<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------- -----------------
Commission File Number: 0-11647
HYCOR BIOMEDICAL INC.
---------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1437178
- ------------------------------- ------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
18800 Von Karman Avenue, Irvine, California 92612-1517
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 440-2000
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1997
- ---------------------------- --------------------------------
Common Stock, $.01 Par Value 7,131,467
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
------------- ------------
CURRENT ASSETS: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 662,565 $ 631,404
Investments 2,009,066 4,732,585
Accounts receivable, net of allowance for
doubtful accounts of $76,934 and $101,191 3,057,000 3,028,689
Income tax receivable 527,989 409,242
Inventories (Note 2) 4,306,588 3,922,543
Prepaid expenses and other current assets 535,768 602,533
Deferred income tax benefit 881,570 491,000
------------ ------------
Total current assets 11,980,546 13,817,996
------------ ------------
PROPERTY AND EQUIPMENT, at cost 12,543,636 11,437,612
Less accumulated depreciation (7,397,883) (6,529,718)
------------ ------------
5,145,753 4,907,894
------------ ------------
GOODWILL AND OTHER INTANGIBLES, net of
amortization of $1,035,509 and $870,110 (Note 3) 4,377,614 4,368,658
DEFERRED INCOME TAX BENEFIT 854,162 854,000
OTHER ASSETS 180,061 329,373
------------ ------------
Total assets $ 22,538,136 $ 24,277,921
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 990,634 $ 1,053,400
Accrued liabilities 691,549 726,474
Accrued payroll expenses 674,484 580,089
Current portion - long-term debt (Notes 3 & 4) 753,164 --
------------ ------------
Total current liabilites 3,109,831 2,359,963
------------ ------------
Long-Term Debt (Notes 3 & 4) 2,158,427 --
------------ ------------
Total Liabilities 5,268,258 2,359,963
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 71,219 72,181
Paid-in capital 12,212,177 12,605,636
Retained earnings 5,423,867 9,232,541
Accumulated foreign currency translation adjustments (439,747) 31,275
Unrealized losses on investments, net of tax benefit 2,362 (23,675)
------------ ------------
Total stockholders' equity 17,269,878 21,917,958
------------ ------------
Total liabilities and stockholders' equity $ 22,538,136 $ 24,277,921
============ ============
</TABLE>
Page 2
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1997 1996 1997 1996
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 4,679,354 $ 4,736,927 $ 14,126,566 $ 15,215,194
COST OF SALES 2,207,826 2,254,307 6,484,235 6,866,042
----------- ------------ ------------ ------------
Gross profit 2,471,528 2,482,620 7,642,331 8,349,152
----------- ------------ ------------ ------------
OPERATING EXPENSES
Selling, general and administrative 2,263,600 2,096,017 6,538,894 6,602,541
Research and development 775,042 734,118 2,112,540 2,080,032
Acquired in-process research and development (Note 3) 3,300,000 -- 3,300,000 --
----------- ------------ ------------ ------------
6,338,642 2,830,135 11,951,434 8,682,573
----------- ------------ ------------ ------------
OPERATING INCOME (LOSS) (3,867,114) (347,515) (4,309,103) (333,421)
INTEREST EXPENSE (Note 4) 38,311 -- 38,472 --
INTEREST INCOME 51,103 93,141 195,406 310,476
FOREIGN EXCHANGE G/(L) (4,326) 12,622 (6,324) 24,296
----------- ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES (3,858,648) (241,752) (4,158,493) 1,351
PROVISION (BENEFIT) FOR INCOME TAXES (247,342) (110,696) (349,818) (14,020)
----------- ------------ ------------ ------------
NET INCOME (LOSS) $(3,611,306) $ (131,056) $ (3,808,675) $ 15,371
=========== ============ ============ ============
NET INCOME (LOSS) PER SHARE $ (0.50) $ (0.02) $ (0.53) $ 0.0
=========== ============ ============ ============
AVE. COMMON SHARES OUTSTANDING 7,148,077 7,698,527 7,169,388 7,817,794
</TABLE>
Page 3
<PAGE> 4
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ -----------
<S> <C> <C>
Net income (loss) $(3,808,675) $ 15,371
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,209,702 1,417,804
Deferred income tax provision (273,829) (205,654)
(Gain) Loss on foreign currency transactions 6,324 (24,296)
(Gain) Loss on sale of assets 68,950 (1,024)
Acquired In-Process R&D 3,300,000 --
Change in assets and liabilities, net of effects of
foreign currency adjustments
Accounts receivable 434,521 596,040
Income tax receivable (120,199) 101,591
Inventories (255,882) (242,571)
Prepaid expenses and other current assets 416,031 255,441
Accounts payable (759,411) (133,525)
Accrued liabilities (631,181) (651,751)
Accrued payroll expenses 88,787 (415,319)
----------- -----------
Total adjustments 3,483,813 696,736
----------- -----------
Net cash provided by (used in) operating activities (324,862) 712,107
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments 2,689,537 1,044,298
Purchases of intangible assets (187,656) (8,799)
Purchases of property, plant and equipment (1,311,709) (1,134,651)
Business acquisitions, net of cash acquired (3,386,169) --
Direct costs of acquisition (224,646) --
Proceeds from sale of property and equipment 60,453 --
Proceeds from collection of notes receivable 179,667 20,133
----------- -----------
Net cash provided by (used in) investing activities (2,180,523) (79,019)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 2,813,821 --
Principal payments on long-term debt (7,648) --
Proceeds from issuance of common stock 73,159 130,204
Purchases of Hycor common stock (467,580) (1,666,273)
----------- -----------
Net cash provided by (used in) financing activities 2,411,752 (1,536,069)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 124,794 7,755
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,161 (895,226)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 631,404 1,033,459
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 662,565 $ 138,233
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - interest 17,927 --
- income taxes $ 58,553 $ 239,103
</TABLE>
Page 4
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited financial
statements include all adjustments necessary to present fairly the
financial position as of September 30, 1997 and December 31, 1996, the
results of operations and the cash flows for the three and nine-month
periods ended September 30, 1997 and 1996.
These statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and do not include
all the information and note disclosures required by generally accepted
accounting principles for complete financial statements and may be subject
to year-end adjustments.
The consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's 1996 annual report on Form 10-K as filed with the Securities
and Exchange Commission. Certain items in the 1996 consolidated financial
statements have been reclassified to conform with the 1997 presentation.
The results of operations for any interim period are not necessarily
indicative of results to be expected for the full year.
Net income per share is based upon the weighted average number of
shares outstanding during the periods plus common stock equivalents
relating to warrants and options. The number of common stock equivalents
relating to options and warrants is determined using the treasury stock
method. Common stock equivalents are not included when their effect is
antidilutive. Fully diluted net income per share approximates primary net
income per share in each period.
In December 1997, the Company will be required to adopt Statement of
Financial Accounting Standard No. 128, "Earnings per share." The
provisions of this statement will require a change in the method of
calculating earnings per share which will result in an insignificant
difference from currently reported earnings per share.
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<PAGE> 6
2. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Cost includes material, direct labor and manufacturing
overhead. Inventories at September 30, 1997 and December 31, 1996 consist
of:
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
<S> <C> <C>
Raw materials $1,038,928 $ 870,887
Work in process 1,533,692 1,216,066
Finished goods 1,733,968 1,835,590
---------- ----------
$4,306,588 $3,922,543
========== ==========
</TABLE>
3. ACQUISITION
On July 21, 1997, the Company acquired from unrelated third parties
all of the outstanding stock of Cogent Diagnostics Limited ("Cogent") for
approximately $1,453,000 in cash and $1,574,000 in three year notes to the
seller group which are secured by individual Shares Pledge agreements
wherein an aggregate of 85,499 shares of Cogent stock are pledged as
security for the debt. The shares pledged as security against the three
year notes represent approximately 95% of the total outstanding shares of
Cogent. The cash portion of the Cogent acquisition was partially financed
through bank borrowings of $1,000,000. The Company also incurred direct
costs of approximately $220,000 related to the acquisition.
The Company obtained an independent valuation of the net assets
acquired in the purchase transaction which resulted in the allocation of
the purchase price to $254,000 of identified assets, $3,300,000 of
acquired in-process research and development, and $148,000 of goodwill.
The purchase price allocated to in-process research and development was
charged to the Company's current operations. The portion of the purchase
price allocated to goodwill is being amortized over 20 years on a straight
line basis.
The acquisition was accounted for using the purchase method of
accounting, and Cogent's operating results have been included in the
accompanying consolidated statements of operations from the date of
acquisition. Cogent is based in Edinburgh, Scotland and develops,
manufactures and markets a broad line of test kits for diagnosis of
autoimmune disease.
4. LONG TERM DEBT
In July 1997,the Company entered into a business loan agreement
("Agreement") with Tokai Bank establishing a two year secured line of
credit of $2,000,000. The Agreement provides that the Company can borrow
at a predetermined spread over the London Inter-Bank Offered Rate (LIBOR).
The primary purpose of the Agreement was to provide financing for the
Cogent acquisition and related costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information contained herein, the matters discussed
in this report are forward-looking statements which involve risk and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, products,
services and prices and other factors discussed in the Company's filings with
the Securities and Exchange Commission.
On September 30, 1996, the Company formed Hycor Biomedical SAS ("Hycor
SAS") as a wholly owned subsidiary. Located in Paris, France, Hycor SAS will
market allergy diagnostic products in France. Hycor SAS commenced direct
commercial activities during the quarter ended September 30, 1997. Pre-tax
losses, including start-up costs, for the quarter for this subsidiary were
approximately $138,000.
On July 21, 1997, the Company acquired from unrelated third parties all of
the outstanding stock of Cogent Diagnostics Limited ("Cogent"). Cogent is based
in Edinburgh, Scotland. Cogent develops, manufactures and markets a broad line
of test kits for diagnosis of autoimmune disease. Cogent sales for its most
recent fiscal year were approximately $1,400,000.
The Company has adequate working capital and sources of capital to carry
on its current business and to meet its existing capital requirements. The
Company decreased its working capital $2,587,318 as of September 30, 1997,
compared to December 31, 1996. This decrease was primarily a result of the
increased investment in PP&E, predominately related to the placement of
HY-TEC(TM) Instruments ($1,312,000), the Company's stock repurchase program
($468,000), and the acquisition of Cogent. In July 1997, the Company entered
into a business loan agreement ("Agreement") with Tokai Bank establishing a two
year secured line of credit of $2,000,0000. The agreement provides that the
Company can borrow at a predetermined spread over the London Inter-Bank Offered
Rate (LIBOR). The primary purpose of the agreement was to provide financing for
the Cogent acquisition and related costs. As of September 30, 1997, there was $1
million outstanding.
During the three and nine-month periods ended September 30, 1997, sales
decreased 1% and 7%, respectively, compared to the same periods last year.
Revenue declines were due primarily to the loss of sales resulting from the 1995
Restructuring Plan and the related discontinued product lines. Revenues in 1996
from discontinued products were $606,000 for the quarter and $2,265,000 for the
nine-month period. In addition, in periods when the U.S. dollar is
strengthening, the effect of the translation of the financial statements of the
consolidated foreign affiliates is that of lower sales, cost, and net income.
The stronger U.S. dollar in the third quarter 1997 and the nine months 1997 when
compared to the corresponding 1996 periods resulted in lower reported sales of
approximately 3% in both periods.
Page 7
<PAGE> 8
Gross profit as a percentage of product sales increased for the quarter
from approximately 52% to 53% and decreased from approximately 55% to 54% for
the same period year-to-date due primarily to the addition of Cogent offset by
the impact of the strengthening U.S. dollar.
Selling, general and administrative expenses have increased approximately
8% for the quarter and decreased approximately 1% for the same period
year-to-date. The cost increases for the quarter are primarily due to the
inclusion in 1997 third quarter results of both Cogent and Hycor SAS. The
decrease in the year-to-date period is primarily due to reduced expense levels
at the Company's German subsidiary resulting from the completion, in 1996, of
certain contractual obligations arising from the acquisition.
