.
(b) This Agreement shall be binding upon Indemnitee and upon the
Corporation, its successors and assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Corporation), and shall
inure to the benefit of Indemnitee, his or her heirs, personal representatives,
executors, administrators, estate and assigns and to the benefit of the
Corporation, its successors and assigns.
(c) No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
(d) "INDEPENDENT COUNSEL" means a law firm with more than ten (10)
full time attorneys, authorized to practice in the State of incorporation of the
Corporation, that is experienced in matters of corporation law and neither
presently is, nor in the past five (5) years has been, retained to represent:
(i) the Corporation or Indemnitee in any matter, or (ii) any other party to the
Claim giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, "INDEPENDENT COUNSEL" shall not mean any person who, under the
applicable standards of professional conduct then prevailing in the jurisdiction
in which such person practices or the State of Colorado, would have a conflict
of interest in representing either the Corporation or Indemnitee in an action to
determine Indemnitee's right hereunder.
(e) "CHANGE IN CONTROL" means that fifty percent or more of the
voting stock entitled to vote for the election of directors of the Corporation
(or if there is more than one class of stock, stock entitled to elect a majority
of the directors) is beneficially held by persons who beneficially hold none or
less than five percent (5%) of such stock on the date hereof.
(f) The parties will act in good faith in connection with this
Agreement.
(g) This Agreement shall be interpreted in all cases to the benefit
of Indemnitee.
(h) All notices to be given hereunder shall be in writing and shall
be considered delivered when received. Notices to the Corporation shall be
given at the corporate headquarters of the company marked "Attn. Chief
Financial Officer". Notices to Indemnitee shall be given to the last address of
the Indemnitee known to the Corporation. Notice may be delivered in hand,
9
by responsible courier (such as Federal Express), or by U.S. mail, but not by
telecopy unless authorized in writing by the intended recipient.
24. ARBITRATION. Except as provided below, any and all disputes arising
under or related to this Agreement which cannot be resolved through negotiations
between the parties shall be submitted to binding arbitration. If the parties
fail to reach a settlement of their dispute within fifteen (15) days after the
earliest date upon which one of the parties notified the other(s) of its desire
to attempt to resolve the dispute, then the dispute shall be promptly submitted
to arbitration by a single arbitrator through the Judicial Arbiter Group, any
successor of the Judicial Arbiter Group, or any similar arbitration provider who
can provide a former judge to conduct such arbitration if JAG is no longer in
existence ("JAG"). The arbiter shall be selected by JAG on the basis, if
possible, of his or her expertise in the subject matter(s) of the dispute. The
decision of the arbitrator shall be final, nonappealable and binding upon the
parties, and it may be entered in any court of competent jurisdiction. The
arbitration shall take place in Boulder, Colorado. The arbitrator shall be
bound by the laws of the State of Colorado applicable to the issues involved in
the arbitration and all Colorado rules relating to the admissibility of
evidence, including, without limitation, all relevant privileges and the
attorney work product doctrine. All discovery shall be completed in accordance
with the time limitations prescribed in the Colorado rules of civil procedure,
unless otherwise agreed by the parties or ordered by the arbitrator on the basis
of strict necessity adequately demonstrated by the party requesting an extension
of time. The arbitrator shall have the power to grant equitable relief where
applicable under Colorado law, and shall be entitled to make an award of
punitive damages when applicable under Colorado law. The arbitrator shall issue
a written opinion setting forth his or her decision and the reasons therefor
within thirty (30) days after the arbitration proceeding is concluded. The
obligation of the parties to submit any dispute arising under or related to this
Agreement to arbitration as provided in this Section shall survive the
expiration or earlier termination of this Agreement. Notwithstanding the
foregoing, either party may seek and obtain an injunction or other appropriate
relief from a court to preserve or protect trademarks, tradenames, copyrights,
patents, trade secrets or other intellectual property or proprietary information
or to preserve the status quo with respect to any matter pending conclusion of
the arbitration proceeding, but no such application to a court shall in any way
be permitted to stay or otherwise impede the progress of the arbitration
proceeding.
In the event of any arbitration or litigation being filed or instituted
between the parties concerning this Agreement, the prevailing party will be
entitled to receive from the other party or parties its attorneys' fees, witness
fees, costs and expenses, court costs and other reasonable expenses, whether or
not such controversy, claim or action is prosecuted to judgment or other form of
relief.
25. REVIEWING PARTY. The "REVIEWING PARTY" shall (i) be the Board of
Directors acting by majority vote of a quorum consisting of directors who are
not parties to the particular Claim with respect to which Indemnitee is seeking
indemnification, or (ii), if such a quorum is not obtainable, by a majority vote
of a committee of the Board of Directors designated by the Board
10
of Directors, which committee shall consist of two or more directors not
parties to the Claim (except that directors who are parties to the claim may
participate in the designation of directors for the committee). If such
quorum cannot be obtained or the committee cannot be so established, or, even
if obtainable a quorum of disinterested directors so directs, the Reviewing
Party shall be Independent Counsel who shall render a written opinion, and,
if not determined by any of the above means, the Reviewing Party shall be the
shareholders of the Corporation.
