Exhibit 10.1
EXECUTIVE EMPLOYMENT
AGREEMENT
This Executive Employment Agreement
(“Agreement”) is entered into as of November 18,
2008 (the “Effective Date”) by and between NovaRay
Medical, Inc., a Delaware corporation with its principal place of
business at 39655 Eureka Drive, Newark, California 94560
(“Company”) and William Frederick, who resides in
Newark, California 94560 (“Executive”) (collectively,
the “parties”).
RECITALS
WHEREAS , Executive desires to be employed by the
Company and the Company desires to employ the Executive pursuant to
the terms and conditions herein.
NOW, THEREFORE
, in consideration of the covenants,
promises and representations set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Employment . Company
shall employ Executive as of December 8, 2008 and Executive
hereby accepts such employment, upon the terms and conditions set
forth herein.
2. Duties .
2.1. Position . Executive
shall be employed by the Company to render services to the Company
in the position of Chief Financial Officer reporting to the
Company’s Chief Executive Officer. Executive shall prepare
and is responsible for monthly, quarterly and annual financial
statements of the Company and notes thereto; for filing of required
documents with the U.S. Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933 and Securities
Exchange Act of 1934, as amended; for developing and implementing
appropriate internal control procedures; for investor relations
activity of the Company including without limitation analyst
conference calls, investor conferences, communications with
research analysts and financial press releases; and for financial
and budgetary planning of the Company. Executive shall perform
faithfully and diligently such duties, as well as such duties and
responsibilities as are normally related to such position in
accordance with the standards of the industry and any additional
duties now or hereafter assigned to Executive by the Company.
Executive also agrees to serve under additional offices, capacities
or as a director of Company or any subsidiary upon request, without
further compensation. Company reserves the right to reasonably
modify Executive’s duties at any time in its sole
discretion.
2.2. Best Efforts/Full-time .
Executive will expend Executive’s best efforts on behalf of
Company, and will abide by all practices, policies and decisions
made or modified by Company from time to time in the
Company’s sole discretion, as well as all applicable federal,
state and local laws, regulations or ordinances. Executive will act
in the best interest of Company at all times. Executive shall
devote Executive’s full business time and efforts to the
performance of Executive’s assigned duties, unless Executive
notifies Company in advance of Executive’s desire to engage
in other work or business activities and receives Company’s
express written consent to
do so. Except upon the prior written
consent of the Company, Executive will not, during the term of this
Agreement, (i) accept any other employment, or engage,
directly or indirectly, in any activity, paid or unpaid, that
creates an actual or potential conflict of interest with Company
(including but not limited to any work or business activity that is
or might be competitive with, or that might place Executive in a
competing position to that of Company) or that might interfere with
Executive’s duties and responsibilities hereunder.
2.3. Work Location .
Executive’s principal place of work shall be located in
Newark, California, at Company’s offices.
3. Term . The
employment relationship pursuant to this Agreement shall be for an
initial term commencing on December 1, 2008 and continuing
until terminated in accordance with Section 7
below.
4. Compensation
.
4.1. Salary . As compensation
for the proper and satisfactory performance of all duties to be
performed by Executive hereunder, Company shall pay to Executive a
base salary of $225,000.00 per year, less applicable withholdings,
payable in accordance with the normal payroll practices of Company
(the “Base Salary”). The Base Salary shall be paid in
accordance with the Company’s regularly established payroll
practice. In the event Executive’s employment under this
Agreement is terminated by either party, for any reason, Executive
will be entitled to receive his Base Salary earned through the date
of such termination.
4.2. Incentive Compensation .
Executive may be granted incentive compensation in the
Company’s discretion. If Company, in its sole and absolute
discretion, grants Executive incentive compensation, the terms,
amount and payment of such incentive compensation will be
determined solely by Company. The Company shall recommend to the
Board of Directors that Executive be eligible for incentive
compensation for the first year of employment targeted at
twenty-five percent (25%) of Executive’s base salary,
with total compensation targeted at $281,250. Incentive
compensation may be payable in either cash or stock of the Company
or any combination thereof at the election of the Company and
pursuant to terms and conditions established by the Board of
Directors of the Company.
4.3. Stock Options .
Executive may be granted stock options from time to time in the
discretion of Company subject to the terms and conditions of a
Company approved stock option plan and pursuant to the stock option
agreement under which such options are granted. The Company shall
recommend to the Board of Directors that Executive be provided with
an option to purchase 150,000 shares of the Common Stock of the
Company. This recommendation will be considered for approval at the
Company’s next Board of Directors meeting in December 2008.
Executive’s entitlement to any stock options that may be
approved is conditioned upon Executive’s signing of the Stock
Option Agreement and is subject to its terms and the terms of the
Company’s Stock Incentive Plan under which the options are
granted, including vesting requirements of twenty-five percent
(25%) after continued employment of one full year and 1/48
after each full month of continued employment
thereafter.
4.4. Performance and Salary
Review . Company will periodically review Executive’s
performance on no less than an annual basis. Executive’s
salary or other compensation may be adjusted from time to time in
Company’s sole and absolute discretion.
5. Customary Fringe
Benefits . Executive will be eligible for all customary and
usual fringe benefits generally available to similarly-situated
executives of Company subject to the terms and conditions of
Company’s benefit plan documents as may be amended from time
to time in the Company’s sole discretion. Company reserves
the right to modify or eliminate the benefits on a prospective
basis, at any time, effective upon notice to Executive.
