2.
Terms of Employment.
2.1
Definitions.
For purposes of this Agreement, the following terms
will have
the following meanings:
(a)
"Accrued Compensation" means any accrued Total Cash
Compensation,
any benefits under any plan of the Company in which the Executive
is a participant to the full extent of the Executive's rights under
such plans, any accrued vacation pay, and any appropriate business
expenses incurred by the Executive in connection with the
performance of the Executive's duties hereunder, all to the extent
unpaid on the date of termination.
(b)
"Base Salary" will have the meaning set forth in Section 3.1
hereof.
(c)
"Change of Control" means the occurrence of any one of
the following:
(i) any "person", as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, a subsidiary, an
affiliate, or a Company employee benefit plan, including any
trustee of such plan acting as trustee) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Company representing
50% or more of the combined voting power of the Company's then
outstanding securities; or (ii) a sale of all or substantially all
of the assets of the Company; or (iii) any merger, reorganization
or other transaction of the Company whether or not another entity
is the survivor, pursuant to which holders of all the shares of
capital stock of the Company outstanding prior to the transaction
hold, as a group, less than 50% of the shares of capital stock of
the Company outstanding after the transaction; provided, however,
that neither (A) a merger effected exclusively for the purpose of
changing the domicile of the Corporation in which the holders of
all the shares of capital stock of the Company immediately prior to
the merger hold the voting power of the surviving entity following
the merger in the same relative amounts with substantially the same
rights, preferences and privileges, nor (B) a transaction the
primary purpose of which is to raise capital for the Company, nor
(C) a reverse merger involving a publicly traded entity and the
Company during such time the Company is a privately-held entity
(the "Reverse
Merger"), will constitute a Change of Control.
(d)
"Death Termination" means termination of the
Executive's employment
due to the death of the Executive.
(e)
"Disability
Termination" means termination of the
Executive's employment
by the Company due to the Executive's incapacitation due to
disability. The Executive will be deemed to be incapacitated
due to disability if at the end of any month the Executive is
unable to perform substantially all of the Executive's duties
under this Agreement in the normal and regular manner due to
illness, injury or mental or physical incapacity, and has been
unable so to perform for either (i) three consecutive full
calendar months then ending, or (ii) 90 or more of the normal
working days during the 12 consecutive full calendar months
then ending. Nothing in this paragraph will alter the
Company's obligations under applicable law, which may, in
certain circumstances, result in the suspension or alteration
of the foregoing time periods.
(f)
"PIPE Financing" means the Company's first sale and issuance
of restricted securities to a third party investor following the
closing of the Reverse Merger during the term hereof.
(g)
"Termination For Cause" means termination of the
Executive's employment
by the Company due to (i) the Executive's dishonesty or fraud,
gross negligence in the performance of the Executive's duties and
responsibilities; (ii) the Executive's conviction of a felony
involving moral turpitude; (iii) the Executive's incurable material
breach of the terms of this Agreement or the Confidentiality
Agreement (as defined below); or (iv) the willful and continued
refusal by Executive to substantially perform Executive's duties or
responsibilities for the Company described herein and as set forth
by the Chief Executive Officer from time to time.
(h)
"Termination Other Than For Cause" means termination of
the Executive's
employment by the Company due to any reason other than as specified
in Sections 2.1(d), (e), (f) or (i) hereof.
(i)
"Total Cash Compensation" means the Executive's Base Salary
plus any cash bonuses, commissions or similar payment accrued
during the preceding calendar year, and if there is no complete
preceding calendar year, then the preceding 12 month period, and if
there is no complete preceding 12 month period, then the preceding
employment period annualized to a twelve (12) month
period.
(j)
"Voluntary Termination" means termination of the Executive's
employment by the voluntary action of the Executive, other than by
reason of a Disability Termination or a Death Termination or as
described in 2.1(g).
