Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement ("AGREEMENT"), dated as of May 15, 2002
("EFFECTIVE DATE"), is between Medical Discoveries, Inc., a Utah corporation
("MDI"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual ("EXECUTIVE").
1. EMPLOYMENT RELATIONSHIP / POSITION / DUTIES.
1.1 EMPLOYMENT RELATIONSHIP. As of the Effective Date, Executive shall
be employed by MDI as President and Chief Executive Officer. Executive and MDI
acknowledge that either party may terminate this employment relationship at any
time and for any or no reason, subject to the obligation of MDI to provide the
severance benefits specified in this Agreement.
1.2 POSITION. Executive will serve MDI as its President and Chief
Executive Officer.
1.3 DUTIES. Executive will, during the term of this Agreement,
faithfully and diligently perform all such acts and duties, and furnish such
services, as the Board of Directors of MDI shall reasonably direct and are
consistent with the position of President and Chief Executive Officer. Executive
will devote such time, energy, and skill to the business of MDI as shall
reasonably be required for such performance of her duties.
2. TERM OF EMPLOYMENT. Unless sooner terminated in accordance with this
Agreement, the term of employment will be for the period commencing on the
Effective Date and ending on the third anniversary of the Effective Date (the
"TERM"); provided, however, that in the event of a Change of Control (as defined
in Section 5.4(c)) during said three-year period, the Term shall extend to the
later of (i) said three-year period or (ii) 12 months following the Change of
Control.
3. SALARY AND BONUS. MDI will pay Executive (i) base pay at an annual rate of
$200,000, plus (ii) bonus payments as part of MDI's annual management bonus
program. Executive's incentive eligibility under the bonus program shall be such
that performance at the target levels established by the Board of Directors for
an annual bonus performance period would result in an incentive payment equal to
50% of Executive's base pay.
4. OTHER BENEFITS.
4.1 SIGNING BONUS. MDI agrees to pay Executive a signing bonus of
$200,000, subject to all applicable withholding requirements, payable upon
execution of this Agreement.
4.2 EMPLOYEE BENEFIT PROGRAMS. Executive will be eligible to participate
in all employee benefit programs established by MDI that are applicable to
management personnel such as medical, pension, 401(k), disability and life
insurance plans on the same basis as other
1
employees of MDI from time to time, but nothing herein shall require the
adoption or maintenance by MDI of any specific plans.
4.3 VACATIONS AND HOLIDAYS. Executive will be provided such holidays,
sick leave and vacation as MDI makes available to its management level employees
generally; provided, however, that Executive shall be entitled to not less than
four weeks' paid vacation in each twelve month period.
4.4 EXPENSES. MDI will reimburse Executive in accordance with company
policies and procedures for reasonable expenses (including travel expenses)
necessarily incurred in the performance of duties hereunder against appropriate
receipts and vouchers indicating the specific business purpose for each such
expenditure. In addition, MDI shall provide Executive with a cellular phone and
a monthly calling plan of Executive's choosing.
4.5 VEHICLE. MDI shall provide Executive with the use of a company-owned
vehicle.
5. COMPENSATION UPON TERMINATION.
5.1 TERMINATION WITHOUT CAUSE. In the event of a Termination of
Executive's Employment (as defined in Section 5.4(a)) at any time during the
Term other than for Cause (as defined in Section 5.4(b)), death, or Disability
(as defined in Section 5.4(d)), and contingent upon Executive's execution of the
Release of Claims (as defined in Section 5.3) and compliance with Section 10,
Executive shall be entitled to receive as severance pay an amount in cash equal
to Executive's annual base pay at the rate in effect immediately prior to the
date of termination for a period equal to the longer of two years or the
unexpired portion of the Term. MDI shall pay Executive such amount in a single
payment after employment has ended and eight days have passed following
execution of the Release of Claims without revocation. This severance pay shall
be in lieu of any other compensation for periods after the date of termination.
