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EXHIBIT 10(j)
SEVERANCE AGREEMENT
Severance Agreement dated as of October 27, 1997 (the "Agreement") by
and between U.S. Drug Testing, Inc., a Delaware corporation (the "Company"), and
Linda H. Masterson (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed by the Company on an at-will
basis as the Chief Executive Officer, President and a Director of the Company;
WHEREAS, effective as of the date hereof, the compensation to be paid
to the Executive by the Company for the services to be performed as follows:
(1) a base salary (the "Base Salary") of $165,000 per annum; provided,
however, that such amount shall be $120,000, effective October 27, 1997 and
remain in effect until long term financing of $5 million (not including short
term funding) shall be secured, which difference shall be paid upon the receipt
of long term funds, or the Executive's termination, whichever shall occur first;
(2) a payment of $10,000 to repay the Executive's secured loan for the
Company's operating expenses to be paid at the completion of short term funding;
a payment of $50,000 to repay the Executive's unsecured loan for the Company's
payroll in July 1997 to be paid at the completion of long term funding, but not
later than March 31, 1997, in addition to payment of all deferred salary, unpaid
expenses, and unpaid salary due to the Executive through October 27, 1997, to be
paid on October 27, 1997;
(3) the grant to the Executive of a stock option to purchase 150,000
shares of the Common Stock pursuant to the Company's employee stock option plan
at $0.50 per share, to be approved by the Board of Directors, the option to
become exercisable provided that the Executive is still employed by the Company
except that, anything in the foregoing notwithstanding, the option shall become
immediately exercisable as to all shares subject thereto in the event that the
Executive is terminated without cause, or the Company is acquired or sold
without Board of Directors approval, or the Corporate headquarters are relocated
outside the State of California, or the positions of Chief Executive Officer or
President are eliminated in the Company, or the duties substantially changed in
the Company;
(4) the grant to the Executive of a stock option to purchase 150,000
shares of the Common Stock of the Company at $0.50 per share, to be approved by
the Board of Directors; 75,000 to be granted at the completion of the working
pilot plant, and 75,000 to be granted upon product release into the first
targeted market;
(5) the grant to the Executive of a 5-year stock warrant to purchase
400,000 shares of the Common Stock of the Company at $0.50 per share, subject to
approval by the Board of Directors and registered with the first registration
filing made by the Company; 200,000 to be granted at the completion of the
purchase of the SAT owned majority shares by Michael Rosenblum/Meadow Lane
Partners, and 200,000 to be granted at the completion of the long term funding
of at least $5 million (not including short term funding) effort to achieve
product release; and
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WHEREAS, the employee benefits, vacation, life insurance and other
perquisites to be received by the Executive during the term of this Agreement
are as follows:
(i) participation in all employee pension and welfare benefit plans and
programs made available to the Company's senior level executives or to its
employees generally, as such plans or programs may be in effect from time to
time, including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, medical, dental, hospitalization, short-term and
long-term disability and life insurance plans, accidental death and
dismemberment protection, travel accident insurance, and any other pension or
retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded, but not less than the benefits currently furnished by USD;
(ii) five weeks vacation per year which, if not taken, will accrue; and
(iii) standard company paid travel and customary business related
expenses in accordance with the Company's policies, provided that the Executive
furnishes appropriate documentation therefor in accordance with the regulations
of the Internal Revenue Service;
(iv) coverage under the Company's Directors and Officers Insurance.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and the Executive hereby agree as
follows:
1. COMPANY'S RIGHT TO TERMINATE. The Company may terminate the
Executive's employment at any time, subject to providing the benefits
hereinafter specified in 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:
(a) Disability
Termination by the Company of the Executive's employment based
on "Disability" shall mean termination (i) because of the Executive's inability
to perform her essential duties with or without reasonable accommodation; or
(ii) as a result of the Executive being certified incompetent by a court of
competent jurisdiction and all appeals from such certification having expired.
(b) Cause
Termination by the Company of the Executive's employment for
"Cause" shall mean termination because of: (i) the Executive's conviction of a
felony; (ii) any action by the Executive involving dishonesty, fraud or gross or
willful misconduct in connection with her employment with the Company; (iii) the
Executive's negligence in the performance of her duties and obligations
hereunder or habitual neglect of her duties, as determined by the Company; (iv)
the Executive's substance abuse which may interfere with her performance; (v)
the Executive's intentional refusal or failure to perform her duties as the
Chief Executive Officer and President 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, as determined by the Company;
(vi) intentional conduct on the part of the Executive which is knowingly
detrimental to the best interests of the Company, as determined by the Company;
or (vii) the
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Executive's failure to perform in a competent manner her duties as Chief
Executive Officer and President of the Company, resulting in damage or detriment
to the Company, as determined by the Company.
