EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 15th day of September 1999, by and between GISH BIOMEDICAL, INC., a
California corporation (the "Company"), and Jack W. Brown, an individual (the
"Executive").
R E C I T A L S
- - - - - - - -
WHEREAS, as of the date hereof Executive has resigned his positions as
Chairman of the Company's Board of Directors and President of the Company; and
WHEREAS, in order to continue to avail itself of the skills and
expertise of Executive, the Company desires to employ Executive, and Executive
desires to enter into the employ of the Company for the period and pursuant to
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the Company and Executive, intending
to be legally bound, hereby agree as follows:
A G R E E M E N T
- - - - - - - - -
1. Employment. The Company hereby employs Executive as Managing
Director of Product Development of the Company, reporting to the Company's
executive committee or its designees (the "Committee"). Executive accepts such
employment and agrees to devote his best efforts and skills to the performance
of his employment responsibilities and functions, and to do so for the exclusive
benefit of the Company.
2. Term. The term of Executive's employment hereunder shall be for a
period of two (2) years, commencing the date hereof, unless earlier terminated
as hereafter specified (such period, the "Term").
3. Position and Duties.
3.1. Service with the Company. During the Term, Executive
agrees to perform such duties and on such basis as shall be assigned to him from
time to time by the Committee; such duties, however, to be commensurate with
Executive's position as a Managing Director of Product Development of the
Company.
3.2. No Conflicting Duties. During the Term, Executive shall
not serve as an officer, director, employee, consultant or advisor to any other
business, unless such other service is approved in advance and in writing by the
Board of Directors of the Company (the "Board"), except that Executive may
continue to serve as an outside director of ICU Medical, Inc. Executive hereby
confirms that he is under no contractual commitments inconsistent with his
obligations as set forth in this Agreement, and agrees that during the Term he
will not render or perform services, or enter into any contract to do so, for
any other corporation, firm, entity or person which are inconsistent with the
provisions of this Agreement.
4. Compensation.
4.1. Base Salary. Subject to the restriction on Executive's
aggregate compensation provided for in Section 4.2 below, as compensation for
all services to be rendered by Executive under this Agreement the Company shall
pay to Executive a base annual salary of One Hundred Thousand Dollars ($100,000)
(the "Base Salary"), which shall be paid on a regular basis in accordance with
the Company's normal payroll procedures and policies.
4.2. Incentive Compensation. Executive shall be eligible to
receive a special bonus of One Hundred Twenty Five Thousand Dollars ($125,000)
(the "Bonus") in the event that, during the Term, the Company shall enter into a
definitive agreement for the Sale of the Company; provided, however, that under
no circumstances shall Executive's total cumulative Base Salary plus Bonus
exceed Two Hundred Twenty Five Thousand Dollars ($225,000). A "Sale of the
Company" means either the purchase by a person or entity not currently a
shareholder of the Company of (a) majority of the voting power of the Company,
or (b) all or substantially all of the assets of the Company, or any other
transaction designated as a "Sale of the Company" by majority vote of the Board.
4.3. Participation in Benefit Plans. During the Term,
Executive shall be entitled to participate in all employee benefit plans or
programs Executive participated in immediately prior to the date hereof, so long
as such plans or programs remain generally available to executives of the
Company, to the extent that his age, health and other qualifications make him
eligible to participate therein. Executive shall also continue to be covered by
the Company's director's and officer's errors and omissions insurance policy.
Executive's participation in any such plan, program or policy shall be subject
to the provisions, rules and regulations thereof that are generally applicable
to all participants therein.
4.4. Stock Options. Executive shall retain the Company stock
options held by him on the date hereof, on the terms and conditions pertaining
thereto on the date hereof, including the original expiration dates of said
options.
4.5. Expenses. In accordance with the Company's policies
established from time to time, and subject to the approval of the Company's
chief financial officer, the Company will pay or reimburse Executive for all
reasonable and necessary out-of-pocket expenses incurred by him in the
performance of his duties under this Agreement.
4.6. Company Car and Outstanding Debt. In addition to the
foregoing, (a) title to Executive's Company car, held by the Company on the date
hereof, shall be transferred to Executive as promptly as practicable after the
execution hereof, and (b) the debt of Executive to the Company outstanding on
the date hereof (approximately $53,000) shall be forgiven upon a Sale of the
Company. Executive shall be responsible for all taxes arising from the transfer
of title and forgiveness of debt described above, and for the expenses of
registering title to and insuring the automobile, but shall not otherwise
compensate the Company for title to the automobile or the forgiveness of
outstanding debt.