Research and development costs for the three and nine-month periods ended
September 30, 1997 have increased approximately 6% and 2%, respectively,
compared to the same periods last year. This increase is due primarily to the
inclusion of Cogent in 1997 results.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Material Contracts Relating to Management Compensation Plans or
Arrangements:
Exhibit 10.1 Employment Agreement of Richard D. Hamill
Exhibit 10.2 Employment Agreement of Mary J. Deal
Exhibit 10.3 Employment Agreement of Reginald P. Jones
Exhibit 10.4 Employment Agreement of Thomas M. Li
Exhibit 10.5 Employment Agreement of Nelson F. Thune
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8K: None
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HYCOR BIOMEDICAL INC.
---------------------
Date: November 14, 1997 By: /s/ Armando Correa
-----------------------------------
Armando Correa, Director of Finance
(Mr. Correa is the Principal
Accounting Officer and has been
duly authorized to sign on behalf
of the registrant.)
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<PAGE> 9
<TABLE>
<CAPTION>
Exhibit List
- ------------
Exhibit No. Name of Exhibit Page Number
- ----------- --------------- -----------
<C> <S> <C>
10.1 Employment Agreement of Richard D. Hamill 10-18
10.2 Employment Agreement of Mary J. Deal 19-26
10.3 Employment Agreement of Reginald P. Jones 27-34
10.4 Employment Agreement of Thomas M. Li 35-42
10.5 Employment Agreement of Nelson F. Thune 43-50
27 Financial Data Schedule 51
</TABLE>
Page 9
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by HYCOR BIOMEDICAL INC., a Delaware corporation ("Company"), and RICHARD D.
HAMILL ("Hamill").
WHEREAS, the Company desires to employ Hamill in an executive
capacity, Hamill desires to accept such employment, and the parties desire to
memorialize the terms and conditions of their employment relationship,
NOW, THEREFORE, in consideration of the promises and covenants
set forth in this Agreement and for other valuable consideration, the parties
agree as follows:
1. Employment: Hamill shall be employed as the President and
Chief Executive Officer of the Company, and shall faithfully and diligently
perform all duties and responsibilities required of such position or assigned by
the Board of Directors from time to time, including service on behalf of the
Company's subsidiary and affiliated companies and as a member of the Board of
Directors.
2. Term. This Agreement and Hamill's employment shall be for a
term of three (3) years commencing on June 20, 1997 and expiring on June 19,
2000, but shall be automatically renewed for successive one-year periods
thereafter unless either party gives written notice to the other party of
nonrenewal at least six (6) months in advance of the expiration date.
3. Compensation: In consideration for all services to be
performed under this Agreement, Hamill shall receive the following compensation:
A. Salary: Hamill shall be paid base salary at the
rate of Two Hundred Fifty Thousand Dollars ($250,000) per year.
Annually, the Board of Directors shall review Hamill's performance with
a view toward increasing his salary.
B. Bonus: Hamill shall be entitled to participate in
the Company's Annual Executive Incentive Plan and the Long Term
Executive Incentive Plan, subject to all of the terms and conditions set
forth in said plans, as amended from time to time, as long as such plans
remain in effect, and to participate in any successor or similar
incentive plan available to management personnel of comparable status
with the Company or its affiliates. Nothing herein or in said plans
shall constitute a guarantee of Hamill's employment by the Company, or a
limitation on the Company's rights under this Agreement, or limitation
on the Company's rights to amend or terminate any plan.
C. Employee Benefit Plans: Hamill shall be
entitled to participate in all employee benefit plans, including group
medical, dental, visual, and life insurance, pension, profit sharing,
group and individual disability income, stock option, vacation, and
other benefit plans, on terms commensurate with the benefits awarded
management personnel of comparable status with the Company or any
affiliate of the Company, but subject, on any termination, to Section
4.E below.
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<PAGE> 2
D. Expense Reimbursement: The Company shall reimburse
Hamill for all reasonable expenses that he necessarily incurs in
connection with his employment and for which he presents adequate
documentation in accordance with Company policies in effect from time to
time.
E. Life Insurance: In addition to any other insurance
benefit, the Company shall maintain a term life insurance policy on
Hamill's life in the amount of $700,000, with Hamill having the right to
designate the beneficiary of such insurance.
F. Disability Supplement: In the event Hamill is
disabled from performing his assigned duties for any period in excess of
thirty (30) days, then in addition to all disability benefits provided
by any other insurance policy or plan and without diminishing the amount
of such benefits, the Company shall pay Hamill for up to twelve (12)
months during the period in which he is disabled an additional amount
equal to the difference between his base salary and other disability
benefits Hamill is eligible to receive.
G. Automobile: The Company shall provide Hamill with
a new full-sized automobile, together with all related maintenance and
operating expenses, such automobile to be replaced with a new like-kind
automobile every two years.
4. Termination: This Agreement and Hamill's employment are
subject to immediate termination at any time as follows:
A. Death: This Agreement shall terminate immediately
upon Hamill's death, in which event the Company's only obligations shall
be (i) to pay all compensation owing for services rendered by Hamill
prior to the date of his death; (ii) to continue paying Hamill's base
salary to his estate for a period of thirty (30) days after his death;
and (iii) to make periodic recoverable advances to Hamill's estate
equivalent to Hamill's base salary for ninety (90) days after said
thirty (30) day period has lapsed, or until the proceeds from the life
insurance policy on Hamill's life referred to in this Agreement become
available, whichever occurs first, with such advances to be repaid when
said insurance proceeds become available.
