THIS EMPLOYMENT
AGREEMENT (“ Agreement ”) is made and entered
into as of November 30, 2006, by and between Xcorporeal, Inc.,
a Delaware corporation (“ Company ”), and Victor
Gura, M.D. (“ Executive ”).
A. WHEREAS,
Executive has experience and expertise applicable to employment
with Company to perform as the Chief Medical and Scientific Officer
of Company, Company has agreed to employ Executive and Executive
has agreed to enter into such employment, on the terms set forth in
this Agreement.
B. WHEREAS,
Executive acknowledges that this Agreement is necessary for the
protection of Company’s investment in its business, good
will, products, patents, inventions, intellectual property, methods
of operation, information, and relationships with its customers and
other employees.
C. WHEREAS,
Company acknowledges that Executive desires definition of his
compensation and benefits, and other terms of his
employment.
NOW, THEREFORE, in
consideration thereof and of the covenants and conditions contained
herein, the parties agree as follows:
1.1 Initial
Term . The initial term of employment will begin on
December 1, 2006 (the “ Commencement Date
”) and will continue until four (4) years following the
Commencement Date (“ Initial Term ”). After the
expiration of the Initial Term, Executive will be employed on an
at-will basis, with either party able to terminate the employment,
with or without cause and with or without notice. For purposes of
this Agreement, the “ Term ” shall mean the
period during which Executive is an employee of the
Company.
2.1 Employment
of Executive . Company agrees to employ Executive to render
services on the terms set forth herein. Executive hereby accepts
such employment on the terms and conditions of this
Agreement.
2.2 Position
and Duties . Executive will serve as Chief Medical and
Scientific Officer of Company, reporting to the Chief Executive
Officer or Chairman (“ Chairman ”) of the
Company’s Board of Directors (“ Board ”),
and will have the general powers, duties and responsibilities of
management usually vested in that office in a corporation and such
other powers and duties as may be prescribed from time to time by
the Chairman or the Board.
2.3 Standard of
Performance . Executive agrees that he will at all times
faithfully and industriously and to the best of his ability,
experience and talents perform all of the duties that may be
required of and from him pursuant to the terms of this Agreement.
Such duties will be performed at such place or places as the
interests, needs, business and opportunities of Company will
require or render advisable.
(a) Subject
to Section 2.4(b) , Executive will (i) devote
substantially all of his business energies and abilities and all of
his productive time to the performance of his duties under this
Agreement (reasonable absences during holidays and vacations
excepted), and will not, without the prior written consent of
Company, render to others any service of any kind (whether or not
for compensation) that, in the opinion of Company, would materially
interfere with the performance of his duties under this Agreement,
and (ii) not, without the prior written consent of Company,
maintain any affiliation with, whether as an agent, consultant,
employee, officer, director, trustee or otherwise, nor will he
directly or indirectly render any services of an advisory nature or
otherwise to, or participate or engage in, any other company or
business activity.
(b) Provided
that doing so does not interfere with Executive’s obligations
under the other provisions of this Section 2 ,
Executive may spend up to ten hours per week (on a non-cumulative
basis) attending and presenting at medical conferences, meetings
and symposiums, lecturing and teaching at UCLA The Geffen School of
Medicine, or treating private patients, all in a manner that does
not compete with the business of the Company.
3.1
Compensation . During the Term, Company will pay the amounts
and provide the benefits described in this Section 3 ,
and Executive agrees to accept such amounts and benefits in full
payment for Executive’s services under this
Agreement.
3.2 Base
Salary . Company will pay to Executive a base salary equivalent
to $420,000.00 per year commencing the Commencement Date, payable
in accordance with Company’s standard payroll practices. At
Company’s sole discretion, Executive’s base salary may
be increased, but not decreased, annually. Notwithstanding the
foregoing, commencing on January 1, 2008 and annually
thereafter, the Base Salary will be increased by at least the
Consumer Price Index for Los Angeles, California (or a reasonable
proxy thereof).
3.3
Discretionary Bonus . Except as described in
Section 5.1 below, Executive is eligible to receive an
annual bonus in an amount that will be targeted at 50% of
Executive’s base salary for such year. The bonus will be
based on Executive achieving designated individual goals and
milestones, and the overall performance and profitability of the
Company. The goals and milestones will be established and
reevaluated on an annual basis by mutual agreement of Executive and
the Chairman, subject to review and approval by the Board or its
Compensation Committee. Any bonus under this
Section 3.3 will be based on a calendar year and will
be paid no later than the March 15 th of
the following year, and will be payable to the extent awarded
regardless of whether Executive’s employment terminated prior
to such payment. The first
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annual bonus
(for calendar year 2006), to the extent granted at the sole
discretion of the Company, will be prorated based on the
Commencement Date.
(a) Upon
U.S. Food and Drug Administration approval of the Company’s
first product, Executive will, subject to Board approval (which
will not be unreasonably withheld), be granted an option to
purchase 500,000 shares of Company’s common stock pursuant to
a stock option agreement under the provisions of Company’s
2006 Stock Incentive Plan (“ Plan ”) at an
exercise price equal to the fair market value of the common stock
on the date of grant, with a term of 10 years. This option is
in addition to the option to purchase 500,000 shares of common
stock granted to Executive on November 14, 2006 in his capacity as
a director of the Company.