5.2 TERMINATION FOR CAUSE, DEATH, OR DISABILITY. Upon Termination of
Executive's Employment at any time during the Term for Cause, death, or
Disability, Executive will be paid her compensation through the date of
termination and will have no rights to payments after the termination date.
5.3 RELEASE OF CLAIMS. In consideration for and as a condition precedent
to receiving the severance benefits outlined in Section 5.1 and elsewhere in
this Agreement, Executive agrees to execute a comprehensive release of
claims/non-disparagement agreement in a form acceptable to MDI ("RELEASE OF
CLAIMS"). Executive promises to execute and deliver the Release of Claims to MDI
within the later of (i) 45 days from the date Executive receives the Release of
Claims or (ii) the last day of Executive's active employment.
5.4 DEFINITIONS.
(a) Termination of Executive's Employment. Termination of
Executive's Employment means that MDI has terminated Executive's employment with
MDI (including any
2
subsidiary of MDI). If Executive is assigned additional or different titles,
tasks or responsibilities from those currently held or assigned, consistent with
Executive's areas of professional expertise and with no decrease in annual base
compensation, whether at MDI or any subsidiary of MDI, such circumstances shall
not constitute a Termination of Executive's Employment. Termination of
Executive's Employment shall include termination by resignation of Executive,
within 12 months of a Change of Control, by written notice to MDI referring to
the applicable paragraph of Section 5.4(a), for "Good Reason" based on:
(i) the assignment to Executive of a different title, job
or responsibilities that results in a decrease in the level of
responsibility of Executive with respect to the surviving company after
the Change of Control when compared to Executive's level of
responsibility for MDI's operations prior to the Change of Control;
provided that Good Reason shall not exist if Executive continues to have
the same or a greater general level of responsibility for the former MDI
operations after the Change of Control as Executive had prior to the
Change of Control even if the former MDI operations are a subsidiary or
division of the surviving company;
(ii) a reduction by MDI or the surviving company in
Executive's base pay as in effect immediately prior to the Change of
Control;
(iii) a significant reduction by MDI or the surviving
company in total benefits available to Executive under cash incentive,
stock incentive and other employee benefit plans after the Change of
Control compared to the total package of such benefits as in effect
prior to the Change of Control; or
(iv) MDI or the surviving company requires Executive to be
based more than 50 miles from where Executive's office is located
immediately prior to the Change of Control except for required travel on
company business to an extent substantially consistent with the business
travel obligations that Executive undertook on behalf of MDI prior to
the Change of Control.
(b) Cause. Termination of Executive's Employment for "Cause"
shall mean termination upon (i) the willful and continued failure by Executive
to perform substantially Executive's reasonably assigned duties with MDI (other
than any such failure resulting from Executive's incapacity due to physical or
mental illness) after a demand for substantial performance is delivered to
Executive by the Board of Directors of MDI which specifically identifies the
manner in which the Board believes that Executive has not substantially
performed Executive's duties or (ii) the willful engaging by Executive in
illegal or dishonest conduct which is materially and demonstrably injurious to
MDI. No act, or failure to act, on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive without reasonable
belief that Executive's action or omission was in, or not opposed to, the best
interests of MDI. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the
3
Board or based upon the advice of counsel for MDI shall be conclusively presumed
to be done, or omitted to be done, by Executive in the best interests of MDI.
(c) Change of Control. A Change of Control shall mean that one of
the following events has taken place:
(i) The consummation of a merger or consolidation of MDI
with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of MDI immediately prior to such merger, consolidation or
other reorganization; or
(ii) the sale, transfer or other disposition of all or
substantially all of MDI's assets; or
(iii) A change in the composition of the Board of
Directors, as a result of which fewer than one-half of the incumbent
directors are directors who either:
(1) Had been directors of MDI 24 months prior to
such change; or
(2) Were elected, or nominated for election, to
the Board of Directors with the affirmative votes of at least a
majority of the directors who had been directors of MDI 24 months
prior to such change and who were still in office at the time of
the election or nomination.