B. Disability: In the event that Hamill is disabled
from performing his assigned duties under this Agreement due to illness
or injury for a period in excess of one hundred eighty (180) days, the
Company may place Hamill on an unpaid leave of absence for a period not
to exceed six (6) months, in which case the Company's only obligation
shall be (i) to continue Hamill's group medical and life insurance for
the duration of the leave; (ii) to pay the bonus, if any, that Hamill
would be entitled to under the terms of the bonus plans referred to in
Section 3B of this Agreement; (iii) to allow Hamill to continue
receiving benefits under the disability insurance and other employee
benefit plans in effect at the time of his disability in accordance with
the terms and conditions of such plans; and (iv) to pay a disability
supplement in accordance with Section 3F of this Agreement. The granting
of a leave of absence does not guarantee that Hamill will be returned to
employment, and the
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<PAGE> 3
Company reserves the right to replace Hamill or to take other action in
his absence due to business necessity. If Hamill is certified to return
to work before his leave of absence expires, and desires to do so, the
following provisions shall apply: (i) the Company will attempt to return
Hamill to his same or similar position, provided this does not result in
undue hardship to the Company; and (ii) if the Company is unable to
reinstate Hamill because his position has been filled, then as a special
severance benefit, the Company shall pay a lump-sum severance payment
equal to twenty (20) months of Hamill's base salary as in effect
immediately prior to the commencement of Hamill's leave of absence. If
Hamill is not certified to return to work before his leave of absence
expires, or does not desire to return, his employment and this Agreement
shall terminate upon the expiration of his leave of absence.
C. Termination For Cause: The Company may terminate
this Agreement for cause immediately upon written notice to Hamill in
the event Hamill (i) engages in any material misconduct, willful breach,
or habitual neglect of his duties as an officer or director of the
Company, or (ii) is finally convicted of a felony. In either event, the
Company's sole obligation to Hamill in lieu of all claims for
compensation or damages shall be to pay all compensation owing for
services rendered by Hamill prior to the date of termination under this
subsection.
D. Termination Without Cause: The Company in its sole
discretion may terminate this Agreement without cause or prior warning
immediately upon written notice to Hamill. For purposes of this Section
4D, any failure to renew this Agreement and any resignation following a
substantial reduction in Hamill's salary, duties or responsibilities
shall constitute an involuntary termination without cause for the
convenience of the Company. In the event of a termination under this
Section 4D the Company shall pay all compensation owing for services
rendered by Hamill prior to the date of termination, shall pay a
lump-sum severance benefit equal to twenty (20) months of Hamill's base
salary at the time of termination, and shall continue to provide Hamill
at Company expense all medical, disability and insurance benefits
available to him at the time of termination for a period of twenty (20)
months after the termination or, if shorter, the maximum period allowed
under the Company's policies as then in effect or under applicable law.
As an additional severance payment, if the Company has in effect at the
time of any termination without cause under this Section 4D any bonus or
incentive plan which provides for awards in cash and is based on the
Company's revenues or results of operations for a fiscal year or other
period, Hamill shall be entitled to an amount equal to a pro rata award
based on the portion of the fiscal year or other period for which he was
employed. Such severance shall be payable at the same time, and computed
on the same terms, as awards under the plan in question, except for
periods of service. In addition, any termination under this Section 4D
shall constitute a termination for the convenience of the Company and
shall extend the post-termination exercise period for all stock options
granted to Hamill under the Company's stock option and other benefit
plans so that such options will be exercisable for the longer of three
months following the date of termination or any longer period provided
in such plan. Such payments and benefits shall not entitle Hamill to any
other benefits or compensation program available to Company employees.
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<PAGE> 4
E. Termination Following Change In Control: If either the
Company elects to terminate Hamill without cause pursuant to Section
4(D) within ninety (90) days before or twenty four (24) months after a
change in control or Hamill elects to resign with good reason within
twenty four (24) months after a change in control of the Company, then
as a severance benefit and in lieu of all compensation or damages the
Company shall (i) pay Hamill a lump sum equal to 299% of the average of
the annual base salary plus bonuses paid to Hamill during each of the
three years prior to the time of such termination or resignation, (ii)
continue to provide Hamill at Company expense all medical, disability
and insurance benefits available to him at the time of such termination
or resignation for a period of twenty four (24) months after such
termination or resignation, or, if shorter, the maximum period allowed
under the Company's policies as then in effect or under applicable law,
(iii) accelerate the vesting of all unvested stock options granted to
Hamill under the Company's stock option or other benefit plans so that
all such stock options will vest and be fully exercisable on the date of
such termination or resignation, and (iv) extend the post-termination
exercise period for all stock options granted to Hamill under the
Company's stock option and other benefit plans so that all such stock
options will be exercisable for the longer of three months after the
date of such termination or resignation or any longer post-termination
exercise period provided in such plan.
For purposes of this subsection, the term "change in
control" shall mean any change in control that the Company would be
required to report in response to Item 5(f) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Without limiting the foregoing, a change
in control shall also be deemed to have occurred if (i) any "person" as
defined in Section 13(d) and 14(d) of the Exchange Act is or becomes,
directly or indirectly, the "beneficial owner" as defined in Rule 13
(d-3) under the Exchange Act of securities of the Company which
represent 25% or more of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of said two year period
constituted the Board of Directors of the Company cease for any reason
to constitute at least a majority of the Board unless the election or
nomination of each new director was approved by a vote of at least
two-thirds of the directors who were in office at the beginning of said
two year period.
For purposes of this subsection, Hamill shall be deemed
to have resigned "with good reason" if he does so following a change in
control as a result of the Company having done any or all of the
following without Hamill's express written consent: (i) assigned Hamill
different duties or made changes in his reporting responsibilities,
title, or office that are substantially inconsistent with Hamill's
duties, responsibilities, titles, or offices immediately prior to the
change in control; (ii) reduced Hamill's base salary from that in effect
at the time of the change in control; (iii) failed to continue any bonus
plan in substantially the same form as it existed prior to the change in
control; (iv) required Hamill to be based more than fifty (50) miles
from his present office location, except for required travel consistent
with Hamill's present business travel obligations; (v) failed to
continue any plan or program for compensation, employee benefits, stock
purchase or ownership, life insurance, group medical, disability, or
vacation in substantially the same form as immediately prior to the
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<PAGE> 5
change in control, or otherwise made any material reduction in Hamill's
fringe benefits, or (vi) failed to obtain the assumption of this
Agreement by any successor to the Company.
