Exhibit 10.43
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated January 1, 1997, by and between MEDTOX
Scientific, Inc., a corporation (the "Company") and Richard J. Braun a resident
of Minnesota ("Executive").
WHEREAS, the Company desires to employ Executive upon and subject to
the terms and conditions set forth in this agreement, and Executive desires to
render services for the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the Company and Executive set forth below, the Company and
Executive agree as follows:
1.1 Definitions. The following defined terms have the respective
meanings described below:
1.1 Change in Control. A "Change in Control" of the
Company shall mean any of the following:
(a) a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Company is then subject to such reporting requirement; or
(b) a merger or consolidation to which the Company is a party if, following
the effective date of such merger or consolidation, the individuals and entities
who were shareholders of the Company prior to the effective date of such merger
or consolidation have beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of less than fifty percent (50%) of the combined voting power of
the surviving corporation following the effective date of such merger or
consolidation; or
(c) when, during any period of twenty-four (24) consecutive months during
the term of this Agreement, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof; provided, however,
that a director who was not a director at the beginning of such twenty-four (24)
month period shall be deemed to have satisfied such twenty-four (24) month
requirement, and be an Incumbent Director, if such director was elected by, or
on the recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually, because
they were directors at the beginning of such twenty-four (24) month period, or
by prior operation of this Section.
1.2 Potential Change in Control. A "Potential Change in Control"
of the Company shall be deemed to have occurred if:
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(b) any person (including the Company) publicly announces
an intention to take or to consider taking actions which if consummated would
constitute a Change in Control;
(c) any person becomes the beneficial owner, directly or
indirectly, of securities of the Company representing
ten percent (10%) or more of the combined voting
power of the Company's then outstanding securities;
or
(d) the Board adopts a resolution to the effect that, for
the purposes of this Agreement, a "Potential Change
in Control" of the Company has occurred.
1.3 Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination upon:
(a) the willful and continued failure by the Executive to
substantially perform Executive's duties with the
Company (other than any such failure resulting from
Executive's incapacity due to physical or mental
illness) after a written demand for substantial
performance is delivered to the Executive by the
Company's Board of Directors, which demand
specifically identifies the manner in which the
Company believes that Executive has not substantially
performed Executive's duties; or
(b) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise.
For purposes of this Section 1.3, no act, or failure to act, on the Executive's
part shall be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the Executive's
action or omission was in the best interest of the Company.
1.4 Company. The term "Company" means MEDTOX Scientific, Inc.
and any successors and assigns of the Company.
2. Employment. The Company hereby employs Executive as Chief Executive
Officer, and Executive accepts such employment and agrees to perform services
for the Company, for the period and upon the other terms and conditions set
forth in this agreement.
3. Term of Employment. The term of Executive's employment hereunder
("Term of Employment") shall commence on the date hereof and shall continue for
a three year period ending on December 31, 1999 (unless earlier terminated in
accordance with the provisions of Section 13 of this agreement). The Term of
Employment shall be automatically extended by successive 12 month terms
thereafter.
4. Position and Duties.
4.1 Service with Company. During his Term of Employment,
Executive agrees to perform such reasonable employment duties,
consistent with the terms of this agreement, as the Board of Directors
of the Company shall assign to him from time to time. Such duties and
employment responsibilities shall be performed in accordance with the
Company's rules, regulations and instructions now in force or which may
be adopted by the Company in the future. During the Executive's Term of
Employment, the Board of Directors shall nominate and recommend to
shareholders the election of, and vote all shareholder proxies in favor
of, Executive's election to the Company's Board of Directors.
4.2 Performance of Duties. During his Term of Employment, the
Executive agrees to serve the Company exclusively and to the best of
his ability. The Executive shall have active involvement and be fully
committed to the business and affairs of the Company, and shall devote
one hundred percent of his business time to the affairs of the Company,
except for (i) vacations and excused leaves of absence as permitted in
accordance with Company policy; (ii) service on the Boards of Directors
of other companies at the discretion of the Company's Board of
Directors; (iii) service on the Boards of Directors of not-for-profit
entities without approval of the Company's Board of Directors; and (iv)
a reasonable amount of time during the business day to handle his
personal affairs. Executive hereby confirms that he is under no
contractual commitments inconsistent with his obligations set forth in
this agreement and that during his Term of Employment, except as
provided herein, he will not render or perform services for any other
corporation, firm, entity or person, nor will he become involved in the
operations or management of any other commercial corporation, firm,
entity or person.