5. Termination.
5.1. Termination by Executive Prior to the Expiration of the
Term. Executive may terminate his employment for any reason or for no reason at
any time upon thirty (30) days prior notice to the Committee; provided, however,
that at the Company's sole election, the effective date of such termination may
be shortened to any date between the fifth (5th) and the thirtieth (30th)
following the date of the Executive's notice of termination hereunder.
5.2. Termination by Company Without Cause. The Company may
terminate Executive's employment without Cause (as defined below) by thirty (30)
days written notice to Executive, in which case Executive shall be entitled to
the compensation set forth in Section 5.6 below.
5.3. Termination by the Company for Cause. Any of the
following acts or omissions shall constitute grounds for the Company to
terminate Executive's employment immediately for "Cause".
(a) The continued, willful failure or refusal by Executive to
perform any material duties required of him by this Agreement or as reasonably
requested by the Committee or the Board if consistent with the terms of this
Agreement.
(b) Any material act or omission by Executive involving
malfeasance or gross negligence in the performance of Executive's duties to, or
a material deviation from any of the policies or directives of, the Company,
other than a deviation taken in good faith by the Executive for the benefit of
the Company.
(c) Conduct on the part of Executive which constitutes a
breach of any statutory or common law duty of loyalty to the Company.
(d) Any illegal act by Executive which materially and
adversely affects the business of the Company or any felony committed by
Executive, as evidenced by conviction thereof.
Termination by the Company for cause shall be accomplished by written
notice to Executive and, if given pursuant to clauses (a) or (b) above, shall be
preceded by a written notice providing a reasonable opportunity for Executive to
correct his conduct. Any such termination shall be without prejudice to any
other remedy to which the Company may be entitled either at law, in equity, or
under this Agreement.
5.4. Termination for Death or Disability. Executive's
employment pursuant to this Agreement shall be immediately terminated without
notice by the Company upon the Executive's death or totally disability. For
purposes of this Agreement, the term "totally disability" means an inability of
Executive, due to physical or mental illness, injury or impairment, to perform a
substantial portion of his duties for a period of one hundred eighty (180) or
more consecutive days, as determined by a competent physician selected by the
Board and reasonably agreed to by Executive, following such one hundred eighty
(180) day period.
5.5. Termination for Good Reason. Executive's employment
pursuant to this Agreement may be terminated by Executive for "Good Reason" if
Executive voluntarily terminates his employment as a result of any of the
following.
(a) Without Executive's prior written consent, a reduction in
the Base Salary;
(b) The taking of any action by the Company that would
substantially diminish the aggregate value of the benefits provided the
Executive under the medical, health, accident, disability insurance, life
insurance, thrift and retirement plans in which he is entitled to participate in
pursuant to this Agreement other than any such reduction which is (i) required
by law, (ii) implemented in connection with a general concessionary arrangement
affecting all executives or employees or affecting the group of employees of
which the Executive is a member, or (iii) generally applicable to all
beneficiaries of such plans;
(c) resignation as a result of unlawful discrimination, as
evidenced by a final court order; or
(d) the Company materially breaches any provision of this
Agreement.
5.6. Payments Upon Termination. If during the term of this
Agreement, the Company terminates Executive's employment as provided in Section
5.2 hereof, or the Executive resigns for one of the reasons stated in Section
5.5, Executive shall be entitled to the following compensation: (i) the unpaid
Base Salary due Executive through the expiration of the Term, and (ii) any
vested incentive to which Executive is entitled as of the date of termination
pursuant to Section 4.2. All payments required to be made by the Company to the
Executive pursuant to this Section 5.6 shall be paid on a regular basis in
accordance with the Company's normal payroll procedures and policies. Except as
specifically provided above, all other benefits will terminate on the effective
date of termination of Executive's employment. If the Company terminates the
Executive's employment pursuant to Sections 5.3 or 5.4, or if Executive resigns
pursuant to Section 5.1, then Executive shall be entitled only to the
compensation set forth in clause (ii) above.
6. Treatment of Company Proprietary Information.
6.1. Confidential Information. During the term of this
Agreement, Executive acknowledges and agrees that he will have access to and
become acquainted with confidential, proprietary and business information and
trade secrets about the professional, business, and financial affairs of the
Company and its customers, suppliers, vendors, and employees (the "Confidential
Information"). Executive further recognizes that he is being employed as a key
employee, that the Company is engaged in highly competitive businesses, and that
the success of the Company in the marketplace depends upon its goodwill, its
business reputation and the protection of the Confidential Information.