Hamill shall not be entitled to the benefits of this
Section 4(E) if this Agreement and his employment are terminated
pursuant to Section 4(A), (B) or (C). If Hamill institutes legal
proceedings to enforce any provision of this Section 4E or any other
provision of this Agreement providing rights or benefits after a change
of control, he shall be entitled to recover from the Company all costs,
fees and expenses of such proceeding if he is the prevailing party.
F. Company's Obligations Under This Agreement
Exclusive: The benefits set forth in subsections A through E above
(which benefits, in the event of termination pursuant to subsections A,
C, D or E, include payment for services rendered prior to termination as
provided in such subsection), as applicable, constitute the sole
obligations of the Company to Hamill upon a termination and are in lieu
of any damages or other compensation that Hamill may claim under other
Company policies in connection with this Agreement. The benefits on
termination in this Agreement are in substitution for any severance or
termination benefits otherwise available under Company policies of
general application. Hamill expressly acknowledges that certain Company
benefit or incentive plans provide for vesting in, or award of, benefits
based on employment on or through particular dates and that nothing in
this Agreement entitles him to partial vesting or partial awards under
such plans. Any payments under Section 4D relating to any incentive or
bonus plan are expressly acknowledged to be benefits under this
Agreement and not an interpretation or modification of any such plan.
G. Resignation As Officer and Director: In the event
of any termination pursuant to this Section 4, Hamill shall be deemed to
have resigned as an officer and director of the Company if he was
serving in such capacity at the time of termination.
5. Confidentiality: Hamill acknowledges and agrees that he has
been and will continue to be entrusted with trade and proprietary information
regarding the products, processes, methods of manufacture and delivery,
know-how, designs, formula, work in progress, research and development, computer
software and data bases, copyrights, trademarks, patents, marketing techniques,
and future business plans, as well as customer lists and information concerning
the identity, needs, and desires of actual and potential customers of the
Company and its subsidiaries, joint venturers, partners, and other affiliated
persons and entities ("Confidential Information"), all of which derive
significant economic value from not being generally known to others outside the
Company.
A. During the entire term of his employment with the
Company and for two years thereafter, Hamill shall not disclose or
exploit any Confidential Information except for the sole benefit of the
Company or with its express written consent.
B. During the entire term of his employment by the
Company and for one year thereafter, Hamill shall not directly or
indirectly solicit
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<PAGE> 6
any actual or potential customer of the Company or its subsidiary and
affiliated companies for any business that competes directly or
indirectly with the Company, except for the sole benefit of the Company
or with its express written consent.
C. During the entire term of his employment by the
Company and for one year thereafter, Hamill shall not induce or attempt
to induce any employee of the Company to leave the Company's employ
except for the sole benefit of the Company or with its express written
consent.
D. In the event any provision in this Section 5 is
more restrictive than allowed by the law of any jurisdiction in which
the Company seeks enforcement, such provision shall be deemed amended
and shall then be fully enforceable to the extent permitted by such law.
E. Hamill acknowledges and agrees that any violation
of this Section 5 would cause immediate irreparable damage to the
Company, and that it would be extremely difficult or impossible to
determine the amount of damage caused to the Company. Hamill therefore
agrees that the Company's remedies at law are inadequate, and hereby
consents to issuance of a temporary restraining order, preliminary and
permanent injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without limiting any
remedies the Company may have at law or in equity.
6. Inventions: Any and all patents, copyrights, trademarks,
inventions, discoveries, developments, or trade secrets developed or perfected
by Hamill during or as the result of his employment with the Company shall
constitute the sole and exclusive property of the Company. Hamill shall disclose
all such matters to the Company, assign all right, title and interest he may
have in them, and cooperate with the Company in obtaining and perfecting any
patent, copyright, trademark, or other legal protection. This Section 6 shall
not apply to any invention which qualifies fully under California Labor Code
Section 2870, a true copy of which is attached to this Agreement as Exhibit A.
7. Conflict Of Interest: During the term of this Agreement,
Hamill shall devote his time, ability, and attention to the business of the
Company, and shall not accept other employment or engage in any other outside
business activity which interferes with the performance of his duties and
responsibilities under this Agreement or which involves actual or potential
competition with the business of the Company, except with the express written
consent of the Board of Directors.
8. Employee Benefit Plans: All of the employee benefit plans
referred to or contemplated by this Agreement shall be governed solely by the
terms of the underlying plan documents and by applicable law. Nothing in this
Agreement shall impair the Company's right to amend, modify, replace and
terminate any and all such plans in its sole discretion as provided by law, or
to terminate this Agreement in accordance with its terms. This Agreement is for
the sole benefit of Hamill and the Company, and is not intended to create an
employee benefit plan or to modify the term of existing plans.
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<PAGE> 7
9. Parachute Limitation:
---------------------
A. If the payments and benefits Hamill is entitled to
under this Agreement and all other contracts, arrangements, or programs upon a
change in control shall, in the aggregate, exceed the maximum amount that may be
paid to Hamill without triggering golden parachute penalties under Section 280G
and related provisions of the Internal Revenue Code, as determined in good faith
by the Company's independent auditors (the "280G Ceiling"), then the cash
amounts paid to Hamill shall be increased to the extent necessary to compensate
Hamill for all excise taxes resulting from exceeding the 280G Ceiling, and all
income and other taxes due on such increased amounts, until Hamill has received
all amounts he would have received if no excise taxes were due under the 280G
Ceiling.
B. Although the Company does not believe it possible
under the terms of this Agreement, if the payments and benefits Hamill would be
entitled to receive upon a termination would exceed the 280G Ceiling and there
has been no change in control, Hamill's benefits shall be cut back in the
priority order designated by Hamill or, if Hamill fails promptly to designate an
order, in the priority order designated by the Company, to an amount $1 less
than the 280G Ceiling. If an amount in excess of the limit set forth in this
Section is paid to Hamill and there has been no change in control, Hamill must
repay the excess amount to the Company upon demand. Hamill and the Company agree
reasonably to cooperate with each other in connection with any administrative or
judicial proceedings concerning the existence or amount of golden parachute
penalties with respect to payments or benefits Hamill receives.