2.2
Employee
at Will. The Executive is an "at will" employee of
the Company,
and the Executive's employment may be terminated by the
Company at any time by giving the Executive written notice
thereof, subject to the terms and conditions of this Agreement
and the At-Will Employment, Confidential Information,
Invention Assignment and Arbitration Agreement attached as
Exhibit
B
hereto (the "Confidentiality
Agreement"), the terms of which are herein incorporated
by reference.
2.3
Termination
For Cause. Upon a Termination For Cause, the
Company will
pay the Executive Accrued Compensation, if any.
2.4
Termination
Other Than For Cause. The Company shall give Executive
not less than one (1) month advance notice of a Termination
Other Than For Cause. Upon a Termination Other Than For Cause,
and provided Executive executes and delivers to the Company a
release and waiver of claims in the form attached hereto as
Exhibit C
and such release and waiver of claims is not revoked and has
become effective pursuant to its terms, the Company will pay
the Executive (a) Accrued Compensation, if any, and (b) a
monthly cash severance payment equal to (x) the Total Cash
Compensation, divided by twelve (12), times (y) thirty five
(35) months minus (ii) the number of whole months elapsing
during the period beginning with the date of this Agreement
and ending on the effective termination date of Executive's
employment, with any fractional month prorated based on the
number of days so elapsed divided by the total
number
of days in such calendar month (the result of (y), the
"Severance
Period"). For certainty, in no event shall the
Severance Period exceed thirty five (35) months.
2.5
Disability
Termination. The Company will have the right to effect
a Disability
Termination by giving written notice thereof to the Executive.
Upon a Disability Termination, the Company will pay the
Executive all Accrued Compensation, if any.
2.6
Death
Termination. Upon a Death Termination, the
Executive's employment
will be deemed to have terminated as of the last day of the
month during which her death occurs, and the Company will
promptly pay to the Executive's estate Accrued Compensation,
if any.
2.7
Voluntary
Termination. In the event the Executive wishes to
consummate a
Voluntary Termination, the Executive shall give the Company at
least thirty (30) days advance written notice. During such
period, the Executive will continue to receive regularly
scheduled Base Salary payments and benefits. Following the
effective date of a Voluntary Termination, the Company will
pay the Executive Accrued Compensation, if any.
2.8
Timing
of Termination Payments. Unless expressly provided
otherwise, the
foregoing termination payments will be made at the usual and
agreed times provided for in Section 3.1 of this
Agreement.
3.
Compensation
and Benefits.
3.1
Base
Salary. As payment for the services to be rendered by
the Executive as
provided in Section 1 and subject to the provisions of Section
2 of this Agreement, the Company will pay the Executive a
"Base Salary" at the rate of $280,000 per year, payable on the
Company's normal payroll schedule. The Executive's "Base
Salary" may be increased in accordance with the provisions
hereof or as otherwise determined from time to time, but
reviewed at least annually, by the Compensation Committee of
the Board.
3.2
Additional
Benefits.
(a)
Benefit Plans. The Executive will be eligible to participate
in such of
the Company's benefit plans as are now generally available or later
made generally available to senior officers of the Company,
including, without limitation, medical, dental, life, and
disability insurance plans.
(b)
Expense Reimbursement. The Company agrees to reimburse the
Executive for all reasonable, ordinary and necessary travel and
entertainment expenses incurred by the Executive in conjunction
with the Executive's services to the Company consistent with the
Company's standard reimbursement policies. The Company will pay
travel costs incurred by the Executive in conjunction with the
Executive's services to the Company consistent with the Company's
standard travel policies.
(c)
Vacation.
The Executive will be entitled, without loss of
compensation,
to twenty (20) days of vacation per year. Unused vacation in
any given year may be accrued by the Executive pursuant to the
Company's standard vacation policies.
3.3
Bonus.
(a)
Mandatory. As soon as practicable following the closing of
the PIPE
Financing, the Company shall pay Executive a one time, lump sum
cash bonus in the amount of (x) $23,333.33, times the number of
whole months elapsing during the period beginning April
1,
2007 and ending on the closing date of the PIPE Financing, with any
fractional month prorated based on the number of days so elapsed
divided by the total number of days in such calendar month, minus
(y) the total amount of cash compensation paid to Executive by the
Company during the period beginning April 1, 2007 and ending on the
closing date of the PIPE Financing, which bonus shall be subject to
normal withholdings.