5. Compensation.
5.1 Base Salary. Initial base compensation for all services to
be rendered by the Executive under this agreement during the Term of
Employment, the Company shall pay to Executive an annual base salary
of $199,656 per year, which salary shall be paid in accordance with
the Company's normal payroll procedures and policies.
5.2 Options. Executive shall be eligible for annual awards of
options to purchase shares of the Company's common Stock ("Options").
All such awards shall vest daily on a pro rata basis over a three-year
period from the date of grant. Executive and the Company hereby
acknowledge that Executive was granted Options to purchase 1,000,000
shares of the Company's common stock effective January 1, 1997,
pursuant to the Option Agreement attached hereto as Attachment 1.
5.3 Annual Bonus Plan. Executive shall participate in the Annual Bonus Plan
of the Company set forth in Attachment 2 to this Agreement.
5.4 Performance Unit Plan. Executive shall participate in the Performance
Unit Plan of the Company set forth in Attachment 3 to this Agreement.
5.5 Benefits. Executive shall be entitled to such
Company-sponsored benefits as are provided to executive employees of
the Company, subject to the terms and conditions of the applicable
policies and/or plans. Executive shall be entitled to the specific
additional benefits enumerated in Attachment 4 to this Agreement.
6. Executive's Agreement to Continue Employment for Six (6) Months. The
Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a Potential Change in Control of the Company
occurring during the Term of Employment, if so requested by the
Company, Executive will remain in the employ of the Company for a
period of six (6) months after the occurrence of such Potential Change
in Control of the Company. If more than one "Potential Change in
Control" occurs during the Term of Employment, the provisions of this
Section 6 shall be applicable to each "Potential Change of Control"
occurring prior to the occurrence of a Change in Control.
7. Severance Payments. If during the Term of Employment, (i) whether or
not a Change in Control or Potential Change in Control has occurred,
the Company terminates the employment of Executive other than for
Cause, (ji) a Change in Control has occurred and Executive has complied
with Section 6 of this Agreement, or (iii) the Executive's duties,
responsibilities or authority (including status, office, title,
reporting relationships or working conditions) have been materially
altered from those in effect on the date of this Agreement, (iv) the
Executive has been required to relocate to an office or related entity
more than fifty (50) miles from the office where Executive was located
on the date hereof, or (v) the Company has breached any of its
obligations under this Agreement, then, in any such event (at the
Executive's option in the case of any event described in clause (ii)
through (v) above), the Executive's employment hereunder shall cease
and Executive shall be entitled to the following benefits:
(a) the Company will pay to Executive the Executive's
then current base salary for the greater of (i) the
twelve (12) month period following the date of such
termination, or (ii) the balance of the Term of
Employment hereunder, in either case subject to
applicable withholdings and in accordance with the
regular payroll practices of the Company; and
(b) continuous coverage, at the Company's expense, under
any group health plan maintained by or on behalf of
the Company, in which Executive participated as of
the Date of Termination, for the greater of (i) the
twelve (12) month period following the date of
termination, or (ii) the balance of the Term of
Employment hereunder; and
(c) continued participation in the Annual Bonus Plan
referenced in Section 5.3, on a pro rata basis, and
continued benefits referenced in Attachment 4 to this
Agreement, for the same period as base salary shall
be payable pursuant to Section 7(a).
Executive's right to continued coverage under this section shall in no
way reduce or limit any continuation coverage under such group health plan to
which Executive or any of Executive's qualified beneficiaries are entitled under
the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") or Minnesota Statutes 61A.092 and 62A. 17 et seq. This
extension of coverage, however, shall be coordinated with, and shall be provided
concurrently with, any benefits or continuation rights otherwise available to
Executive and Executive's eligible dependents under state or federal
continuation of coverage statutes, including but not limited to, Minnesota
Statutes 61A.092 and 62A. 17 et seq. and the federal Consolidated
Omnibus Budget Reconciliation Act ("COBRA"). Accordingly, within ten (10) days
after the date of termination, Executive and Executive's dependents who are
eligible for such statutory continuation rights shall complete all forms and
papers necessary and customary to elect such continuation coverage. The Parties
expressly agree that the extension of benefits provided for by this Agreement is
not intended to create a retiree health plan covering any other employees. In
all other respects, the payment of benefits, including the amounts and timing
thereof, to Executive and Executive's eligible dependents will be governed by
the terms of applicable employee benefit plans for which Executive and
Executive's dependents are eligible. The Company will answer any reasonable
questions that Executive may have from time to time and will offer him the same
assistance given other participants in employee benefit plans so long as
Executive is entitled to benefits as provided herein or under the terms of those
plans.