10. Assignment: This Agreement may not be assigned by Hamill,
but may be assigned by the Company to any successor in interest to its business.
In the event the Company does not survive any merger, acquisition, or other
reorganization, it shall make a reasonable effort to obtain an assumption of
this Agreement by the surviving entity in such merger, acquisition, or other
reorganization, but the failure to obtain such assumption shall not prevent or
delay such merger, acquisition, or other reorganization or relieve the Company
of its other obligations under this Agreement. This Agreement shall bind and
inure to the benefit of the Company's successors and assigns, as well as
Hamill's heirs, executors, administrators, and legal representatives.
11. Notices: All notices required by this Agreement may be
delivered by first class mail at the following addresses:
To the Company: Hycor Biomedical Inc.
18800 Von Karman Avenue
Irvine, California 92715
To Hamill: Richard D. Hamill
22686 Ledana
Mission Viejo, California 92691
12. Amendment. This Agreement may be modified only by written
agreement signed by the party against whom any amendment is to be enforced.
13. Choice Of Law: This Agreement shall be governed by the
laws of the State of California.
14. Partial Invalidity: In the event any provision of this
Agreement is void or unenforceable, the remaining provisions shall continue in
full force and effect.
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<PAGE> 8
15. Waiver: No waiver of any breach of this Agreement shall
constitute a waiver of any subsequent breach.
16. Complete Agreement: This Agreement contains the entire
agreement between the parties, and supersedes any and all prior and
contemporaneous oral and written agreements, including Hamill's previous
employment contracts, which shall have no further force and effect.
"Hamill" "Company"
RICHARD D. HAMILL HYCOR BIOMEDICAL INC.
______________________________ By:______________________________
Name:___________________________
Dated:________________________ Dated:___________________________
Page 17
<PAGE> 9
EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RENTS
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer;
or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by HYCOR BIOMEDICAL INC., a Delaware corporation ("Company"), and MARY JO DEAL
("Deal").
WHEREAS, the Company desires to employ Deal in an executive
capacity, Deal desires to accept such employment, and the parties desire to
memorialize the terms and conditions of their employment relationship,
NOW, THEREFORE, in consideration of the promises and covenants
set forth in this Agreement and for other valuable consideration, the parties
agree as follows:
1. Employment: Deal shall be employed as a Vice President of the
Company reporting to the President, and shall faithfully and diligently perform
all duties and responsibilities required of such position or assigned by the
President from time to time, including service on behalf of the Company's
subsidiary and affiliated companies.
2. Term. This Agreement and Deal's employment shall be for a term
of three (3) years commencing on September 1, 1997, and expiring on August 31,
2000, but shall be automatically renewed for successive one-year periods
thereafter unless either party gives written notice to the other party of
nonrenewal at least three (3) months in advance of the expiration date.
3. Compensation: In consideration for all services to be
performed under this Agreement, Deal shall receive the following compensation:
A. Salary: Deal shall be paid base salary at the rate of
One Hundred Twenty Thousand Dollars ($120,000) per year. Annually, the
Board of Directors, upon the recommendation of the President, shall
review Deal's performance with a view toward increasing her salary.
B. Bonus: Deal shall be entitled to participate in the
Company's Annual Executive Incentive Plan and the Long Term Executive
Incentive Plan, subject to all of the terms and conditions set forth in
said plans, as amended from time to time, as long as such plans remain
in effect, and to participate in any successor or similar incentive plan
available to management personnel of comparable status with the Company
or its affiliates. Nothing herein or in said plans shall constitute a
guarantee of Deal's employment by the Company, or a limitation on the
Company's rights under this Agreement, or limitation on the Company's
rights to amend or terminate any plan.
C. Employee Benefit Plans: Deal shall be entitled to
participate in all employee benefit plans, including group medical,
dental, visual, and life insurance, pension, profit sharing, group and
individual disability income, stock option, vacation, and other benefit
plans, on terms commensurate with the benefits awarded management
personnel of comparable status with the Company or any affiliate of the
Company, but subject, on any termination, to Section 4.E below.
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<PAGE> 2
D. Expense Reimbursement: The Company shall reimburse
Deal for all reasonable expenses that she necessarily incurs in
connection with her employment and for which she presents adequate
documentation in accordance with Company policies in effect from time to
time.
4. Termination: This Agreement and Deal's employment are subject
to immediate termination at any time as follows:
A. Death: This Agreement shall terminate immediately upon
Deal's death, in which event the Company's only obligations shall be (i)
to pay all compensation owing for services rendered by Deal prior to the
date of her death; (ii) to continue paying Deal's base salary to her
estate for a period of thirty (30) days after her death; and (iii) to
make periodic recoverable advances to Deal's estate equivalent to Deal's
base salary for ninety (90) days after said thirty (30) day period has
lapsed, or until the proceeds from the life insurance policy on Deal's
life referred to in this Agreement become available, whichever occurs
first, with such advances to be repaid when said insurance proceeds
become available.
B. Disability: In the event that Deal is disabled from
performing her assigned duties under this Agreement due to illness or
injury for a period in excess of one hundred eighty (180) days, the
Company may place Deal on an unpaid leave of absence for a period not to
exceed six (6) months, in which case the Company's only obligation shall
be (i) to continue Deal's group medical and life insurance for the
duration of the leave; (ii) to pay the bonus, if any, that Deal would be
entitled to under the terms of the bonus plans referred to in Section 3B
of this Agreement; and (iii) to allow Deal to continue receiving
benefits under the disability insurance and other employee benefit plans
in effect at the time of her disability in accordance with the terms and
conditions of such plans. The granting of a leave of absence does not
guarantee that Deal will be returned to employment, and the Company
reserves the right to replace Deal or to take other action in her
absence due to business necessity. If Deal is certified to return to
work before her leave of absence expires, and desires to do so, the
following provisions shall apply: (i) the Company will attempt to return
Deal to her same or similar position, provided this does not result in
undue hardship to the Company; and (ii) if the Company is unable to
reinstate Deal because her position has been filled, then as a special
severance benefit, the Company shall pay a lump-sum severance payment
equal to twenty (20) months of Deal's base salary as in effect
immediately prior to the commencement of Deal's leave of absence. If
Deal is not certified to return to work before her leave of absence
expires, or does not desire to return, her employment and this Agreement
shall terminate upon the expiration of her leave of absence.
