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SEVERANCE AGREEMENT
This Agreement ("Agreement") date June 27, 1996 by and between U.S. Alcohol
Testing of America, Inc., a Delaware Corporation (the "Company") and Linda H.
Masterson (the "Executive").
WITNESSETH
WHEREAS, since May 13, 1996, the Executive has been employed on an at-will
basis by the Company and effective as of the date hereof is employed by the
Company on an at-will basis as its President and Chief Operating Officer.
WHEREAS, a condition subsequent to the Executive accepting the Company's offer
of employment was that the Company and the executive enter into this Severance
Agreement which provides for the Executive's right to severance pay upon her
termination as an employee of the Company without cause, and
WHEREAS, the compensation to be paid to the Executive by the Company for the
services to be performed is as follows:
(i) a base salary of One Hundred Seventy Five Thousand
($175,000) Dollars per annum (the "Base Salary");
(ii) grant to her (a) a stock option to purchase 600,000
shares of the Corporation's Common Stock, $.01 par value (the "Common Stock"),
at $3.125 per share pursuant to an employee stock option plan (the "Option
Plan") to be adopted by the Board of Directors of the Corporation or (b) a
Common Stock purchase warrant to purchase 600,000 share of the Common Stock
also at $3.125 per share if the Option Plan is not adopted, provided that (I)
the option or warrant shall become exercisable as follows: (A) as to 50,000
shares upon the commencement of her employment, (B) as to 100,000 shares on the
first anniversary of such commencement of employment, (C) as to 150,000 shares
on the second anniversary of such commencement of employment, (D) as to 150,000
shares on the third anniversary of such commencement of employment, and (E) as
to 150,000 shares on the fourth anniversary of such commencement of employment,
(ii) the option, if granted, shall expire in accordance with the terms of the
Option Plan and (iii) the warrant, if granted, shall expire as to a specified
number of shares of the Common Stock four years from the respective date on
which the warrant becomes exercisable as to such shares. In the advent of the
acquisition, sale or relocation of the Company, or the elimination of the
position of President/COO, in Rancho Cucamonga, all stock option shares or
warrants will immediately be 100% vested and Registered within 60 days.
(iii) grant to her a bonus for the fiscal year ending March
31, 1997
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("fiscal 1997") in the form of a stock option pursuant to the Option Plan, or
a warrant if no Option Plan is adopted, to purchase (a) 33,000 shares of the
Common Stock if the Corporation and its subsidiaries operate without a net loss
for fiscal 1997 and (b) an additional 50,000 shares of the Common Stock if the
Corporation and its subsidiaries have net income of at least $.06 per share of
the Common Stock for fiscal 1997, the exercise price of the option or warrant
to be the closing sales price in the date of grant which shall be the date on
which the results of the operations for fiscal 1997 are reported and the
expiration date of which option or warrant shall be as set forth in the Option
Plan if an option and four years from the date of grant if a warrant.
(iv) bonuses in respect to subsequent fiscal years shall
be determined by the Company's Board of Directors or Compensation Committee.
NOW, THEREFORE, in consideration of the promises of the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S AND EXECUTIVE'S RIGHT TO TERMINATE. The Company may
terminate the Executive's employment at any time, subject to providing the
benefits hereinafter specified in the accordance with the terms hereof. The
Executive may terminate her employment at any time.
2. TERMINATION OF EMPLOYMENT. The termination of the Executive
as an employee of the Company for Disability or Cause shall be on the
following terms and conditions:
(i) Disability. Termination by the Company of the
Executive's employment based on "Disability" shall mean termination (a) because
of the Executive's inability to perform her duties with the Company on a full
time basis for four consecutive months or 180 days out of any twelve-month
period, as a result of the Executive's incapacity due to physical or mental
illness; or (b) as a result of the Executive being certified incompetent by a
court of competent jurisdiction and which appeals from such certification have
expired.
(ii) Cause. Termination by the Company of the Executive's
employment for "Cause" shall mean termination because of: (a) the Executive's
conviction of a felony; (b) any action by the Executive involving dishonesty,
fraud or gross or willful misconduct in connection with her employment with the
Company; (c) the Executive's gross negligence in the performance or her duties
and obligations hereunder or habitual neglect of her duties; (d) the
Executive's substance abuse, including, without limitation, chronic alcoholism
or drug addiction; (e) the Executive's intentional refusal or failure to
perform her duties as an employee of the Company, including, without
limitation, the intentional disregard of a lawful directive by the Board of
Directors of the Company or any committee thereof; (f) intentional conduct on
the part of the Executive which is knowingly detrimental to the best
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interests of the Company; or (g) the Executive's failure to perform her duties
in a competent manner.