Provided, however, that after a Change in Control, Indemnitee may require
that the Board of Directors act in accordance with the written opinion of
Independent Counsel selected by Indemnitee and approved by the Corporation and
not use any other method for making its determination. The Corporation shall
object to Indemnitees choice of Independent Counsel within seven (7) days of its
selection or shall lose all rights to object thereto in the future unless it is
later discovered that such counsel has a conflict of interest that would render
its representation inappropriate under the rules of ethics than in effect in the
state in which such counsel practices. If Indemnitee and the Corporation cannot
agree on Independent Counsel after two (2) selections, Independent Counsel shall
be selected by arbitration conducted under the arbitration clause of this
Agreement. Independent Counsel in all cases, among other things, shall render
its written opinion to the Corporation, the Board of Directors and Indemnitee
within ninety (90) days after it is retained. The Corporation agrees to at
least monthly pay the reasonable fees and expenses of Independent Counsel and to
fully indemnify such counsel against any and all reasonable expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
Both parties will provide reasonable information requested by the Reviewing
Party to assist in its determination.
If it is contrary to State Statute or other applicable law to require that
the binding decision be made by Independent Counsel, in circumstances where
Independent Counsel is to render a decision hereunder, Independent Counsel shall
nevertheless be retained to, and shall, render such opinion as above provided
and such opinion shall be provided to the Reviewing Party, Indemnitee and the
Board of Directors of the Corporation.
If Independent Counsel is the Reviewing Party, it will also render its non-
binding opinion on whether the Expenses requested are reasonable.
26. ATTORNEY'S FEES. If any action is brought by Indemnitee to enforce or
interpret any of the terms hereof, Indemnitee shall be entitled to be paid all
costs and expenses, including reasonable attorney's and expert witness fees,
incurred by Indemnitee with respect to such action, except to the extent that a
court or arbitration body determines that a particular claim was frivolous, in
which case no expenses shall be paid attributable to the additional expenses of
asserting the particular claim. If a action is brought by or in the name of the
Corporation to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all costs and expenses, including
reasonable expert witness and attorney's fees, incurred by
11
Indemnitee in defending against such claim and in asserting any mandatory
counterclaims or any cross-claims in such action, except to the extent that a
court or arbitration body determines that a particular defense, counterclaim
or crossclaim was frivolous, in which case no expenses shall be paid
attributable to the additional expenses of asserting the particular defense,
counterclaim, or cross-claim.
27. TRUST. Nothing herein prohibits the Corporation from establishing one
or more trusts or similar arrangements, from time to time, to provide or hold a
source of funds for indemnification hereunder.
28. SUBSEQUENT INSTRUMENTS AND ACTS. The parties shall execute and
deliver further instruments and perform any acts that may reasonably become
necessary from time to time to carry out the terms and intent of this Agreement.
29. INDEMNITEE HAS CONSULTED OWN ADVISORS. Indemnitee is aware that the
Courts and State Statute, as well as the policy or law of federal and possibly
state and local governmental agencies and bodies, may restrict or prohibit the
indemnification, including of Expenses, of Indemnitee by the Corporation. This
could include claims under various securities laws and the Employee Retirement
Income Security Act ("ERISA"). Indemnitee has had an opportunity to review this
agreement with legal counsel of his choosing and understands that he may not be
entitled as a matter of law to all the benefits of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the day and year first above written.
The Officer: The Company:
Electroscope, Inc.
/s/ XXXXXXX XXXXX By: /s/ XX. XXXXXX X. XXXXXX
------------------------------- ---------------------------------
Xxxxxxx Xxxxx Xx. Xxxxxx X. Xxxxxx
Management Committee Member
By: /s/ XXXXX XXXXX
---------------------------------
Xxxxx Xxxxx
Management Committee Member
By: /s/ XX. XXXXX X. XXXXXXX
---------------------------------
Xx. Xxxxx X. Xxxxxxx
Management Committee Member
12
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of this 5th day of May, 1997, by and between Electroscope,
Inc., a Colorado corporation, with its principal offices located at 0000
Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000, (hereinafter the "Company"), and Xxxxxxx
Xxxxx, residing at 0000 Xxxxxx Xxxxx, Xxxxxxx, XX 00000 (hereinafter the
"Officer").
1. DEFINITIONS. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be
deemed to have occurred if (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, beneficially owns 50%
or more of the Company's voting common stock; or, (b) at any time
during the period of three consecutive years (not including any period
prior to the date hereof), individuals who at the beginning of such
period constitute the Board (and any new director whose election by
the Board or whose nomination for election by the Company's
stockholders were approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority thereof; or (c) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation,
other than a merger or consolidation in which both (i) a majority of
the directors of the surviving entity were directors of the Company
prior to such consolidation or merger, and (ii) which would result in
the voting securities of the Company outstanding immediately prior
thereto continue to represent (either by remaining outstanding or by
being changed into voting securities of the surviving entity) at least
51% of the combined voting power of the voting securities of the
surviving entity outstanding immediately after such merger or
consolidation; or (d) the stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(b) "Termination Date" shall mean the date following a Change of Control
when the Officer receives written notice that his employment is
terminated without Cause as defined in the Employment Agreement, or,
if later, such other termination date specified in the written notice.