A transaction shall not constitute a Change of Control if its sole purpose is to
change the state of MDI's incorporation or to create a holding company that will
be owned in substantially the same proportions by the persons who held MDI's
securities immediately before such transaction. In addition, notwithstanding
anything in the foregoing to the contrary, no Change of Control shall be deemed
to have occurred for purposes of this Agreement by virtue of any transaction
which results in Executive, or a group of persons which includes Executive,
acquiring, directly or indirectly, securities representing 20% or more of the
voting power of outstanding securities of MDI.
(d) Disability. Termination of Executive's Employment based on
"Disability" shall mean termination without further compensation under this
Agreement, due to Executive's absence from Executive's full-time duties with MDI
for an aggregate of 90 days in any period of 180 consecutive days as a result of
Executive's incapacity due to physical or mental illness, unless within 30 days
after notice of termination by MDI following such absence Executive shall have
returned to the full-time performance of Executive's duties.
5.5 GROSS-UP PAYMENT. Notwithstanding anything in this Agreement to the
contrary, if any payment pursuant to this Agreement (each a "PAYMENT") is
subject to the excise tax
4
imposed on "excess parachute payments" by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "CODE") (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "EXCISE TAX"), then
Executive shall be entitled to an additional payment (a "GROSS-UP PAYMENT") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Payment and any federal, state and local income tax and Excise Tax upon
the Gross-Up Payment, shall be equal to the Payment. No Gross-Up Payment shall
be payable under this Section 5.5 if the Payment is not subject to an Excise
Tax.
6. CONFIDENTIAL INFORMATION.
6.1 Executive recognizes that MDI's business and continued success
depend upon the use and protection of confidential and proprietary business
information concerning MDI and its business (all such information being
"CONFIDENTIAL INFORMATION"). For purposes of this Agreement, the phrase
"Confidential Information" includes, for MDI and its current or future
subsidiaries and affiliates, without limitation, and whether or not specifically
designated as confidential or proprietary: all business plans and marketing
strategies; information concerning existing and prospective markets and
customers; financial information; information concerning the development of new
products and services; and technical and non-technical data related to designs,
specifications, compilations, inventions, improvements, methods, processes,
procedures and techniques; provided, however, that the phrase does not include
information that (a) was lawfully in Executive's possession prior to disclosure
of such information by MDI; (b) was, or at any time becomes, available in the
public domain other than through a violation of this Agreement or any other
confidentiality agreement maintained by MDI; (c) is documented by Executive as
having been developed by Executive outside the scope of Executive's employment
and independently; or (d) is furnished to Executive by a third party not under
an obligation of confidentiality to MDI.
6.2 Executive agrees that Executive will use Confidential Information
only for the benefit of MDI and will not directly or indirectly use or divulge,
or permit others to use or divulge, any Confidential Information for any reason,
except as authorized by MDI. Executive's obligation under this Agreement is in
addition to any obligations Executive has under state or federal law. Executive
agrees to deliver to MDI immediately upon termination of Executive's employment,
or at any time MDI so requests, all tangible items containing any Confidential
Information (including, without limitation, all memoranda, computer storage
devices, photographs, records, reports, manuals, drawings, blueprints,
prototypes, notes taken by or provided to Executive, and any other documents or
items of a confidential nature belonging to MDI), together with all copies of
such material in Executive's possession or control. Executive agrees that in the
course of Executive's employment with MDI, Executive will not violate in any way
the rights that any entity has with regard to trade secrets or proprietary or
confidential information. Executive's obligations under this Section 6 are
indefinite in term and shall survive the termination of this Agreement.