Nothing in this Agreement, including the Severance Payments described
in this Section 7, shall in any way be construed to extend the period of
Executive's employment with the Company.
8. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the term of this Agreement or at any time
thereafter Executive shall not divulge, furnish or make accessible to anyone or
use in any way (other than in the ordinary course of the business of the
Company) any confidential or secret knowledge or information of the Company
which Executive has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of the period of his employment by the
Company (including employment by the Company or any affiliated companies prior
to the date of this agreement), whether developed by himself or by others,
concerning any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. Executive
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial investment
of time and expense by the Company and its predecessors, and that any disclosure
or other use of such knowledge or information other than for the sole benefit of
the Company would be wrongful and would cause irreparable harm to the Company.
Both during and after the term of this agreement, Executive will refrain from
any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is now published
or which subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect result of the
breach of this agreement by Executive. It is hereby acknowledged that it is not
the intention of the forgoing provisions to preclude the Executive from securing
gainful employment with subsequent employers who are not competitors of the
Company or who would otherwise have no reasonable commercial use of the above
described knowledge or information, but only to protect the Company's legitimate
proprietary information or knowledge.
9. Ventures. If, during the term of this Agreement, Executive is
engaged in or associated with the planning or implementing of any project,
program or venture involving the Company and a third party or parties, all
rights in such project, program or venture shall belong to the Company. Except
as formally approved by the Company's Board of Directors, Executive shall not be
entitled to any interest in such project, program or venture or to any
commission, finder's fee or other compensation in connection therewith other
than the salary or other compensation to be paid to Executive as provided in
this Agreement.
10. Noncompetition Covenant.
10.1 Agreement Not to Compete. Executive agrees that, during
his Term of Employment with the Company and for a period of twelve (12)
months after the termination of such employment (whether such
termination is with or without Cause, or whether such termination is
occasioned by Executive or the Company), he shall not, directly or
indirectly, engage in competition with the Company in any manner or
capacity (e.g., as an advisor, principal, agent, partner, officer,
director, stockholder, employee, or otherwise) in any phase of the
business which the Company is conducting during the term of this
Agreement. In addition, during this same twelve (12) month period
following Executive's Term of Employment, Executive shall not solicit
or otherwise encourage any third party or representative thereof, who
was at the end of Executive's Term of Employment, a customer of the
Company, for the purpose of causing such customer or customers to
purchase, lease or otherwise use any product or service offered by
Executive or any organization with which Executive is affiliated. Nor
during this same twelve (12) month period shall Executive solicit or
otherwise encourage any employee of the Company to leave the employ of
the Company for any reason.
10.2 Geographic Extent of Covenant. The obligations of Executive under
Section 11.1 shall apply to any geographic area in which the Company:
(a) has engaged in business during the term of this agreement through
production, promotional, sales or marketing activity, or otherwise, or
(b) has otherwise established its goodwill, business reputation, or any
customer or supplier relations.
10.3 Limitation on Covenant. Ownership by Executive, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or publicly
traded in the over-the-counter market shall not constitute a breach of this
Section 11.
10.4 Indirect Competition. Executive further agrees that, during his
Term of Employment and within twelve (12) months thereafter, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 11 if such activity were carried out by Executive,
either directly or indirectly; and in particular Executive agrees that he will
not, directly or indirectly, induce any employee of the Company to carry out,
directly or indirectly, any such activity.
11. Patent, Copyrights and Related Matters.
11.1 Disclosure and Assignment. Executive will promptly disclose in
writing to the Company complete information concerning each and every invention,
discovery, improvement, device, design, apparatus, practice, process, method or
product, whether patentable or not, made, developed, perfected, devised,
conceived or first reduced to practice by Executive, either solely or in
collaboration with others, during the term of this agreement, or within six
months thereafter, whether or not during regular working hours, relating to any
phase of the business of the Company conducted at such time (hereinafter
referred to as "Developments"). Executive, to the extent that he has the legal
right to do so, hereby acknowledges that any and all of said Developments are
the property of the Company and hereby assigns and agrees to assign to the
Company and all of the Executive's right, title and interest in and to any and
all of such Developments.
