SEVERANCE AGREEMENT AND MUTUAL
GENERAL RELEASES
THIS SEVERANCE
AGREEMENT AND MUTUAL GENERAL RELEASES (the “
Agreement ”) is made and entered into on
October 31, 2008 by and between GARY L. DREHER (“
Mr. Dreher ”), on the one hand, and AMDL,
INC., a Delaware corporation, (the “ Company
”), on the other hand. Mr. Dreher and the Company are
collectively referred to herein as the parties.
A. On
March 31, 2008, and effective as of January 31, 2008, the
Company and Mr. Dreher entered into an Employment Agreement
(the “ Employment Agreement ”). A copy of the
Employment Agreement is attached hereto as
Exhibit C.
B. Effective
as of September 26, 2008, Mr. Dreher was re-elected as a
member of the Board of Directors of the Company.
C. The
Company and Mr. Dreher desire to settle fully and finally any
and all potential differences between them that may have arisen out
of Mr. Dreher’s employment relationship as an officer of
the Company, status as a member of the Board of Directors of the
Company, and Mr. Dreher’s resignations from those
positions.
NOW,
THEREFORE, for such good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, Mr. Dreher and the
Company understand and agree as follows:
1.
Payments . In connection with the terms and conditions
of this Agreement, the Company has agreed as follows.
(a) The
Company will pay and deliver on or before November 3, 2008 to
Mr. Dreher the gross amount of $125,000. Said payment shall be
by check made payable to “Gary Dreher.”
(b) The
Company will pay the gross amount of $25,000 by check made payable
to “Steptoe & Johnson LLP Client Trust Account” and
delivered on or before November 3, 2008 to Mark A. Neubauer,
Esq., Steptoe & Johnson LLP, 2121 Avenue of the Stars,
Suite 2800, Los Angeles, California 90067, and will be to
secure payment of Mr. Dreher’s legal fees.
(c) For
a period of 30 months, commencing on January 31, 2009 and
continuing thereafter on the last business day of each of the
succeeding 29 months, the Company shall tender payments, each
in the gross amount of $18,000, to Mr. Dreher or, as
applicable, to his heirs, successors or assigns.
(d) In
the event of Mr. Dreher’s death before all of the
payments and benefits in Sections 1 and 2 have been received
by him, the remaining payments and benefits will be made to Beverly
Dreher (or such other individual or trust as may be subsequently
designated in writing by Gary Dreher).
(e) The
parties agree that the Company shall have no obligation to
reimburse Mr. Dreher for business expenses incurred on or
after November 1, 2008, but will reimburse him for all
reasonable expenses incurred prior to that date in accordance with
Company policies as historically implemented. The Company likewise
shall not be required to pay for car allowances, club or equivalent
dues, and earned or contingent bonus compensation which may become
due and payable from and after November 1, 2008.
(f) All
payments made pursuant to Sections 1(a), and (c) shall be
subject to withholding and shall be reported on an IRS Form W-2. It
is intended that the payments under Sections 1(a) and (b), as well
as payments under Section 1(c) made prior to March 15, 2009,
be exempt from Section 409A of the Internal Revenue Code as a
short-term deferral pursuant to Section 1.409A-1(b)(4) of the
Treasury Regulations. Moreover, it is intended that payments made
under Section 1(c) on or after March 15, 2009 and prior to
December 31, 2010, as well as life insurance premiums paid
under Section 3 prior to December 31, 2010, be exempt
from Section 409A of the Internal Revenue Code as separation
pay pursuant to Section 1.409A-1(b)(9) of the Treasury
Regulations. It is intended that all other payments under
Section 1(c), as well as all other life insurance premiums
paid under Section 3, comply with the requirements of
Section 409A. Mr. Dreher shall indemnify and hold the
Company harmless if any such payments are ultimately determined not
to be exempt from Section 409A. and if the payment made under
Section 1(b) is ultimately determined to be subject to withholding
and should have been reported on an IRS Form W-2. Each payment
under Section 1(c) shall be treated as separate payments for
purposes of Section 1.409A-2(b)(2)(iii) of the Treasury
Regulations.
2.
Health Insurance (Medical and Dental) . Commencing now
and until the expiration of the 30-month period set forth in
Section 1(c) above, the Company shall keep in effect the policy of
health insurance (or one of substantially similar coverage) that
the Company provided to Mr. Dreher as of October 1, 2008,
and, during such time period, the full costs of such policy shall
continue to be borne by the Company. As of the end of such period,
Mr. Dreher’s rights, and those of his qualified
beneficiaries (within the meaning of Section 4980B(g)(1) of
the Internal Revenue Code), regarding continuation of such health
insurance coverage will be governed by the provisions of the
Consolidated Omnibus Reconciliation Act of 1986
(“COBRA”). Not later than contemporaneously with the
final monthly payment set forth in Section 1(c), above,
Mr. Dreher (and his qualified beneficiaries) will receive
COBRA information that will include the notice of his rights to
elect continuation coverage under COBRA for group health insurance.