7. WORK PRODUCT AND TRADEMARKS, TRADENAMES AND COPYRIGHTS. Executive agrees that
all right, title and interest in and to all trademarks, tradenames and
copyrights, registered or unregistered, used by MDI in its business (the
"BUSINESS") are the property of MDI, and
5
Executive will not during the term of her employment or thereafter use or, to
the extent of her ability to do so, permit others to use such trademarks,
tradenames and copyrights except as permitted by MDI. Further, Executive agrees
that all right, title and interest in and to the materials resulting from the
performance of Executive's duties to MDI and all copies thereof, including works
in progress, in whatever media, (the "WORK"), will be and remain in MDI upon
their creation. Executive will ▇▇▇▇ all Work with MDI's copyright or other
proprietary notice as directed by MDI. Executive further agrees:
7.1 To the extent that any portion of the Work constitutes a work
protectable under the copyright laws of the United States (the "COPYRIGHT LAW"),
that all such Work will be considered a "work made for hire" as such term is
used and defined in the Copyright Law and that MDI will be considered the
"author" of such portion of the Work and the sole and exclusive owner throughout
the world of copyright therein; and
7.2 If any portion of the Work does not qualify as a "work made for
hire" as such term is used and defined in the Copyright Law, that Executive
hereby assigns and agrees to assign to MDI, without further consideration, all
right, title and interest in and to such Work or in any such portion thereof and
any copyright therein and further agrees to execute and deliver to MDI, upon
request, appropriate assignments of such Work and copyright therein and such
other documents and instruments as MDI may request to fully and completely
assign such Work and copyright therein to MDI, its successors or nominees, and
that Executive hereby appoints MDI as attorney-in-fact to execute and deliver
any such documents on Executive's behalf in the event Executive should fail or
refuse to do so within a reasonable period following MDI's request.
8. INVENTIONS AND PATENTS. For purposes of this Agreement, "Inventions"
includes, without limitation, information, inventions, contributions,
improvements, ideas, or discoveries, whether patentable or not, and whether or
not conceived or made during work hours. Executive agrees that all Inventions
conceived or made by Executive during the period of employment with MDI belong
to MDI, provided they grow out of Executive's work with MDI or are related in
some manner to the Business, including, without limitation, research and product
development, and projected business of MDI or its affiliated companies.
Accordingly, Executive will:
8.1 Make adequate written records of such Inventions, which records will
be MDI's property;
8.2 Assign to MDI, at its request, any rights Executive may have to such
Inventions for the U.S. and all foreign countries;
8.3 Waive and agree not to assert any moral rights Executive may have or
acquire in any Inventions and agree to provide written waivers from time to time
as requested by MDI; and
8.4 Assist MDI (at MDI's expense) in obtaining and maintaining patents
or copyright registrations with respect to such Inventions.
6
Executive understands and agrees that MDI or its designee will
determine, in its sole and absolute discretion, whether an application for
patent will be filed on any Invention that is the exclusive property of MDI, as
set forth above, and whether such an application will be abandoned prior to
issuance of a patent. MDI will pay to Executive, either during or after the term
of this Agreement, the following amounts if Executive is sole inventor, or
Executive's proportionate share if Executive is joint inventor: $750 upon filing
of the initial application for patent on such Invention; and $1,500 upon
issuance of a patent resulting from such initial patent application, provided
Executive is named as an inventor in the patent.
Executive further agrees that Executive will promptly disclose in
writing to MDI during the term of Executive's employment and for one year
thereafter, all Inventions whether developed during the time of such employment
or thereafter (whether or not MDI has rights in such Inventions) so that
Executive's rights and MDI's rights in such Inventions can be determined.
Executive represents and warrants that Executive has no Inventions, software,
writings or other works of authorship useful to MDI in the normal course of the
Business, which were conceived, made or written prior to the date of this
Agreement and which are excluded from the operation of this Agreement
9. REMEDIES. Notwithstanding other provisions of this Agreement regarding
dispute resolution, Executive agrees that Executive's violation of any of
Sections 6, 7, or 8 of this Agreement would cause MDI irreparable harm which
would not be adequately compensated by monetary damages and that an injunction
may be granted by any court or courts having jurisdiction, restraining Executive
from violation of the terms of this Agreement, upon any breach or threatened
breach of Executive of the obligations set forth in any of Sections 6, 7, or 8.