(b)
Other. The Executive will be entitled to participate in
any management
bonus plan adopted by the Company on terms comparable to other
senior officers of the Company, which may include the
following:
(i)
2007 Program. In the event the Reverse Merger is closed
during calendar year 2007, then Executive may be entitled to a one
time, lump sum cash bonus payment, payable upon the first payroll
date following December 31, 2007 in accordance with the Company's
normal payroll procedures, in an amount equal to 0% to 37.5% of
Executive's Base Salary as of December 31, 2007, with such final
percentage determined by the Board based upon Executive's and/or
the Company's achievement by December 31, 2007 of the following
milestones:
|
Milestone
|
Percentage of then Base Salary
|
|
(1)
Closing of Reverse Merger
|
10%
|
|
(2)
Closing of a PIPE Financing at a pre-money Company valuation of at
least $25M
|
10%
|
|
(3)
Establishment of an office space for the Company in New Jersey
accommodating at least two (2) people
|
2%
|
|
(4)
Development of investor relations plan for calendar year
2008
|
8%
|
|
(5)
Development of a detailed financial plan for calendar year
2008
|
7.5%
|
|
TOTAL
|
37.5%
|
(ii)
2008
Program. Provided the PIPE Financing has closed
prior
to or during calendar year 2007, then Executive may be
entitled to a one time, lump sum cash bonus payment, payable
upon the first payroll date following December 31, 2008 in
accordance with the Company's normal payroll procedures, in an
amount equal to 0% to 50.0% of Executive's Base Salary as of
December 31, 2008, with such final percentage determined by
the Board based upon Executive's achievement by December 31,
2008 of certain milestones to be d etermined
by the Board and Executive as soon as practicable following
the later to occur of the date of closing of the PIPE
Financing and January 1, 2008.
3.4
Option
to Purchase Common Stock. Promptly following the
Effective Date,
the senior management of the Company will recommend that the
Board grant the Executive an option (the "Option")
to purchase 750,000 shares of the Company's Common Stock
pursuant to the Company's 2004 Equity Incentive Plan (the
"Plan")
at an exercise price per share equal to the fair market value
of a share of the Company's Common Stock as of the date of
such grant, as determined by the Board, and subject to the
following vesting schedule: 1/36 of the shares subject to the
Option shall vest on each monthly anniversary of the date of
this Agreement, subject to Executive's Continuous Service (as
defined in the Plan) through each such date. Notwithstanding
the above, the Option will vest immediately with respect to
100% of any then unvested or unreleased shares upon a
Termination Other Than For Cause.
3.5
Future
Options. Any other equity award made to Executive
following the Effective
Date in addition to the Option which is subject to vesting or
forfeiture (each such equity award, a "Future
Option") shall also vest immediately with respect to
100% of any then unvested or unreleased shares upon a
Termination Other Than For Cause.
4.
Miscellaneous.
4.1
Waiver.
The waiver of the breach of any provision of this Agreement
will not
operate or be construed as a waiver of any subsequent breach
of the same or other provision hereof.
4.2
Notices.
All notices and other communications under this Agreement
will be
in writing and will be given by personal or courier delivery,
facsimile or first class mail, certified or registered with
return receipt requested, and will be deemed to have been duly
given upon receipt if personally delivered or delivered by
courier, on the date of transmission if transmitted by
facsimile, or three business days after mailing if mailed, to
the addresses of the Company and the Executive contained in
the records of the Company at the time of such notice. Any
party may change such party's address for notices by notice
duly given pursuant to this Section 4.2.
4.3
Headings.
The section headings used in this Agreement are intended
for convenience
of reference and will not by themselves determine the
construction or interpretation of any provision of this
Agreement.