(c) "Terminate" shall mean not only a complete termination of employment
by the Company or its successor but also a significant negative change
in the terms of
1
employment with the Company or its successor, including but not
limited to a requirement to relocate or a significant reduction in
salary and benefits.
(d) "Termination Following a Change of Control" shall mean a termination
without Cause by the Company following or in connection with a change
of control or a termination by the Officer for "Good Reason" of the
Officer's employment with the Company within two years following a
"Change of Control" (as defined below).
(e) For purposes of this Agreement, "Good Reason" shall include, but not
be limited to, any of the following (without the Officer's express
written consent):
i) the assignment to the Officer by the Company of duties
inconsistent with or a substantial alteration in the nature or
status of, the Officer's responsibilities as in effect
immediately prior to a Change of Control;
ii) a reduction by the Company in the Officer's compensation or
benefits as in effect immediately prior to the date of a Change
of Control;
iii) a relocation of the Company's principal offices beyond 25 miles
from the present Boulder, Colorado location, or the Officer's
relocation to any place other than the Boulder, Colorado offices
of the Company, except for reasonably required travel by the
Officer on the Company's business;
iv) any material breach by the Company of any provision of this
Agreement if such material breach has not been cured within
thirty (30) days following written notice of such breach by the
Officer to the Company setting forth with specificity the nature
of the breach; or
v) any failure by the Company to obtain the assumption and
performance of the Employment Agreement and this Agreement by any
successor (by merger, consolidation or otherwise) or assignee of
the Company.
2. SEVERANCE BENEFITS. In the event there is a Termination Following a Change
of Control, the Officer shall be entitled to the following severance
benefits for a period of 12 months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected
by the Officer, a lump sum payable within 30 days of the Officer's
election.
(b) Bonus payable in such amount as would be payable to the Officer had he
been employed by the Company for the full fiscal year during which the
termination occurred, and the Company had achieved Plan performance
for such fiscal year. Such bonus shall be paid in the same manner as
elected by the Officer in (a) above;
(c) Continued medical, dental, life and disability insurance benefits; and
2
(d) Continued retirement benefits, including 401(k) plan.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Officer was entitled immediately
prior to the Change of Control. During such 12-month period, the Officer
shall continue to be an employee of the Company for purposes of
participation in the plans which provide the benefits described in
subsections (c) and (d) above but shall have no further responsibilities as
an employee and shall not be required or permitted to continue his former
duties. Subject to Section 3, the Officer shall be free to accept other
employment during such period, and there shall be no offset of any
employment compensation earned by Officer in such other employment during
such period against payments due the Officer hereunder, and there shall be
no offset in any compensation or benefits received from such other
employment against the continued salary and benefits set forth above.
3. STOCK OPTION VESTING. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Officer which are not
then exercisable, shall become exercisable in their entirety as of the date
immediately preceding the Termination Date.
4. NONCOMPETITION AGREEMENT. Officer acknowledges that the Company has trade
secrets and confidential information, that as President and Chief Executive
Officer he will have access to all such trade secrets and confidential
information and that in performing duties in an executive position for
another company he might necessarily use and divulge such trade secrets and
confidential information. Therefore, in consideration for the severance
benefits set forth above, the Officer agrees that for a period of 12 months
subsequent to the Termination Date, the Officer will not, directly or
indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of
diverting, taking away the business of, or selling products or
services competitive with significant products or services provided by
the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit
or induce any person or persons employed by the Company within one
year prior to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder,
corporate officer, director, or in any other individual or
representative capacity, engage or participate in any business that is
in competition in any significant manner with any material business
conducted by the Company on the Termination Date.
3
5. TERMINATION. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
(b) upon termination of Officer's employment prior to, and not in
connection with, a Change of Control.
(c) when the Officer attains age 65.
6. SEVERABILITY. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid
and enforceable to the extent possible.
7. ASSIGNMENT. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this
Agreement.
8. MISCELLANEOUS. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing
signed by the party sought to be charged with such amendment or waiver; (c)
shall be construed in accordance with, and governed by, the laws of
Colorado; and (d) shall be binding upon and shall inure to the benefit of
the parties and their respective personal representatives and permitted
assigns, including, without limitation, any successor to the business of
the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE OFFICER: THE COMPANY:
Electroscope, Inc.
/s/ XXXXXXX XXXXX By: /s/ XX. XXXXXX X. XXXXXX
------------------------------ -------------------------------------
Xxxxxxx Xxxxx Xx. Xxxxxx X. Xxxxxx
Management Committee Member
By: /s/ XXXXX XXXXX
-------------------------------------
Xxxxx Xxxxx
Management Committee Member
By: /s/ XX. XXXXX X. XXXXXXX
-------------------------------------
Xx. Xxxxx X. Xxxxxxx
Management Committee Member
4