(b) Except
as otherwise set forth herein, vesting of options will cease upon
the termination of both Executive’s service as a director and
employment with Company and its affiliates.
3.6 Fringe
Benefits . Subject to Section 3.7 and upon
satisfaction of the applicable eligibility requirements, Executive
and Executive’s family will be provided with group medical
and dental insurance and group dental coverage through
Company’s plans. Medical and dental benefits will commence on
the first day of the month following the Commencement Date. In the
event that no benefit plans are in place at that time, the Company
will reimburse Executive for COBRA coverage until such time as
Executive is covered under the Company’s group medical and
dental plans. Company will pay for $500,000 of term life insurance
for the benefit of Executive, subject to the standard physical
examination that is required by the issuing insurance company. In
addition, Executive will be provided with accidental death and
disability and long-term disability insurance, or reimbursed for
the reasonably equivalent cost of a private disability policy.
Executive will also be provided with $1,500 per month to reimburse
executive for the cost of an automobile. Executive is also eligible
to participate in Company’s 401K plan beginning on the first
day of the month following the Commencement Date.
3.7 Paid Time
Off . Executive will accrue, on a daily basis, a total of four
(4) workweeks of paid time off (PTO) per year commencing with
the Commencement Date, provided, however, that Executive’s
accrued and unused PTO may not exceed a total of seven
(7) workweeks. This PTO will be in addition to normal Company
holidays, which will be determined at the discretion of the Company
from time to time. Thereafter, Executive will not continue to
accrue PTO benefits until he has used enough PTO time to fall below
this maximum amount. Any accrued but unused PTO will be paid to
Executive, on a pro rata basis, at the time that his employment is
terminated. In addition to PTO, the Executive will be entitled to
normal Company holidays.
3.8 Deduction
from Compensation . Company will deduct and withhold from all
compensation payable to Executive all amounts required to be
deducted or withheld pursuant to any present or future law,
ordinance, regulation, order, writ, judgment, or decree requiring
such deduction and withholding.
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4.
REIMBURSEMENT OF EXPENSES
4.1 Travel and
Other Expenses . Company will pay to or reimburse Executive for
those travel, promotional, professional continuing education and
licensing costs (to the extent required), professional society
membership fees, seminars and similar expenditures incurred by
Executive which Company determines are reasonably necessary for the
proper discharge of Executive’s duties under this Agreement
and for which Executive submits appropriate receipts and indicates
the amount, date, location and business character in a timely
manner.
4.2 Liability
Insurance . Company will provide Executive with officers and
directors’ insurance, or other liability insurance,
consistent with its usual business practices, to cover Executive
against all insurable events related to his employment with
Company.
4.3
Indemnification . Promptly upon written request from
Executive, Company will indemnify Executive, to the fullest extent
under applicable law, for all judgments, fines, settlements,
losses, costs or expenses (including attorney’s fees),
arising out of Executive’s activities as an agent, employee,
officer or director of Company, or in any other capacity on behalf
of or at the request of Company. Such agreement by Company will not
be deemed to impair any other obligation of Company respecting
indemnification of Executive otherwise arising out of this or any
other agreement or promise of Company or under any statute. The
rights to indemnification will survive any termination of
Executive’s employment or this Agreement.
5.1 Termination
With Good Cause; Resignation Without Good Reason . Company may
terminate Executive’s employment at any time, with or without
notice, or Good Cause (as defined below). If Company terminates
Executive’s employment with Good Cause, or if Executive
resigns without Good Reason (as defined below), Company will pay
Executive his salary prorated through the date of termination, at
the rate in effect at the time notice of termination is given,
together with any benefits accrued through the date of termination
and any accrued bonus earned through the date of termination.
Company will have no further obligations to Executive under this
Agreement or any other agreement, and all unvested options will
terminate.
5.2 Termination
Without Good Cause; Resignation with Good Reason . Executive
will have the right to terminate his employment with notice and
Good Reason. If Company terminates Executive’s employment
without Good Cause, or Executive resigns for Good
Reason:
(a) Company
will pay Executive his salary prorated through the date of
termination, at the rate in effect at the time notice of
termination is given, together with any benefits accrued through
the date of termination;
(b) Company
will pay Executive in a lump sum an amount equal to two
(2) year’s salary (at the rate in effect at the time of
termination) plus a bonus equal to 200% of the targeted bonus for
the year in which termination occurs;
(c) All
of Executive’s unvested stock options will vest immediately;
and
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(d) In
addition to any rights under COBRA, the term for continued medical
benefits provided by Company will continue for a period of two
years from the date of termination, provided that coverage will
terminate sooner if Executive and his family become eligible for
coverage under another employer’s plan.
To
be eligible for the compensation provided for in
Section 5.2(b), (c) and (d) above, Executive must
execute a full and complete release of any and all claims against
Company, excluding only: (i) claims for indemnification under
(A) Sections 4.3 or 10.12 of this Agreement,
(B) the Indemnification Agreement dated October 13, 2006
between the Company and Executive, or (C) the articles of
incorporation or bylaws of the Company or applicable law;
(ii) post-employment termination rights under employee benefit
plans and stock option agreements; and (iii) rights to the
compensation provided for in Section 5.2(b), (c) and
(d) above. Except as set forth above, the release shall be in
substantia
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