[LETTERHEAD]
November 17, 1995
Mr. Richard M. Stern
Vice President, Marketing
Molecular Biosystems, Inc.
10030 Barnes Canyon Road
San Diego, California 92121
Re: Terms of Separation from MBI
----------------------------
Dear Rich:
In accordance with our recent discussions, this letter ("Letter
Agreement") will set forth the terms of our agreement regarding your
voluntary departure from MBI.
1. DESCRIPTION. Both parties shall regard your departure as a
voluntary resignation to pursue personal goals and other opportunities.
2. TIMING. You shall resign as an employee and officer of MBI
effective as of December 2, 1995 ("Resignation Date"). Your resignation
shall be in the form attached hereto.
EFFECTIVE DATE. This Letter Agreement and the Consultant Agreement (see
Paragraph 3) shall become effective on the eighth day following your
execution of both agreements, unless you have revoked acceptance during the
seven days prior thereto. (SEE ALSO Paragraph 15(b).) Regardless of when
this takes place, the Agreements shall be deemed to have been in effect
retroactive to December 2, 1995. Neither agreement shall become effective
unless both are executed by you and MBI.
3. CONSULTING. Because you are a long-time employee of MBI, we would
like to be able to avail ourselves of your expertise after your departure.
Effective as of December 2, 1995, we shall enter into a one-year Consultant
Agreement substantially in the form attached hereto. Its terms are
incorporated herein by reference, and vice versa.
4. WELFARE BENEFITS. Regular medical, dental, vision and life
insurance will continue through December 31, 1995, accidental death and
dismemberment insurance, and long-term disability coverage will continue
through the Resignation Date and end thereafter. In addition:
Mr. Richard M. Stern
November 17, 1995
Page 2
(a) Medical, dental, and vision insurance under MBI's policies for
you and currently insured dependents will be extended through COBRA from
January 1, 1996 through December 31, 1996 (or until the Consultant
Agreement is earlier terminated) at MBI's expense. Thereafter, you may
elect to continue COBRA coverage at your expense for an additional six
months. (Maximum COBRA coverage is 18 months.)
(b) You will be provided the information needed to request the option
of converting the group life insurance coverage to an individual policy
through NorthWestern National Life ("NWNL"). You will work directly with
NWNL should you elect this option. You would need to exercise this option
within 31 days of the benefits termination date, December 31, 1995.
(c) You will be provided the information needed to request the option
of converting the LTD insurance coverage to an individual policy through
UNUM. You should work directly with UNUM should you elect this option.
You would need to exercise this option within 31 days of your resignation
date, December 2, 1995.
(d) Depending on the size of your 401(k) plan account, you may either
elect to remain in the plan with no further deposits (balance greater than
$3500), or elect a distribution of your funds (balance less than $3500).
You will notify MBI within 30 days of the Resignation Date as to how and to
whom your funds should be distributed. Representatives of Human Resources
will provide additional details and information regarding tax consequences
of your various options.
(e) If you are a participant in the health care reimbursement plan,
you will have until the end of 1995 to request reimbursement for charges
incurred through the Resignation Date. Any such request should be made
directly to UNUM.
(f) You will be paid for all earned and unused vacation hours. You
will not accrue any additional vacation during the period of your
Consultant Agreement.
Representatives of Human Resources will be available to explain details of
these items.
Mr. Richard M. Stern
November 17, 1995
Page 3
5. STOCK OPTIONS.
(a) CURRENT OPTIONS. You have been granted stock options as
described in the attached schedule. As of December 2, MBI will accelerate
the vesting of all unvested options. MBI will also extend the period of
exercisability of those options to the maximum period available under our
plans. (That is, the lapse dates in the charts, which are already at the
maximum, will not be reduced on account of your ceasing to be an employee.)
(b) NEW OPTIONS. MBI will grant you 10,000 additional options which
will vest in full at an exercise price equal to the closing price of MBI
common stock on December 1, 1995. The options will be exercisable until
December 1, 2005.
Until May 31, 1996 ("Reporting Period"), you will be under the same
constraints imposed by MBI and securities laws on MBI vice presidents
regarding the exercise of options and the purchase and sale of MBI shares.
During the Reporting Period, you shall notify us of your intentions in this
regard (including option exercises) and shall execute such forms, if any, as
MBI and the U.S. securities laws require. If you wish, you may use the
services of Ruth Coolong (or her successor or designee) to assist you in
exercising your options and selling your shares (if that is how you choose to
proceed) during the Reporting Period. You acknowledge that taxes and
commissions will be withheld from any profit you make on the sale of the
stock following exercise and sale during the Reporting Period. During the
Reporting Period, you will be notified monthly, along with other MBI Section
16(b) reporting persons, as to the current trading status of MBI stock (i.e.,
"green light," "yellow light," or "red light"). At no time -- presently, or
at any future time, during or after the Reporting Period -- may you trade on
inside MBI information.