The preceding sentence shall not be construed to limit MDI from any other relief
or damages to which it may be entitled as a result of Executive's breach of any
provision of this Agreement, including Sections 6, 7, or 8.
10. RESIGNATION OF CORPORATE OFFICES. Executive will resign Executive's office,
if any, as a director, officer or trustee of MDI, its subsidiaries or affiliates
and of any other corporation or trust of which Executive serves as such at the
request of MDI, effective as of the date of Termination of Executive's
Employment. Executive agrees to provide MDI such written resignation(s) upon
request and that no severance will be paid until after such resignation(s) are
provided.
11. DISPUTE RESOLUTION. Except for the right of MDI and Executive to seek
injunctive relief in court, any controversy, claim or dispute of any type
arising out of or relating to Executive's employment or the provisions of this
Agreement shall be resolved in accordance with this Section 11, which will be
the sole and exclusive procedure for the resolution of any disputes. Matters
subject to these provisions include, without limitation, claims or disputes
based on statute, contract, common law and tort and will include, for example,
matters pertaining to termination, discrimination, harassment, compensation and
benefits. Matters to be resolved under these procedures also include claims and
disputes arising out of statutes such as Title VII of the Civil Rights Act and
the Age Discrimination in Employment Act. Nothing in this
7
provision is intended to restrict Executive from submitting any matter to an
administrative agency with jurisdiction over such matter.
11.1 COMPLIANCE WITH MDI POLICY. Executive and MDI will make a good
faith attempt to resolve all disputes in accordance with any dispute resolution
policy adopted by MDI before resorting to any other dispute resolution
procedure.
11.2 MEDIATION. MDI and Executive will make a good faith attempt to
resolve any and all claims and disputes not resolved in accordance with Section
11.1 by submitting them to mediation in Salt Lake City, Utah before resorting to
arbitration or any other dispute resolution procedure. The mediation of any
claim or dispute must be conducted in accordance with the then-current American
Arbitration Association ("AAA") national rules for the resolution of employment
disputes by mediation, by a mediator who has had both training and experience as
a mediator of general employment and commercial matters. If the parties to this
agreement cannot agree on a mediator, then the mediator will be selected by the
AAA in accordance with the criteria described in this provision. Within 30 days
after the selection of the mediator, MDI and Executive and their respective
attorneys will meet with the mediator for one mediation session of at least four
hours. If the claim or dispute cannot be settled during such mediation session
or mutually agreed continuation of the session, either MDI or Executive may give
the mediator and the other party to the claim or dispute written notice
declaring the end of the mediation process. All discussions connected with this
mediation provision will be confidential and treated as compromise and
settlement discussions. Nothing disclosed in such discussions, which is not
independently discoverable, may be used for any purpose in any later proceeding.
The mediator's fees will be paid by MDI.
11.3 ARBITRATION. If any claim or dispute has not been resolved in
accordance with Section 11.1 and Section 11.2, then the claim or dispute will be
determined by arbitration in Salt Lake City, Utah, in accordance with the
then-current AAA national rules for the resolution of employment disputes by
arbitration, except as modified herein. The arbitration will be conducted by a
sole neutral arbitrator who has had both training and experience as an
arbitrator of general employment and commercial matters and who is and for at
least ten years has been, a partner, a shareholder, or a member in a law firm.