(iii) Notice of Termination. Any purported termination by
the Company pursuant to Section (i) or (ii) above or for any other reason
shall be communicated by written Notice of Termination to the Executive from
the Chief Executive Officer at the direction of the Board of Directors of the
Company. For the purposes of this Agreement, a "Notice of Termination" shall
mean a notice such shall indicate that it is without cause or the specific
termination provision in the Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(iv) Date of Termination. "Date of Termination" shall
mean (a) if the Executive's employment is terminated for Disability, the date
specified in the Notice of Termination, (b) if the Executive's employment is
terminated for Cause, the date specified in the Notice of Termination, (c) if
the Executive's employment is terminated for death, the date of death, (d) if
the Executive's employment is terminated, without cause, the date on which a
Notice of Termination is given and (e) if the Executive's voluntary resigns
his employment, the effective date if such resignation.
3. CERTAIN BENEFITS UPON TERMINATION.
(i) If the Executive's employment is terminated by the
Company other than for Cause, Disability or death, then the Executive shall be
entitled to the benefits provided below:
(a) the Company shall pay the Executive her full
Base Salary through the Date of Termination at the rate in effect at the time
the Notice of Termination is given plus credit for any vacation earned but
not taken and the amount, if any, of any bonuses for a past fiscal year which
has not yet been awarded or paid to the executive.
(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount to equal one years
Base Salary that would have been paid to the Executive had she not been
terminated during the period commencing on the Date of Termination and ending
on May 13, 1999;
(c) the Company shall maintain in full force and
effect, for the earlier of A) one calendar year or B) the Executive's
commencement of full time employment with a new employer, her automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of
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Termination, provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs. In the
event that the Executive's participation in any such plan or program is barred,
the Company shall arrange to provide the Executive with benefits substantially
similar to those which the Executive was entitled to receive under such plans
and programs;
(ii) If the Executive's employment is terminated for
Disability under Section 2(i)(b) the Executive shall be entitled to the
benefits provided below:
(a) the Company shall pay the Executive his full
Base Salary through the Date of Termination at the rate in effect at that time
the Notice of Termination is given plus credit for any vacation earned but not
taken and the amount, if any, of any bonus for a past fiscal year which has not
yet been awarded or paid to the Executive.
(b) in lieu of any further salary, bonuses or
benefits payments to the Executive for periods subsequent to the Date of
Termination, the Company shall pay as severance pay to the Executive on the
30th day following the Date of Termination a lump sum amount equal to the
annual Base Salary that would have been paid tot he Executive had he not been
terminated during the period commencing on the Date of Termination and ending
on the earlier of four months after the Date of Termination or May 13, 1999;
(c) the Company shall maintain in full force and
effect, the Executive's continued benefit for one year. Her automobile
allowance and all life insurance, medical, health and accident, and disability
plans, programs or arrangements in which the Executive was entitled to
participate immediately prior to the Date of Termination, provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall arrange
to provide the Executive with benefits substantially similar to those which the
Executive was entitled to receive under such plans and programs;
(iii) If the Executive's employment is terminated for
Cause, Disability under Section 2(i)(a) or death, the Executive shall be paid
her full Base Salary through the Date of Termination at the rate in effect at
the time the Notice of Termination is given plus credit for any vacation earned
but not taken and the amount, if any, of any bonus for a past fiscal year which
has not yet been awarded or paid to the Executive.
4. TERM OF AGREEMENT. This Agreement shall terminate May 13, 1999.
5. SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding
upon and shall inquire to the benefit of the respective successors, assigns,
legal representatives and heirs of the parties hereto.
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6. NOTICE. Any and all notices or other communications or delivered
required or permitted to be given or made shall be in writing and delivered
personally, or sent by certified or registered mail, return receipt requested
and postage prepaid, or sent by overnight courier service as follows:
If to the Company, at:
U.S. Alcohol Testing of America, Inc.
10410 Trademark Street
Rancho Cucamonga, California 91730
Attention: President
With a copy to:
Gold & Wachtel, LLP
110 East 59th Street
New York, NY 10022
Attention: Robert Berend, Esq.
If to the Executive, at:
Linda H. Masterson
4321 N. Studebaker Road
Placerville, CA 95664
or at such other address as any party may specify by notice given to such other
party in accordance with this Section 6. The date of giving of any such notice
shall be the date of hand delivery, two days after the date of the posting of
the mail or the date when deposited with the overnight courier.
7. WAIVER. No provisions of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the sale or at any prior or subsequent time.
8. ENTIRE AGREEMENT. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the Validity or enforceability of any other
provisions of
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this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in or one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. GOVERNING LAW. This Agreement shall be construed (both as to
validity and performance) and enforced in accordance with, and governed by, the
laws of the State of California applicable to contracts to be performed
entirely within that State, without giving effect to the principles of
conflicts of law. Any suit or proceeding arising out of this Agreement shall
be brought only in a federal or state court located in the County of San
Bernardino, State of California; provided, however, that neither party waives
its right to request removal of such action or proceeding from the state court
to a federal court in such jurisdiction. The parties hereto each waive any
claim that such jurisdiction is not a convenient forum for any such suit or
proceeding and the defense of lack of personal jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed on June 27, 1996.
U.S. ALCOHOL TESTING OF AMERICA, INC.
By:
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Robert M. Stutman
Chairman, and Chief Executive Officer
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Linda H. Masterson