MBI shall also pay you the $16,800 you borrowed to pay taxes upon
exercise of your loan, grossed up for taxes, upon presentation of your loan
documentation.
6. PLACEMENT. MBI will provide you with six months' outplacement
counseling and services through Lee Hecht Harrison.
7. COOPERATION; NO RAIDING; NON-DISPARAGEMENT. You shall cooperate
with MBI in any and all governmental and/or third-party proceedings,
Mr. Richard M. Stern
November 17, 1995
Page 4
including but not limited to lawsuits and other disputes. Following your
resignation such cooperation shall be at MBI's expense (except that MBI
cannot pay for the content of sworn testimony). You shall keep MBI advised
of contacts by governmental agencies and third parties, and shall reasonably
cooperate with MBI in handling any response. At your request, MBI shall
provide counsel to you, if the parties deem counsel necessary or desirable,
in any such proceeding. You shall not voluntarily cooperate with, testify
for, or otherwise assist parties adverse to MBI in a dispute, although you
may respond to compulsory process (i.e., a valid subpoena).
For a period of one year following the Termination Date, you shall not
contact persons employed by MBI at the time to recruit them for your business
or any business by which you are employed or with which you are affiliated,
or otherwise encourage them to leave MBI.
You shall not materially disparage MBI, and MBI shall not materially
disparage you, to any third parties.
8. CONTACTS BY POTENTIAL EMPLOYERS. Potential employers contacting
MBI will be told only that your resignation was voluntary; your title; your
dates of employment; and your final salary. MBI will provide you with a
positive letter of reference. The letter will be agreed upon between you and
me.
9. CONFIDENTIALITY. You will not remove any MBI information,
documents, or other property from its premises, and you will return any MBI
information currently in your possession or control off MBI's premises. In
addition:
(a) You acknowledge that in the course of your employment with MBI
you have had and will have access to and familiarity with information of
substantial value to MBI which is not old or generally known to the public
and which gives MBI an advantage over its competitors who do not know or
use it, including but not limited to strategies, business plans, research,
formulas and formulations, techniques, designs, drawings, processes,
inventions, developments, equipment, prototypes, sales and customer
information, and financial information, relating to the business, products,
and practices of MBI (hereinafter referred to as "Confidential
Information"). You agree at all times following your resignation to regard
and preserve as confidential such Confidential Information, and to refrain
from publishing or disclosing any part of such Confidential Infor-
Mr. Richard M. Stern
November 17, 1995
Page 5
mation and from using it except on behalf of MBI. You further agree at all
times to refrain from any other acts or omissions that would reduce the
value of such Confidential Information to MBI and to take all reasonably
necessary and desirable precautions to prevent such Confidential
Information from being disseminated to any third parties.
(b) You acknowledge that a breach of the terms of this paragraph
would threaten MBI with immediate and irreparable harm not readily
compensable in money damages, and that MBI would be entitled to injunctive
and declaratory relief to stop or prevent any such breach.
Nothing in this paragraph shall be construed to prevent you from using or
disclosing your general knowledge of the imaging industry (as opposed to
MBI-specific information) acquired at any time prior to or during the course
of your employment.
10. EMPLOYMENT BY COMPETITORS. This Letter Agreement does not limit
your ability to work for competitors of MBI, PROVIDED THAT for a period of
one year from the Resignation Date, reasonably in advance of accepting any
employment with any company, individual, or other entity engaged or planning
to engage in the development, manufacture, or marketing of ultrasound
contrast agents ("Competitor"), you shall notify the President or Chief
Executive Officer of MBI. Prior to accepting any such employment, or
promptly following your engagement in any consulting relationship with a
Competitor, you shall give MBI the opportunity to discuss your plans with you
in order to explore any possible problems or conflicts. While MBI shall not
disparage you or attempt to dissuade any Competitor from employing or
engaging you, you acknowledge that MBI may contact such Competitor informing
it truthfully of your confidentiality obligations to MBI. MBI shall have no
liability to you in the event of a decision by a Competitor not to employ or
engage you following such contact by MBI. Failure to provide this notice to
MBI during this period shall be deemed a material breach of this Agreement.
You remain bound by your confidentiality obligations even if you work
for a Competitor.