C. Termination For Cause: The Company may terminate this
Agreement for cause immediately upon written notice to Deal in the event
Deal (i) engages in any material misconduct, willful breach, or habitual
neglect of her duties as an officer of the Company, or (ii) is finally
convicted of a felony. In either event, the Company's sole obligation to
Deal in lieu of all claims for compensation or damages shall be to pay
all compensation owing for services rendered by Deal prior to the date
of termination under this subsection.
D. Termination Without Cause: The Company in its sole
discretion may terminate this Agreement without cause or prior warning
immediately upon written notice to Deal. For purposes of this Section
4D, any
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<PAGE> 3
failure to renew this Agreement and any resignation following a
substantial reduction in Deal's salary, duties or responsibilities shall
constitute an involuntary termination without cause. In the event of a
termination under this Section 4D the Company shall pay all compensation
owing for services rendered by Deal prior to the date of termination,
shall pay a lump-sum severance benefit equal to twelve (12) months of
Deal's base salary at the time of termination, and shall continue to
provide Deal at Company expense all medical, disability and insurance
benefits available to her at the time of termination for a period of
twelve (12) months after the termination or, if shorter, the maximum
period allowed under the Company's policies as then in effect or under
applicable law. As an additional severance payment, if the Company has
in effect at the time of any termination without cause under this
Section 4D any bonus or incentive plan which provides for awards in cash
and is based on the Company's revenues or results of operations for a
fiscal year, Deal shall be entitled to an amount equal to a pro rata
award based on the period of the fiscal year for which she was employed
if a termination under this Section 4D occurs after the completion of
three fiscal quarters. Such severance shall be payable at the same time,
and computed on the same terms, as awards under the plan in question,
except for periods of service. Such payments and benefits shall not
entitle Deal to any other benefits or compensation program available to
Company employees.
E. Termination Following Change In Control: If either the
Company elects to terminate Deal without cause pursuant to Section 4(D)
within ninety (90) days before or twenty four (24) months after a change
in control or Deal elects to resign with good reason within twenty four
(24) months after a change in control of the Company, then as a
severance benefit and in lieu of all compensation or damages the Company
shall (i) pay Deal a lump sum equal to 200% of the average of the annual
base salary plus bonuses paid to Deal during each of the three years
prior to the time of such termination or resignation, (ii) continue to
provide Deal at Company expense all medical, disability and insurance
benefits available to her at the time of such termination or resignation
for a period of twenty four (24) months after such termination or
resignation, or, if shorter, the maximum period allowed under the
Company's policies as then in effect or under applicable law, (iii)
accelerate the vesting of all unvested stock options granted to Deal
under the Company's stock option or other benefit plans so that all such
stock options will vest and be fully exercisable on the date of such
termination or resignation, and (iv) extend the post-termination
exercise period for all stock options granted to Deal under the
Company's stock option and other benefit plans so that all such stock
options will be exercisable for a period of three months after the date
of such termination or resignation (except that with respect to any
stock options having a post-termination exercise period in excess of
three months, such longer post-termination exercise period shall remain
in effect).
For purposes of this subsection, the term "change in
control" shall mean any change in control that the Company would be
required to report in response to Item 5(f) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Without limiting the foregoing, a change
in control shall also be deemed to have occurred if (i) any "person" as
defined in Section 13(d) and 14(d) of the Exchange Act is or becomes,
directly or indirectly, the "beneficial owner" as defined in Rule 13
(d-3) under the Exchange Act of securities of the Company which
represent 25% or more of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive
years,
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<PAGE> 4
individuals who at the beginning of said two year period constituted the
Board of Directors of the Company cease for any reason to constitute at
least a majority of the Board unless the election or nomination of each
new director was approved by a vote of at least two-thirds of the
directors who were in office at the beginning of said two year period.
For purposes of this subsection, Deal shall be deemed to
have resigned "with good reason" if she does so following a change in
control as a result of the Company having done any or all of the
following without Deal's express written consent: (i) assigned Deal
different duties or made changes in her reporting responsibilities,
title, or office that are substantially inconsistent with Deal's duties,
responsibilities, titles, or offices immediately prior to the change in
control; (ii) reduced Deal's base salary from that in effect at the time
of the change in control; (iii) failed to continue any bonus plan in
substantially the same form as it existed prior to the change in
control; (iv) required Deal to be based more than fifty (50) miles from
her present office location, except for required travel consistent with
Deal's present business travel obligations; (v) failed to continue any
plan or program for compensation, employee benefits, stock purchase or
ownership, life insurance, group medical, disability, or vacation in
substantially the same form as immediately prior to the change in
control, or otherwise made any material reduction in Deal's fringe
benefits, or (vi) failed to obtain the assumption of this Agreement by
any successor to the Company.
Deal shall not be entitled to the benefits of this
Section 4(E) if this Agreement and her employment are terminated
pursuant to Section 4(A), (B) or (C).
F. Company's Obligations Under This Agreement Exclusive:
The benefits set forth in subsections A through E above (which benefits,
in the event of termination pursuant to subsections A, C, D or E,
include payment for services rendered prior to termination as provided
in such subsections), as applicable, constitute the sole obligations of
the Company to Deal upon a termination and are in lieu of any damages or
other compensation that Deal may claim under other Company policies in
connection with this Agreement. The benefits on termination in this
Agreement are in substitution for any severance or termination benefits
otherwise available under Company policies of general application. Deal
expressly acknowledges that certain Company benefit or incentive plans
provide for vesting in, or award of, benefits based on employment on or
through particular dates and that nothing in this Agreement entitles her
to partial vesting or partial awards under such plans. Any payments
under Section 4D relating to any incentive or bonus plan are expressly
acknowledged to be benefits under this Agreement and not an
interpretation or modification of any such plan.