Executive recognizes that in order to safeguard the legitimate business
interests of the Company, it is necessary for the Company to protect the
Confidential Information, as well as the Company's goodwill and reputation both
during Executive's employment and thereafter. Accordingly, Executive expressly
agrees that during the Term and thereafter Executive will regard and preserve as
confidential all Confidential Information obtained by him in connection with his
employment. Executive agrees that he will not, without prior written authority
from the Company to do so, disclose to others, or take or use for his own
purposes or purposes of others, either during his employment or thereafter, any
such information. Executive further agrees he will not remove without
authorization, retain, transmit by any means, copy or disclose any of the
Company's or its supplier's or customer's specifications, drawings, blueprints,
reproductions, computer programs, or any other documents or information, or
things, except as required in the line of his employment with the Company.
Executive recognizes that this obligation applies not only to technical
information but any business information which the Company reasonably considers
confidential. The foregoing restrictions shall not apply to (i) information
which is or becomes, other than as a result of a breach of this Agreement,
generally available to the public or (ii) the disclosure of information required
pursuant to a subpoena or other legal process; provided that Executive shall
notify the Company in writing of the receipt of any such subpoena or other legal
process requiring such disclosure immediately after receipt thereof and the
Company shall have a reasonable opportunity to quash such subpoena or other
legal process prior to any disclosure by Executive.
6.2. Retaining and Assigning Inventions and Original Works.
(a) Inventions and Original Works Retained by Executive.
Executive has attached hereto as Exhibit 1 a list describing all inventions,
original works of authorship, developments, improvements, and trade secrets
which belong to him, which relate to the Company's proposed business and
products, and which are not assigned to the Company; or, if no such list is
attached, Executive thereby represents that there are no such inventions.
(b) Inventions and Original Works Assigned to the Company.
Executive agrees that he will promptly make full written disclosure to the
Company, will hold in trust for the sole right and benefit of the Company, and
will assign to the Company all his right, title and interest in and to any and
all inventions, original works of authorship, developments, improvements or
trade secrets which Executive may solely or jointly conceive or develop or
reduce to practice, or cause to be conceived or developed or reduced to
practice, during the Term. Executive recognizes, however, that Section 2870 of
the California Labor Code (a copy of which is attached hereto as Exhibit 2)
exempts from this provision any invention as to which he can prove the
following:
(i) Executive developed the invention entirely on his own
time;
(ii) Executive did not use any equipment, supplies,
facility or trade secret information of the Company
in the invention's development;
(iii) at the time the invention was conceived or reduced to
practice, it did not relate to the Company's
business, or the Company's actual or demonstrably
anticipated research or development; and
(iv) the invention did not result from any work that
Executive performed for the Company.
Executive acknowledges that all original works of authorship which are made by
him (solely or jointly with others) within the scope of his employment and which
are protectable by copyright are "works made for hire" as that term is defined
in the United States Copyright Act (17 USC, Section 101).
(c) Maintenance of Records. Executive agrees to keep and
maintain adequate and current written records of all inventions and original
works of authorship made by him (solely or jointly with others) during the Term.
The records will be in the form of notes, sketches, drawings, and any other
format that may be specified by the Company. The records will be available to
and remain the sole property of the Company at all times.
(d) Inventions Assigned to the United States. Executive agrees
to assign to the United States government all his right, title and interest in
and to any and all inventions, original works of authorship, developments,
improvements or trade secrets whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
(e) Obtaining Letters Patent and Copyright Registrations.
Executive agrees that his obligation to assist the Company to obtain United
States or foreign letters patent and copyright registrations covering inventions
and original works of authorship assigned hereunder to the Company shall
continue beyond the expiration of the Term, but the Company shall compensate
Executive at a reasonable rate for time actually spent by him at the Company's
request on such assistance. If the Company is unable because of Executive's
mental or physical incapacity or for any other reason to secure Executive's
signature to apply for or to pursue any application for any United States or
foreign letters patent or copyright registrations covering inventions or
original works of authorship assigned to the Company as above, then Executive
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as Executive's agent and attorney in fact, to act for and in
Executive's behalf and stead to execute and file any such applications and to do
all other lawfully permitted acts to further the prosecution and issuance of
letters patent or copyright registrations thereon with the same legal force and
effect as if executed by Executive. Executive hereby waives and quitclaims to
the Company any and all claims, of any nature whatsoever, which Executive now or
may hereafter have for infringement of any patents or copyright resulting from
such application for letters patent or copyright registrations assigned
hereunder to the Company.