11.2 Future Developments. As to any future Developments made by
Executive and which are first conceived or reduced to practice during the term
of Executive's employment, or within six months thereafter, but which are
claimed for any reason to belong to an entity or person other than the Company,
Executive will promptly disclose the same in writing to the Company and shall
not disclose the same to others if the Company, within ninety (90) days
thereafter, shall claim ownership of such Developments under the terms of this
agreement. If the Company makes such claim, Executive agrees that, insofar as
the rights (if any) of Executive are involved, it will be settled by arbitration
in accordance with the rules of the American Arbitration Association. The locale
of the arbitration shall be Minneapolis, Minnesota (or other locale convenient
to the Company's principal executive offices). If the Company makes no such
claim, Executive hereby acknowledges that the Company has made no promise to
receive and hold in confidence any such information disclosed by Executive.
11.3 Limitation on Sections 11.1 and 11.2. The provisions of sections 11.1
and 11.2 shall not apply to any Development meeting the following conditions:
(a) such Development was developed entirely on Executive's own time; and
(b) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information; and
(c) such Development does not relate (i) directly to the
business of the Company, or (ii) to the Company's actual or
demonstrably anticipated research or development.
11.4 Executive Assistance. Executive agrees to assist Company in
obtaining patents or copyrights on any Developments assigned to the Company that
the Company, in its sole discretion, seeks to patent or copyright. Executive
also agrees to sign all documents and do all things deemed necessary by Company
to obtain and/or maintain such patents or copyrights, to assign them to Company,
and to protect them against infringement. The obligations of this Section 11 are
continuing and shall survive the termination of Executive's employment with
Company.
11.5 Appointment of Agent. Executive irrevocably appoints the Chairman
of the Board of the Company to act as Executive's agent and attorney in fact to
perform all acts necessary to obtain and/or maintain patents or copyrights to
any Developments assigned by Executive to the Company under this Agreement if
(i) Executive refuses to perform those acts or (ii) is unavailable, within the
meaning of the United States patent and copyright laws. Executive acknowledges
that the grant of the foregoing power of attorney is coupled with an interest
and shall survive the death or disability of Executive and the termination of
Executive's employment with the Company.
11.6 Notice and Acknowledgment. Executive acknowledges that this
section of this Agreement does not apply to a Development for which there was no
equipment, supplies, facilities or trade secret information of the Company used
and which was developed entirely on Executive's own time, and which does not
relate directly to the business of the Company or the Company's actual or
demonstrably anticipated research or development, or which does not result from
any work performed by Executive for the Company.
12. Termination.
12.1 Grounds for Termination. This agreement shall be terminated under the
following circumstances:
(a) By mutual agreement of Executive and the Company;
(b) Immediately upon the death of Executive;
(c) Upon delivery by Executive of a notice of termination
to the Company, in which event this agreement shall
be terminated sixty (60) days after receipt of such
notice;
(d) At Executive's option, upon the occurrence of any of the events set
forth in clauses (ii) through (v) of the first paragraph of Section 7;
(e) Upon the occurrence of an event constituting "Cause" as defined in
Section 1.3.
Notwithstanding any termination of this agreement, Executive, in consideration
of his employment hereunder to the date of such termination, shall remain bound
by the provisions of this agreement which specifically relate to periods,
activities or obligations upon or subsequent to the termination of Executive's
employment, and the Company shall remain bound by the provisions of Section 5
(to the extent that they relate to time periods prior to the date of such
termination), and Section 7 except in the case of a termination for Cause
pursuant to Section 12.1(e) or a termination by Executive pursuant to Section
12.1(c).
12.2 Surrender of Records and Property. Upon termination of his
employment with the Company, Executive shall deliver promptly to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company; which in any of these cases are in his possession or
under his control. Provided, however, that Executive shall be entitled to retain
items of sentimental value, copies of which shall be provided to the Company at
the request of the Company and at the Company's expense.
13. Miscellaneous.
13.1 Governing Law. This Agreement is made under and shall be governed by
and construed in accordance with the laws of the State of Minnesota.
13.2 Prior Agreements. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings 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.