Mr. Dreher shall be solely responsible for the full cost of
COBRA coverage and shall be solely responsible for making all COBRA
payments.
3.
Life Insurance . Commencing now and until the expiration
of the 30-month period set forth in Section 1(c) above, the Company
shall keep in effect a one million dollar term life insurance
policy as referenced in Section 2.6 of the Employment
Agreement (or one of substantially similar coverage), with Beverly
Dreher (or such other individual or trust as may be subsequently
designated in writing by Gary Dreher) as the named beneficiary. The
Company will pay the full cost of all premiums therefor, and
Mr. Dreher acknowledges that a portion or all of the cost of
such insurance may be deemed compensation to him for tax
purposes.
4.
Treatment of Stock Options . The non-qualified and
incentive stock options granted to Mr. Dreher in connection
with the Employment Agreement and referenced therein and in the
relevant Incentive and Non-Qualified Stock Option Agreements shall
continue to vest in
accordance with
the time periods set forth in those Agreements as though
Mr. Dreher was still employed with the Company, except that
the expiration of said options shall be in accordance with the
schedule attached hereto as Exhibit A and incorporated herein
by this reference. All incentive stock options granted to
Mr. Dreher shall continue and shall be treated as
non-qualified stock options beginning effective three months after
the date of this Agreement.
5. No
Admission of Liability . This Agreement was entered into
solely to effectuate an economic resolution of the matters set
forth in this Agreement. This Agreement effects the settlement of
claims that are denied and contested, and nothing herein shall be
construed as an admission by any party of any liability for any
purpose, any such liability being expressly denied.
6.
Resignation as Employee and as Member of Board of Directors
. Mr. Dreher hereby resigns his employment as an officer
of the Company and his status as a member of the Board of Directors
of the Company as of the close of business on October 31,
2008.
7.
Company Property . Mr. Dreher shall, not later than
the close of business seven days after the execution of this
Agreement, turn over to the Company all original files, memoranda,
records, and other documents, and any other tangible property of
the Company in his possession, custody, or control as of the close
of business on October 31, 2008. It is understood and agreed
that Mr. Dreher is entitled to and may keep his laptop
computers, cellular phone, records pertaining to his status as a
shareholder of the Company, and copies of records created during
his employment and membership on the Board of Directors and those
materials are subject to the Confidentiality Provisions of
Section 5.1 of the Employment Agreement.
8.
Covenant Not to Sue . The parties and their
representatives covenant and agree that they will forever refrain
and forbear from bringing, commencing, or prosecuting any action,
lawsuit, claims or proceedings in any forum based on, arising out
of, or in connection with any claim, debt or obligation that is
released or discharged herein, including, but not limited to, any
claims related in any way to Mr. Dreher’s employment
with the Company and/or his membership on the Board of Directors.
This Section bars the parties from initiating legal action only to
the fullest extent such a prohibition is valid under law. This
provision does not preclude any party from suing based on anything
arising from the respective obligations and duties which survive
this Agreement.
9. No
Other Actions . The parties each represent and agree that,
prior to signing this Agreement, they have not filed and/or pursued
any complaints, charges, or lawsuits of any kind with any court,
governmental or administrative agency, and/or arbitrator against
the other party hereto and/or its stockholders, officers,
directors, agents, or employees, asserting any claims that are
released in this Agreement.
10.
Confidential Information; Solicitation of Employees .
Notwithstanding anything herein to the contrary, Mr. Dreher
shall remain bound by the provisions of Sections 5.1 and 5.2
of the Employment Agreement, to the extent valid under California
law.
11.
Consulting Services .
(a) For
so long as the Company is obligated hereunder to tender the
payments specified in Section 1(c) above, Mr. Dreher will
provide advisory and consulting services to the
Company on a
mutually-agreed upon basis not to exceed four hours each month.
However, the failure or refusal of Mr. Dreher to provide such
services shall not relieve the Company of any of its obligations
under this Agreement.
(b) The
Company will not have an exclusive right to Mr. Dreher’s
services during the period set forth in Section 11(a), above,
and Mr. Dreher shall retain the right to perform services for
others during this period. The Company also is free to utilize the
services of others during this period.
(c) Mr. Dreher
agrees that, except as otherwise expressly provided in this
Agreement, he will not be eligible to participate in any employee
benefits, leaves of absence, or other programs that are now or may
be provided by the Company to its employees during the period set
forth in Section 11(a) above.
(d) Mr. Dreher
acknowledges that he will not be covered by the Company’s
worker’s compensation insurance after October 31,
2008.
(e) Mr. Dreher
acknowledges and agrees that he shall have no authority to enter
into contracts or agreements on behalf of the Company or to
represent the Company as an agent after October 31,
2008.
12.
Indemnification; Executive and Organization Liability Insurance
Policy . The Company shall provide Mr. Dreher with
such indemnification as the Delaware General Corporation Law and
the California Labor Code, as each is in effect at any relevant
time, shall require. Further, the Company shall maintain in effect
for the next four years an officer and direc
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