(c) Notice of Termination
Any purported termination by the Company pursuant to
subsections (a) or (b) of this Section 2 or for any other reason shall be
communicated by written Notice of Termination to the Executive from the Chairman
of the Board of the Company at the direction of the Board of Directors of the
Company. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate that it is without Cause or shall indicate 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.
(d) Date of Termination
"Date of Termination" shall mean the date specified in the
Notice of Termination or the date of Executive's resignation.
3. CERTAIN BENEFITS UPON TERMINATION.
(a) If the Executive's employment is terminated by the Company
without cause, or the Company is acquired or sold without Board of Directors'
approval, or the Corporate headquarters are relocated outside of 100 miles of
its current location, or the positions of Chief Executive Officer or President
are eliminated in the Company, or the duties substantially changed in the
Company, then the Executive shall be entitled to the benefits provided below:
(i) 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 bonus for a past fiscal year which has not yet
been awarded or paid to the Executive;
(ii) 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 to the Executive on the 30th day
following the Date of Termination a lump sum amount equal to one year's Base
Salary that would have been paid to the Executive had he not been terminated
during the period commencing on the Date of Termination and ending on October
27, 2001; and
(iii) the Company shall maintain in full force and
effect, for the Executive's continued benefit until the earlier of (A) one
calendar year or (B) the Executive's commencement of full time employment with a
new employer, 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.
(b) If the Executive's employment is terminated for Disability
under Section 2(a)(ii), then the Executive shall be entitled to the benefits
provided below:
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(i) 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 bonus for a past fiscal year which has not yet
been awarded or paid to the Executive;
(ii) 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 Base Salary
that would have been paid to the 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 October 27, 2001; and
(iii) the Company shall maintain in full force and
effect for the Executive's continued benefit, for one full year, 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 provision 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.
(c) If the Executive's employment is terminated for Cause,
Disability under Section 2(a)(i), death or voluntary termination or resignation
of employment by the Executive, 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.
(d) Anything in subsections (a), (b) and (c) of this Section 6
to the contrary notwithstanding, the Company's obligations hereunder to make
severance payments to the Executive and to make available other benefits upon
termination of her employment shall be reduced to the extent he receives
payments or benefits from SAT pursuant to the SAT Severance Agreement for such
termination of employment.
4. TERM OF AGREEMENT. This Agreement shall terminate October 27, 2001.
5. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the respective successors, assigns, legal representatives and heirs
of the parties hereto.
(b) If the operations of the Company are transferred to a
wholly-owned subsidiary (the "Subsidiary") in order to permit an investment or
loan by a third part in the Subsidiary, then the Company agrees to have the
Subsidiary assume the obligations of the Company hereunder, particularly the
Executive's right to acquire shares of the Common Stock in the Company.
6. NOTICE. Any and all notices or other communications or deliveries
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:
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If to the Company, at:
U.S. Drug Testing, Inc.
10410 Trademark Street
Rancho Cucamonga, CA 91730
Attention: Chairman of the Board
If to the Executive, at:
Linda H. Masterson
6241 Chablis Drive
Shingle Springs, Ca 95682
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. EMPLOYEE, PROPRIETARY INFORMATION, AND INVENTIONS AGREEMENT. The
Employee, Proprietary Information and Inventions Agreement, shall be signed by
the Executive in conjunction with this agreement.
8. 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 same or at any prior or subsequent time.
9. 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,
and this Agreement replaces all previous agreements made with the Company and/or
SAT.
10. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. COUNTERPARTS. This Agreement may be executed in 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.
12. 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 Sate of California applicable to contracts to be performed entirely
within that State, without giving effect tot he 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 or such other county and/or state in which the principal office of
the Company shall be located; provided, however, that neither party waives its
right to request the 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.
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13. DISCLOSURE STATEMENT. The Executive hereby represents and warrants
that he is not aware of any competing offers for the shares of common stock of
the Company currently owned by SAT and will not solicit same.
IN WITNESS WHEREOF, this Agreement has been executed on October 27,
1997.
U.S. DRUG TESTING, INC.
By:
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Jonathan J. Pallin, Chairman of the Board
By:
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Linda H. Masterson
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