13.3 Withholding Taxes. The Company may withhold from all salary,
bonus, severance pay or other benefits payable under this agreement all federal,
state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
13.4 Amendments. No amendment or modification of this agreement shall be
deemed effective unless made in writing and signed by the parties hereto.
13.5 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 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 specifically
waived.
13.6 Severability. To the extent any provision of this agreement shall
be invalid or unenforceable, it shall be considered deleted here from and the
remainder of such provision and of this agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business activities
covered by, any provision of this agreement be in excess of that which 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. Executive acknowledges the uncertainty of the law in this respect
and expressly stipulates that this agreement be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
13.7 Assignment. This agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party.
13.8 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 the provisions of Sections 9, 10,
11 and 12.2. Accordingly, Executive specifically agrees that the Company shall
be entitled to temporary and permanent injunctive relief to enforce the
provisions of this agreement and that such relief may be granted without the
necessity of proving actual damages. 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.
MEDTOX SCIENTIFIC, INC.
By
Its ___________________________
Richard J. Braun
ATTACHMENT 1
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is dated effective as of the grant date set forth on
Exhibit A attached hereto, between MEDTOX Scientific, Inc., a Delaware
corporation (the "Corporation"), and the individual listed on Exhibit A
("Grantee").
WHEREAS, the Corporation desires to grant and the Grantee desires to
accept the Nonqualified Stock Options to purchase Common Stock of the
Corporation (as defined below);
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements set forth below, it is mutually agreed as follows:
1. Grant of Options. The Corporation hereby grants to Grantee an Option
to purchase from the Corporation all or any part of an aggregate amount of the
shares of the Common Stock of the Corporation, $.15 par value per share (the
"Common Stock"), at the Option price and on other terms, as set forth in Exhibit
A attached hereto and made a part hereof. The date of this Agreement is the
effective date of the grant. This Option is not intended to qualify as an
Incentive Stock Option as described in Section 422 of the Internal Revenue Code
of 1986 and is referred to as a Nonqualified Stock Option.
2. Exercise Period. This Option shall vest and become exercisable in
accordance with the schedule attached hereto as Exhibit A and made a part
hereof. All vested Options must be exercised on or before the earlier of a date
ten (10) years from the date vesting. Vesting shall continue in accordance with
Exhibit A notwithstanding the termination of Grantee's employment by the
Corporation..
3. Exercise of Option. The vested portion of this Option may be
exercised only by written notice of intent to the Corporation at its office at
402 West County Road D, New Brighton, Minnesota 55112. Such notice shall state
the number of shares of Common Stock in respect of which the Option is being
exercised and shall be accompanied by payment for such Common Stock in cash,
certified or cashier's check or by personal check, if acceptable to the
Corporation, by tendering previously held shares of Common Stock of the
Corporation held for at least six months. A form of Notice of Exercise is
attached hereto.
4. Withholding. In the event that the Grantee elects to exercise this
Option or any part thereof, and if the Corporation shall be required to withhold
any amounts by reasons of any federal, state or local tax laws, rules or
regulations in respect of the issuance of shares to the Grantee pursuant to the
Option, the Corporation shall be entitled to deduct and withhold such amounts
from any payments to be made to the Grantee. In any event, the Grantee shall
make available to the Corporation, promptly when requested by the Corporation,
sufficient funds or shares of Common Stock of the Corporation held for at least
six months, to meet the requirements of such withholding; and the Corporation
shall be entitled to take and authorize such steps as it may deem advisable in
order to have such funds available to the Corporation out of any funds or
property due or to become to the Grantee.
5. No Shareholder Rights. Grantee shall have no rights as a stockholder
with respect to any shares of Common Stock subject to this Option prior to the
date of issuance of a certificate or certificates for such shares.
6. Investment Representation. Notice of the exercise of this Option may
include a representation that any of the Option shares purchased shall be
acquired as an investment and not with a view to, or for sale in connection
with, any public distribution.
7. Compliance with Law and Regulations. The Grantee acknowledges that
this Option may not be exercised until the Corporation has taken all actions
then required to comply with all applicable federal and state laws, rules and
regulations and any exchange on which the Common Stock may then be listed. The
certificates representing the shares purchased upon the exercise of this Option
may bear a legend in substantially the following form:
These shares have not been registered either under any applicable
federal law and rules and resale will not be permitted under state law
unless the shares are first registered under the Minnesota Securities
law. Further, no sale, offer to sell, or transfer of these shares
shall be made unless a registration statement under the federal
Securities Act of 1933, as amended, with respect to such shares is
then in effect or an exemption from the registration requirements of
such Act is then in fact applicable to such shares.