4.4
Governing
Law. This Agreement will be governed by and construed
in accordance
with the laws of the State of California, excluding those laws
that direct the application of the laws of another
jurisdiction.
4.5
Survival
of Obligations. This Agreement will be binding upon and
inure to
the benefit of the executors, administrators, heirs,
successors, and assigns of the parties; provided, however,
that except as herein expressly provided, this Agreement will
not be assignable
either by the Company (except to an affiliate or successor of
the Company) or by the Executive without the prior written
consent of the other party.
4.6
Counterparts
and Facsimile Signatures. This Agreement may be
executed
in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and
the same instrument. This Agreement may be executed by
facsimile signature (including signatures in Adobe PDF or
similar format).
4.7
Withholding.
All sums payable to the Executive hereunder will be
reduced by
all federal, state, local, and other withholdings and similar
taxes and payments required by applicable law.
4.8
Enforcement.
If any portion of this Agreement is determined to be
invalid or
unenforceable, such portion will be adjusted, rather than
voided, to achieve the intent of the parties to the extent
possible, and the remainder will be enforced to the maximum
extent possible.
4.9
Entire
Agreement; Modifications. Except as otherwise provided
herein or in the exhibits hereto, this Agreement and all
exhibits hereto represents the entire understanding among the
parties with respect to the subject matter of this Agreement,
and supersedes any and all prior and contemporaneous
understandings, agreements, plans, and negotiations, whether
written or oral, with respect to the subject matter hereof,
including, without limitation, any understandings, agreements,
or obligations respecting any past or future compensation,
bonuses, reimbursements, or other payments to the Executive
from the Company. All modifications to the Agreement must be
in writing and signed by each of the parties hereto. The
Company and Executive acknowledge that upon the execution of
this Agreement, the Consulting Agreement dated March 1, 2007,
as amended, between the parties is hereby terminated, save for
any surviving obligations of the parties set forth therein,
and Executive hereby waives any notice requirements in
connection therewith; provided, however, that to the extent
any provision of this Agreement or the Confidentiality
Agreement conflicts with a surviving obligation of the
Consulting Agreement, the provision set forth in this
Agreement and/or the Confidentiality Agreement shall
control.
4.10
Section
409A.
(a)
Notwithstanding anything to the contrary in this Agreement,
if Executive
is a "specified employee" within the meaning of Section 409A
of the Internal Revenue Code of 1986, as amended (the
"Code")
and the final regulations and any guidance promulgated
thereunder ("Section
409A") at the time of Executive's termination, and the
severance payable to Executive, if any, pursuant to this
Agreement, when considered together with any other severance
payments or separation benefits which may be considered
deferred compensation under Section 409A (together, the
"Deferred
Compensation Separation Benefits") will not and could
not under any circumstances, regardless of when such
termination occurs, be paid in full by March 15 of the year
following Executive's termination, then only that portion of
the Deferred Compensation Separation Benefits which do not
exceed the Section 409A Limit (as defined below) may be made
within the first six (6) months following Executive's
termination of employment in accordance with the payment
schedule applicable to each payment or benefit.
For
these
purposes, each severance payment is hereby designated as a
separate payment and will not collectively be treated as a
single payment. Any portion of the Deferred Compensation
Separation Benefits in excess of the Section 409A Limit shall
accrue and, to the extent such portion of the Deferred
Compensation Separation Benefits would otherwise have been
payable within the first six (6) months following Executive's
termination of employment, will become payable on the first
payroll date that occurs on or after the date six (6) months
and one (1) day following the date of Executive's termination
of employment. All subsequent Deferred Compensation Separation
Benefits, if any, will be payable in accordance with the
payment schedule applicable to each payment or
benefit.
(b)
The
foregoing provision is intended to comply with the
requirements
of Section 409A so that none of the severance payments and benefits
to be provided hereunder will be subject to the additional tax
imposed under Section 409A, and any ambiguities herein will be
interpreted to so comply. The Company and Executive agree to work
together in good faith to consider amendments to t
