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Exhibit 10.5
EMPLOYMENT AGREEMENT
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 ”).
RECITALS
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:
AGREEMENT
1.
TERM OF EMPLOYMENT
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.
EMPLOYMENT
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.
2.4
Exclusive Service .
(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.
COMPENSATION
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
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.
3.5
Stock Options .
(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.
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.
TERMINATION
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
(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 substantially
the standard form used by Co
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