8. Non-Transferability. This Option shall not be transferable other than by
will or by laws of descent and distribution. During the lifetime of the Grantee,
this Option shall be exercisable only by such Grantee.
9. Other Assistance. Upon the exercise of this Option the Grantee or
other person exercising the Option must execute a shareholder's agreement and
make any representation or give any commitment which the Company, in its
discretion, deems necessary or advisable by reason of the securities laws of the
United States or any state, and execute any document or pay any sum of money in
respect of taxes or undertake to pay or have paid any such sum which the
Company, in its discretion, deems necessary be reason of the Code or any rule or
regulation thereunder, or by reason of the tax laws of any state.
10. Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the legal representatives, executors, administrators, successors
and assigns of each party to this Agreement.
11. Complete Agreement. This Agreement sets forth the entire understanding
of the parties hereto and shall not be amended, changed or terminated except by
an instrument in writing signed by the parties to this Agreement.
12. Counterparts and Governing Law. This Agreement may be executed in
counterparts, and its validity, construction and performance, shall be governed
by the laws of the state of Minnesota.
13. Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings described below.
(a) Cause. Termination by the Company of the Executive's employment for
"Cause" shall mean termination upon:
(1) the willful and continued failure by the
Executive to substantially perform
Executive's duties with the Company (other
than any such failure resulting from
Executive's incapacity due to physical or
mental illness) after a written demand for
substantial performance is delivered to the
Executive by the Company's Board of
Directors, which demand specifically
identifies the manner in which the Company
believes that Executive has not
substantially performed Executive's duties;
or
(2) the willful engaging by the Executive in conduct which is demonstrably
and materially injurious to the Company, monetarily or otherwise.
For purposes of this Section, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to
be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best
interest of the Company.
(b) Change in Control. A "Change in Control" of the Company shall mean any
of the following:
(1) a change in control of a nature that would
be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then
subject to such reporting requirement; or
(2) a merger or consolidation to which the
Company is a party if, following the
effective date of such merger or
consolidation, the individuals and entities
who were shareholders of the Company prior
to the effective date of such merger or
consolidation have beneficial ownership (as
defined in Rule 13d-3 under the Exchange
Act) of less than fifty percent (50%) of the
combined voting power of the surviving
corporation following the effective date of
such merger or consolidation; or
(3) when, during any period of twenty-four (24)
consecutive months during the term of this
Agreement, the individuals who, at the
beginning of such period, constitute the
Board (the "Incumbent Directors") cease for
any reason other than death to constitute at
least a majority thereof; provided, however,
that a director who was not a director at
the beginning of such twenty-four (24) month
period shall be deemed to have satisfied
such twenty-four (24) month requirement, and
be an Incumbent Director, if such director
was elected by, or on the recommendation of
or with the approval of, at least two-thirds
of the directors who then qualified as
Incumbent Directors either actually, because
they were directors at the beginning of such
twenty-four (24) month period, or by prior
operation of this Section.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
the date first above written.
MEDTOX SCIENTIFIC, INC.
By:
Print Name:_________________________
Title:_______________________________
GRANTEE
[Grantee's signature is set forth on Exhibit
A attached hereto and made a part hereof.]
NOTICE OF EXERCISE OF STOCK OPTION
MEDTOX Scientific, Inc.
402 West County Road D
New Brighton, Minnesota 55112
The undersigned is the holder of a Stock Option (the "Option") to
purchase shares of Common Stock of MEDTOX Scientific, Inc. (the "Corporation "),
pursuant to the terms of the Stock Option Agreement between the Corporation and
the undersigned (the "Agreement"). The undersigned hereby irrevocably elects to
exercise the Option to purchase _______ shares of Common Stock (the "Option
Shares"). Enclosed herewith are (1) the original signed Agreement, and (2)
payment for the Option Shares as required under the Agreement. The undersigned
requests that the certificate representing the Option Shares be issued in the
name of the undersigned and delivered to the address set forth below.
In connection with the issuance of the Option Shares to the
undersigned, the undersigned hereby certifies and represents to the Corporation
that the undersigned is acquiring such shares for the purpose of investment and
not with a view toward distribution. The undersigned understands that these
securities have not been registered either under any applicable federal law and
rules or applicable state law and rules and that resale will not be permitted
under state law unless the securities are first registered or the sale is a
transaction exempt from registration under the applicable state securities law.