6. Termination of
Employment .
6.1. Termination for Cause by
Company . Company may terminate Executive’s employment
immediately at any time for Cause if: (a) Executive engages in
any acts or omissions constituting gross negligence, recklessness,
physical harm to any person, breach of trust, willful misconduct or
dishonesty or engages in conduct that is in bad faith and
materially injurious to the Company, including but not limited to,
misappropriation of trade secrets, fraud or embezzlement;
(b) Executive breaches a material term of this Agreement;
(c) Executive is convicted of or enters a plea of nolo
contendere for fraud, misappropriation or embezzlement, or of
any crime or engaging in any conduct which Company, in its
discretion, determines has or may adversely impact Company;
(d) Executive breaches his fiduciary duties toward Company;
(e) Executive breaches or violates his obligations under the
Confidential Information and Invention Assignment Agreement
referenced in Section 8 below; (f) Executive persistently
fails to satisfactorily perform his duties and responsibilities;
(g) Executive refuses to follow or implement a specific,
lawful direction or order of the Company or its Board of Directors
provided that the Company notifies the Company’s independent
registered public accounting firm of such direction or order upon
such refusal by Executive and Executive continues such refusal
after such notification; (h) the Company restates any
financial statement filed with the SEC after December 1, 2008
or note thereto resulting from, arising out of or in connection
with any negligent act or omission of Executive and the Company
files a notification of Non-Reliance on Previously Issued Financial
Statements or a Related Audit Report or Completed Interim Review
under Form 8-K, other than restatements solely caused by accounting
rule changes effected after the filing date of such financial
statement or note or restatements to the Annual Report on Form 10-K
for the year ending December 31, 2008 or any year prior to
such year; or (i) Executive dies or becomes mentally or
physically incapacitated and cannot perform the essential functions
and duties of his position. In the event Executive’s
employment is terminated in accordance with this Section 6.1,
Executive shall be entitled to receive only (x) his Base
Salary then in effect, earned through the date of such termination,
(y) benefits coverage through the date of such termination,
and (z) reimbursement of business expenses properly incurred
prior to the date of such termination and submitted in accordance
with the Company’s policies (collectively referred to as
“Standard Entitlements”). All benefits and perquisites
of employment shall cease as of the date of termination, and all
other Company obligations to Executive pursuant to this Agreement
will become automatically terminated and completely extinguished on
the date of termination. Without limiting the foregoing, in the
event of a termination for Cause, Executive will not be eligible to
receive the Severance Benefits or any part thereof described in
subparagraph 6.2 or 6.4 below.
6.2. Termination Without Cause By
Company/Severance . Executive’s employment with the
Company shall be “at-will” at all times. The Company
may terminate Executive’s employment under this Agreement
without Cause at any time without any advance notice, for any
reason or no reason at all, notwithstanding anything to the
contrary contained in or arising from any statements, policies or
practices of the Company relating to the employment, discipline or
termination of its employees. In the event of such termination,
Executive will receive the Standard Entitlements plus the following
Severance Pay: (a) three (3) months of Executive’s
Base Salary then in effect on the date of termination, payable in
the form of salary continuation, and three (3) months of
Executive’s health care benefits then in effect on the date
of termination provided the cost to the Company of such health care
benefits does not exceed the cost in effect on the date of
termination and for such salary continuation and such health care
benefits, provided such termination occurs after seven
(7) months of continued employment with the Company and
(b) an additional three (3) months of Executive’s
Base Salary then in effect on the date of termination, payable in
the form of salary continuation, and an additional three
(3) months of Executive’s health care benefits then in
effect on the date of termination provided the cost to the Company
of such health care benefits does not exceed the cost in effect on
the date of termination and for such salary continuation and such
health care benefits, provided such termination occurs after twelve
(12) months of continued employment with the Company (the
“Severance Pay”). The Severance Pay will be payable in
accordance with Company’s regular payroll cycle. If Executive
breaches any provision of Section 7, 8 or 9 during any period
in which Executive receives Severance Pay, Executive shall
immediately cease to be entitled to receive such Severance Pay.
Executive’s receipt of the Severance Pay will be contingent
upon: (x) Executive’s compliance with all surviving
provisions of this Agreement as specified in subparagraph 14.7
below; and (y) Executive’s execution of a full general
release in a form provided by the Company, releasing all claims,
known or unknown, that Executive may have against Company arising
out of or any way related to Executive’s employment or
termination of employment with Company. All other Company
obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished.
6.3. Voluntary Resignation By
Executive . Executive may voluntarily resign Executive’s
position with Company at any time on thirty (30) days advance
written notice. The Company shall have the option, in its sole
discretion, to make Executive’s termination effective at any
time prior to the end of such notice period as long as the Company
pays Executive’s Base Salary through the last day of the
thirty (30) day notice period. In the event of
Executive’s resignation, Executive shall be entitled to
receive only the Standard Entitlements. All other Company
obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished. In addition,
in the event Executive resigns from his employment with the
Company, Executive will not be entitled to receive the Severance
Pay or Severance Benefits described in Section 6.2 or 6.4
herein.
6.4. Termination of Executive
Following Change In Control .
(a) Severance Benefits
. If Executive’s employment is terminated by Company without
Cause or by Executive for Good Reason (as that term is defined
below) within one year after a Change in Control (as that term is
defined below), Executive shall be entitled to receive
the
Standard Entitlements. In addition,
Executive also sh