11. LOAN. You executed a Note in favor of MBI dated December 31, 1993,
in the principal amount of $218,766.03. As amended by an Amendment dated
December 31, 1994, it is due and payable on January 31, 1996. The loan is
secured by 15,000 shares of MBI stock (certificate number MB 1698; "the
Mr. Richard M. Stern
November 17, 1995
Page 6
Subject Shares") purchased with the loan proceeds as a result of the exercise
of a stock option. With interest, the indebtedness evidenced by the Note has
risen to approximately $243,000. The indebtedness evidenced by the Note, as
amended, shall be retired as follows: MBI shall purchase the Subject Shares
from you effective December 2, 1995, at the higher of (1) the closing price
of MBI common stock on the New York Stock Exchange as of December 1, 1995, or
(2) the average closing price of MBI common stock on the New York Stock
Exchange on the twenty trading days prior to December 1, 1995. The purchase
proceeds shall be used to reduce the Note. (Cash will not change hands; this
will be handled by bookkeeping entries.) MBI shall forgive the remaining
indebtedness and the Note shall be canceled.
EXAMPLE (if 11-8-95 were the effective date):
Indebtedness: $243,000
Purchase price: $7.70 per share
Times 15,000 shares ($115,500)
Remaining debt $127,500
MBI will forgive the remaining indebtedness of $127,500.
MBI believes, BUT DOES NOT WARRANT, REPRESENT, OR PROMISE, (1) that the
debt forgiveness will not result in current taxable income to you, but will
instead serve to reduce your basis in the shares for purposes of your tax
accounting, and (2) under the circumstances of your option exercise and the
forgiveness, this transaction will leave you with a tax loss which you may
use to offset certain other income in the future. MBI will not include the
forgiveness on your W-2. MBI STRONGLY RECOMMENDS THAT YOU SECURE COMPETENT
TAX ADVICE WITH RESPECT TO THE ACCOUNTING AND TAX TREATMENT OF THE DESCRIBED
TRANSACTION PRIOR TO EXECUTING THIS LETTER AGREEMENT. Additional information
with respect to your loan:
Option price: $12.50
Market price on exercise date $17.375
Taxes advanced and added to loan $20,627 (approx.)
Accrued interest to 11-8-95 $34,697 (approx.)
Mr. Richard M. Stern
November 17, 1995
Page 7
Average per share price from $7.70 (purposes of example
10-10-95 to 11-7-95 only; actual value may
be lower or higher,
depending on prices
on and prior to
December 1, 1995.
Jerry Wills will explain the basis for MBI's belief to you and/or your
professional advisors, if you wish.
12. RELEASE. In consideration for the payments, options, loan
forgiveness, and other consideration described in this Letter Agreement and
the Consultant Agreement, you hereby unconditionally, irrevocably, and
absolutely release and discharge MBI, its employees, officers, directors,
agents, stockholders, independent contractors, attorneys, consultants,
predecessors, successors and assigns from any and all claims related in any
way to any acts, transactions, or occurrences between you and MBI to date,
including but not limited to all losses, liabilities, claims, charges,
demands and causes of action, known or unknown, suspected or unsuspected,
arising directly or indirectly out of, or in any way connected with, your
employment with or resignation from MBI. This includes, but is not limited
to, any claim of employment discrimination arising under federal, state or
local law, including the Age Discrimination in Employment Act of 1967, as
amended, the Americans with Disabilities Act, the California Fair Employment
and Housing Act, any other statutory cause of action, and any tort or
contract claims.
WAIVER OF ADDITIONAL CLAIMS. Section 1542 of the Civil Code of the
State of California provides as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his settlement
with the debtor.
You waive and relinquish any right or benefit which you may have under this
section or any other provision of the statutory or nonstatutory law or any
other jurisdiction to the full extent that you may lawfully waive all such
rights and benefits. In connection with such waiver and relinquishment, you
acknowledge that you are aware that you, your attorneys or agents may
hereafter discover
Mr. Richard M. Stern
November 17, 1995
Page 8
claims or facts in addition to or different from those which they now know or
believe to exist, but that it is your intention thereby fully, finally, and
forever to release all claims, disputes, and differences, known or unknown,
suspected or unsuspected, which now exist, may exist, or have existed between
the parties, their employees, agents, assigns, and other privies. Unless
this provision shall have been procured by fraud, the releases given herein
shall be effective regardless of the discovery or existence of any such claim
or fact.
13. CONSEQUENCES OF BREACH. If you breach this Letter Agreement, MBI
may terminate it, cease providing payments and benefits hereunder, cancel
your stock options, and recover all payments and benefits already paid, in
addition to any other remedies it may have.
14. OTHER MATTERS. You will also receive materials prepared by Human
Resources describing various rights and duties, including optional benefits,
which will come into effect following your resignation. You will also
receive instruments as are customarily submitted to resigning employees. You
will cooperate fully in these separation meetings and execute or complete
such instruments at the time of your resignation.