(f) Exception to Assignments. Executive understands that the
provisions of this Agreement requiring assignment to the Company do not apply to
any invention which qualifies fully under the provisions of Section 2870 of the
California Labor Code, a copy of which is attached hereto as Exhibit 2.
Executive will advise the Company promptly in writing of any inventions,
original works of authorship, developments, improvements or trade secrets that
he believes meet the criteria in Subparagraphs 6.2(b)(i), (ii), (iii) and (iv)
above; and he will at that time provide to the Company in writing all evidence
necessary to substantiate that belief. Executive understands that the Company
will keep in confidence and will not disclose to third parties without
Executive's consent any confidential information disclosed in writing to the
Company relating to inventions that qualify fully under the provisions of
Section 2870 of the California Labor Code.
6.3. Representations. Executive agrees to execute any proper
oath or verify any proper document required to carry out the terms of this
Agreement. Executive represents that his performance of all the terms of this
Agreement will not breach any agreement to keep in confidence proprietary
information acquired by him in confidence or in trust. Executive has not entered
into, and agrees not to enter into, any oral or written agreement in conflict
herewith.
7. Ownership of Records. Executive agrees that upon resignation or
termination of employment for any reason whatsoever, he will return to the
Company all things belonging to the Company and all copies of documents
referring to the Company, its suppliers or its customers, including but not
limited to documents containing Confidential Information in his possession or
control.
8. Non-Solicitation. During the Term and for a period of two (2) years
thereafter, Executive shall not (a) induce or solicit any employee, agent,
consultant, or independent contractor of the Company to quit his/her employment
or other business relationship with the Company or to work for any person or
entity other than the Company; or (b) call on, solicit, or take away, or attempt
to call on, solicit or take away, any past or present customer of the Company
with respect to the same or similar business services now or during the Term
provided by the Company.
9. Assignment. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of Executive, assign its rights and
obligations under this Agreement to an affiliate or to any corporation, firm or
other business entity (i) with or into which the Company may merge or
consolidate, or (ii) to which the Company may sell or transfer all or
substantially all of its assets. After any such assignment by the Company, the
Company shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement.
10. Injunctive Relief. Executive agrees that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of
this Agreement, including, without limitation, Sections 6-8. Accordingly,
Executive specifically agrees that the Company shall be entitled to temporary
and permanent injunctive relief to enforce the provisions of this Agreement, to
the extent that such relief is provided by law for such violation. This
provision with respect to injunctive relief shall not, however, diminish the
right of the Company to claim and recover damages in addition to injunctive
relief.
11. Miscellaneous.
11.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
11.2. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior agreements and understanding with respect to such subject matter, and
the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.
Without limiting the generality of the foregoing, Executive and the Company
hereby agree that, upon the execution of this Agreement, that certain Severance
Compensation Agreement, dated as of August 15, 1997, between the Company and
Executive shall be deemed cancelled, null and void, and the subject matter
thereof shall be superceded in its entirety by the provisions of this Agreement.
11.3. Withholding Taxes. The Company may withhold from any
salary and benefits payable under this Agreement all federal, state, city or
other taxes or amounts as shall be required to be withheld pursuant to any law
or governmental regulation or ruling.
11.4. Amendments. No amendment or modification of this
Agreement shall be deemed effective unless made in writing signed by the parties
hereto.
11.5. No Waiver. No term or condition of this Agreement shall
be deemed to have been waived nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
11.6. Severability. To the extent any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement shall be
unaffected and shall continue in full force and effect. In furtherance of, and
not in limitation of, the foregoing, should the duration, geographical extent of
or business activities covered by any provision of this Agreement be in excess
of what is valid and enforceable under applicable law, then such provision shall
be construed to cover only that duration, extent, or activities which may
validly and enforceably be covered.
11.7. Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.8. Counterparts. This Agreement may be executed by the
parties in separate counterparts hereof and, provided that each party has
executed and delivered a counterpart hereof, this Agreement shall be effective
despite the fact that the parties have not executed the same counterpart hereof.
All such counterparts shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth above.
"Company"
GISH BIOMEDICAL, INC.,
a California corporation
By: /s/ James R. Talevich
------------------------
Its: Chief Financial Officer
------------------------
Date: September 15, 1999
------------------------
"Executive"
/s/ Jack W. Brown
----------------------------------
Jack W. Brown
October 14, 1999
----------------------------------
Date
EXHIBIT 1
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date of Brief Description
----- ---- --------------------
EXHIBIT 2
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign or offer to assign any of his or her rights in any
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
invention that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the
employer.
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded form being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."