If MDI and Executive cannot mutually agree on an arbitrator, then the arbitrator
will be selected by the AAA applying the criteria in this provision. No person
who has served as a mediator under the mediation provision, however, may be
selected as the arbitrator for the same claim or dispute. Reasonable discovery
will be permitted and the arbitrator may decide any issue as to discovery. The
arbitrator may decide any issue as to whether or as to the extent to which, any
dispute is subject to the dispute resolution provisions in Section 11 and the
arbitrator may award any relief permitted by law. The arbitrator must base the
arbitration award on the provisions of Section 11 and applicable law and must
render the award in writing, including an explanation of the reasons for the
award. Judgment upon the award may be entered by any court having jurisdiction
of the matter, and the decision of the arbitrator will be final and binding. The
statute of limitations applicable to the commencement of a lawsuit will apply to
the commencement of arbitration under Section 11.3. The arbitrator's fees will
be paid in equal portions by MDI and Executive, unless the arbitrator determines
that, under the
8
circumstances of the arbitration and considering the award of the arbitrator,
one or the other of the parties should pay the entire amount of the arbitrator's
fees.
12. FEES. Unless otherwise agreed, the prevailing party will be entitled to its
costs and attorneys' fees incurred in any litigation relating to the
interpretation or enforcement of this Agreement.
13. DISCLOSURE. Executive agrees fully and completely to reveal the terms of
this Agreement to any future employer or potential employer of Executive and
authorizes MDI, at its election, to make such disclosure.
14. REPRESENTATION OF EXECUTIVE. Executive represents and warrants to MDI that
Executive is free to enter into this Agreement and has no commitment,
arrangement or understanding to or with any party that restrains or is in
conflict with Executive's performance of the covenants, services and duties
provided for in this Agreement. Executive agrees to indemnify MDI and to hold it
harmless against any and all liabilities or claims arising out of any
unauthorized act or acts by Executive that, the foregoing representation and
warranty to the contrary notwithstanding, are in violation, or constitute a
breach, of any such commitment, arrangement or understanding.
15. ASSIGNABILITY. During Executive's employment, this Agreement may not be
assigned by either party without the written consent of the other; provided,
however, that MDI may assign its rights and obligations under this Agreement
without Executive's consent to a successor by reorganization, sale, merger or
liquidation, if such successor carries on the Business substantially in the form
in which it is being conducted at the time of the reorganization, sale, merger
or liquidation. This Agreement is binding upon Executive, Executive's heirs,
personal representatives and permitted assigns and on MDI, its successors and
assigns.
16. NOTICES. Any notice required or permitted to be given hereunder is
sufficient if in writing and delivered by hand, by facsimile or by registered or
certified mail, to Executive at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or to
MDI at ▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Either
Executive or MDI may change the place to which notice is to be given by
providing notice thereof to the other party.
17. SEVERABILITY. If any provision of this Agreement or compliance by any of the
parties with any provision of this Agreement constitutes a violation of any law,
or is or becomes unenforceable or void, then such provision, to the extent only
that it is in violation of law, unenforceable or void, shall be deemed modified
to the extent necessary so that it is no longer in violation of law,
unenforceable or void, and such provision will be enforced to the fullest extent
permitted by law. If such modification is not possible, said provision, to the
extent that it is in violation of law, unenforceable or void, shall be deemed
severable from the remaining provisions of this Agreement, which provisions will
remain binding on the parties.
18. WAIVERS. No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial
9
waiver of a breach of any provision of this Agreement operate or be construe as
a waiver of any subsequent breach; nor will any single or partial exercise of
any right or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by law.
19. GOVERNING LAW. The validity, construction and performance of this Agreement
shall be governed by the laws of the State of Idaho without regard to the
conflict of laws provisions of such laws.
20. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties with respect to the relationship between Executive and MDI and
supersedes all prior agreements and understandings, and there are no other
representations or agreements other than as stated in this Agreement related to
the terms and conditions of Executive's employment. This Agreement may be
changed only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
IN WITNESS WHEREOF, the parties have duly signed and delivered this
Agreement as of the day and year first above written.
MEDICAL DISCOVERIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------- ------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board of Directors
10