15. ACKNOWLEDGEMENTS.
(a) NO PRE-EXISTING OBLIGATION. You acknowledge that but for the
entry by you and MBI into this Letter Agreement and the Consultant
Agreement, you are not entitled to the payments, stock options, loan
forgiveness, and other consideration provided for in these agreements
(with the exception of federal rights such as COBRA).
(b) Time for Review; Effective Date. You acknowledge that you have
been given 21 days to consider the terms of this Letter Agreement and the
Consultant Agreement. In addition, both parties acknowledge that you may
revoke your acceptance of this Letter Agreement within seven days following
your signature (which may occur during the 21-day period).
(c) Advice of Counsel and Other Professional Advisors. You
acknowledge that you have been advised in writing to consult with an
attorney and an accountant or tax advisor before entering into these
agreements. You acknowledge either that you have done so and received
counseling to your satisfaction, or that you have declined to do
Mr. Richard M. Stern
November 17, 1995
Page 9
so and voluntarily executed this Letter Agreement and the Consultant
Agreement without fraud or undue influence.
16. PROHIBITION AGAINST ASSIGNMENT. You shall not assign this Letter
Agreement or any of the rights, interests and benefits hereunder. However,
you may provide for the assignment, gift, bequest, or transfer of such
benefits under this Letter Agreement to your survivor(s), or to a trust for
their benefit, on your death, or in the event that you suffer a major
disability.
17. ENTIRE AGREEMENT. This Letter Agreement, along with the Consultant
Agreement between the parties dated December 2, 1995, constitutes the entire
Agreement between the parties hereto and contains all of the agreements
between the parties with respect to its subject matter. This Letter
Agreement and the Consultant Agreement supersede any and all other
agreements, either oral or in writing, between the parties hereto with
respect to their subject matter, PROVIDED THAT Paragraphs 3 (Confidentiality)
and 4-9 (relating to inventions made within a year of termination) of your
Employment Agreement dated April 25, 1988, shall remain in effect.
18. BINDING EFFECT. This Letter Agreement shall be binding upon and
inure to the benefit of both parties and their respective heirs, legal
representatives, executors, administrators, and successors.
19. GOVERNING LAW. This Letter Agreement shall be subject to and
governed by the laws of the State of California irrespective of the fact that
you may become a resident of a different state.
20. AMENDMENT OF LETTER AGREEMENT. No change or modification of this
Letter Agreement shall be valid unless the same be in writing and signed by
both parties. No waiver of any provision of this Letter Agreement shall be
valid unless in writing and signed by the person or party to be charged.
21. SEVERABILITY. If any portion or portions of this Letter Agreement
shall be, for any reason, deemed to be invalid or unenforceable, the
remaining portion or portions shall nevertheless be valid, enforceable and
carried into effect, unless to do so would clearly violate the present legal
and valid intention of the parties hereto.
22. HEADINGS. The headings of this Letter Agreement are inserted for
convenience only and are not to be considered in construction of the
provisions
Mr. Richard M. Stern
November 17, 1995
Page 10
hereof.
23. WAIVER OF BREACH. The waiver by either of the parties hereto of
any breach of any provision hereof shall not be construed to be a waiver of
any succeeding breach of that provision or a waiver of any other provision of
this Letter Agreement.
24. INDEMNIFICATION. With respect to any claim against you arising out
of your work for MBI as an officer or employee, or as a consultant under your
Consultant Agreement, you shall have rights of indemnification against MBI
under MBI's certificate of incorporation and bylaws equivalent to those of an
MBI officer.
* * * *
If you are in agreement with these items, please execute the duplicate
originals of this Letter Agreement and Consultant Agreement and return them
to Pam Alexandra, Jerry Wills, or Steve Lawson.
Let me take this opportunity to thank you for your services to MBI over
the past several years. We all wish you every success in your future
endeavors.
Sincerely,
/s/ B. Venkatadri
Bobba Venkatadri
President and Chief Operating Officer
AGREED TO BY:
/s/ Richard M. Stern
- -------------------------------------------
Richard M. Stern
Date: Dec 6, 1995
--------------------------------------
December 2, 1995
Mr. Bobba Venkatadri
President and Chief Operating Officer
Molecular Biosystems, Inc.
10030 Barnes Canyon Road
San Diego, California 92121
Re: Resignation
Dear Bobba:
I resign as an employee and as Vice President, Marketing, of Molecular
Biosystems, Inc., effective immediately.
Sincerely,
/s/ Richard M. Stern
Richard M. Stern
Vice President, Marketing