The undersigned further understands that no sale, offer to sell, or
transfer of the Option Shares shall be made unless a registration statement
under the federal Securities Act of 1933, as amended (the "Act"), with respect
to the Option Shares is then in effect or an exemption from the registration
requirements of the Act is then in fact applicable to the Option Shares. The
undersigned understands that a legend reciting this investment restriction may
be placed on any stock certificate that may be issued to the undersigned.
Dated:_______________________
- ----------------------------------
(Grantee Signature)
- ----------------------------------
(Address)
S.S. No.______________________
EXHIBIT A
TO STOCK OPTION AGREEMENT
MEDTOX SCIENTIFIC, INC.
Name of Grantee: Richard Braun
Date of Grant: March 1, 1998
Number of Shares Granted: 1,000,000
Exercise Price: $0.4375 per share
Type of Option
(Qualified or Non-Qualified):Non-Qualified
Vesting: The Options shall vest pro rata on a daily
basis during the period commencing on
January 1, 1997 and ending on December 31,
1999. All Options shall vest immediately
upon the occurrence of a Change in Control
or a termination of Grantees' employment by
the Company other than for Cause. Vesting
shall continue after termination of
employment as long as Grantee remains a
Director of the Company.
MEDTOX Scientific, Inc. Accepted and agreed to by
the undersigned Grantee
By_____________________________ ______________________________
Signature Signature
Richard Braun
Title _______________________
[Please execute two copies of this Exhibit A
and return one copy to the Corporation.]
ATTACHMENT 2
ANNUAL BONUS PLAN
Participants: Richard Braun
other Senior Technical and Managerial staff as recommended by
the Executive Management of the Company
Purpose: To align Senior Management's financial incentives with the
objectives of the Shareholders.
Philosophy: That Senior Management should be rewarded for creating
economic value on behalf of shareholders but should not be
rewarded for returns less than the risk free rate which
could be achieved by shareholders.
Plan Function: (Example) Beginning equity of equal to $20 Million. Approximate
Base Salaries of members of the pool of $1,000,000.
Earnings Operating % of Salaries Pool $
Pre-tax ROE
(Millions)
1.2 6% 0 $ 0
1.6 8% 5 $ 50,000
2.0 10% 10 $100,000
2.4 12% 25 $250,000
3.0 15% 30 $300,000
3.4 17% 40 $400,000
4~0 20% 50 $500,000
4.4 22% 60 $600,000
4.8 24% 70 $700,000
5.2 26% 80 $800,000
5.6 28% 90 $900,000
6.0 30% 100 $1,000,000
Amounts in excess of 30% ROE will be at discretion of Compensation
Committee.
ATTACHMENT 3
PERFORMANCE UNIT PLAN FOR CEO
Purpose: The purpose of the Plan is to provide a means of paying a
longer term incentive compensation, in addition to salary
and annual incentive bonus, to the CEO who contributes
materially to the success of the Company and to structure
that incentive to achieve economic value added for
Shareholders that may be inhibited by the annual Incentive
Plan.
Administration:
The Compensation Committee will administer the Plan. The CEO will receive a
bonus as follows:
1. $50,000 per year if over the prior three year period the Company has
achieved an average annual revenue growth rate of 15% and achieved an average
ROE of 15%.
2. $75,000 per year if over the prior three year period the Company has
achieved an average annual revenue growth rate of 20% and achieved an average
ROE of 20%.
3. $100,000 per year if over the prior three year period the Company has
achieved an average annual revenue growth rate of 25% and achieved an average
ROE of 25%.
The plan will begin on January 1, 1997 and first awards will
be eligible to be paid on January 1, 2000. The employee
must be at the Company to receive the award except in the
event of a change of control or retirement from the
Company.
ATTACHMENT 4
Fringe Benefits: Vacation 3 weeks
Health Care - Standard Company Plan
Dental - Standard Company Plan
Flexible Spending Account - Standard Company Plan
Matching 401(k) - up to 6% of Compensation -
Standard Company Plan
Life Insurance/ ADD
Car allowance provided by Company
Club membership at one club of choice
LTD Policy paid by Company
Training and Development budget of $10,000
Financial Planning/Tax Planning budget of $2,500