G. Resignation As Officer: In the event of any
termination pursuant to this Section 4, Deal shall be deemed to have
resigned as an officer of the Company if she was serving in such
capacity at the time of termination.
5. Confidentiality: Deal acknowledges and agrees that she has
been and will continue to be entrusted with trade and proprietary information
regarding the products, processes, methods of manufacture and delivery,
know-how, designs, formula, work in progress, research and development, computer
software and data bases, copyrights, trademarks, patents, marketing techniques,
and future business
Page 22
<PAGE> 5
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint venturers, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
A. During the entire term of her employment with the
Company and for two years thereafter, Deal shall not disclose or exploit
any Confidential Information except for the sole benefit of the Company
or with its express written consent.
B. During the entire term of her employment by the
Company and for one year thereafter, Deal shall not directly or
indirectly solicit any actual or potential customer of the Company or
its subsidiary and affiliated companies for any business that competes
directly or indirectly with the Company, except for the sole benefit of
the Company or with its express written consent.
C. During the entire term of her employment by the
Company and for one year thereafter, Deal shall not induce or attempt to
induce any employee of the Company to leave the Company's employ except
for the sole benefit of the Company or with its express written consent.
D. In the event any provision in this Section 5 is more
restrictive than allowed by the law of any jurisdiction in which the
Company seeks enforcement, such provision shall be deemed amended and
shall then be fully enforceable to the extent permitted by such law.
E. Deal acknowledges and agrees that any violation of
this Section 5 would cause immediate irreparable damage to the Company,
and that it would be extremely difficult or impossible to determine the
amount of damage caused to the Company. Deal therefore agrees that the
Company's remedies at law are inadequate, and hereby consents to
issuance of a temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any actual or
threatened violation of this Section, without limiting any remedies the
Company may have at law or in equity.
6. Inventions: Any and all patents, copyrights, trademarks,
inventions, discoveries, developments, or trade secrets developed or perfected
by Deal during or as the result of her employment with the Company shall
constitute the sole and exclusive property of the Company. Deal shall disclose
all such matters to the Company, assign all right, title and interest she may
have in them, and cooperate with the Company in obtaining and perfecting any
patent, copyright, trademark, or other legal protection. This Section 6 shall
not apply to any invention which qualifies fully under California Labor Code
Section 2870, a true copy of which is attached to this Agreement as Exhibit A.
7. Conflict Of Interest: During the term of this Agreement, Deal
shall devote her time, ability, and attention to the business of the Company,
and shall not accept other employment or engage in any other outside business
activity which interferes with the performance of her duties and
responsibilities under this Agreement or which involves actual or potential
competition with the business of the Company, except with the express written
consent of the President.
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<PAGE> 6
8. Employee Benefit Plans: All of the employee benefit plans
referred to or contemplated by this Agreement shall be governed solely by the
terms of the underlying plan documents and by applicable law. Nothing in this
Agreement shall impair the Company's right to amend, modify, replace and
terminate any and all such plans in its sole discretion as provided by law, or
to terminate this Agreement in accordance with its terms. This Agreement is for
the sole benefit of Deal and the Company, and is not intended to create an
employee benefit plan or to modify the term of existing plans.
9. Parachute Limitation: The payments and benefits Deal is
entitled to under this Agreement and all other contracts, arrangements, or
programs shall not, in the aggregate, exceed the maximum amount that may be paid
to Deal without triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as determined in good faith by
the Company's independent auditors. If Deal's benefits must be cut back to avoid
triggering such penalties, Deal's benefits shall be cut back in the priority
order designated by Deal or, if Deal fails promptly to designate an order, in
the priority order designated by the Company. If an amount in excess of the
limit set forth in this Section is paid to Deal, Deal must repay the excess
amount to the Company upon demand, with interest at the rate provided for in
Internal Revenue Code Section 1274(b)(2)(B). Deal and the Company agree
reasonably to cooperate with each other in connection with any administrative or
judicial proceedings concerning the existence or amount of golden parachute
penalties with respect to payments or benefits Deal receives.
10. Assignment: This Agreement may not be assigned by Deal, but
may be assigned by the Company to any successor in interest to its business. In
the event the Company does not survive any merger, acquisition, or other
reorganization, it shall make a reasonable effort to obtain an assumption of
this Agreement by the surviving entity in such merger, acquisition, or other
reorganization, but the failure to obtain such assumption shall not prevent or
delay such merger, acquisition, or other reorganization or relieve the Company
of its other obligations under this Agreement. This Agreement shall bind and
inure to the benefit of the Company's successors and assigns, as well as Deal's
heirs, executors, administrators, and legal representatives.
11. Notices: All notices required by this Agreement may be
delivered by first class mail at the following addresses:
To the Company: Hycor Biomedical Inc.
18800 Von Karman Avenue
Irvine, California 92715
To Deal: Mary Jo Deal
6352 Marcellena Drive
Huntington Beach, California 92647
12. Amendment. This Agreement may be modified only by written
agreement signed by the party against whom any amendment is to be enforced.
13. Choice Of Law: This Agreement shall be governed by the laws
of the State of California.
14. Partial Invalidity: In the event any provision of this
Agreement is void or unenforceable, the remaining provisions shall continue in
full force and effect.
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<PAGE> 7
15. Waiver: No waiver of any breach of this Agreement shall
constitute a waiver of any subsequent breach.
16. Complete Agreement: This Agreement contains the entire
agreement between the parties, and supersedes any and all prior and
contemporaneous oral and written agreements, including Deal's previous
employment contracts, which shall have no further force and effect.
MARY JO DEAL
__________________________________ Dated: _______________________
HYCOR BIOMEDICAL INC.
By:_______________________________ Dated: _______________________
Name: Richard D. Hamill, Ph.D.
-----------------------------------
Title: Chairman, President & CEO
----------------------------------
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<PAGE> 8
EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RENTS
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of her or her rights in an
invention to her or her employer shall not apply to an invention that the
employee developed entirely on her or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer;
or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (a), the provision
is against the public policy of this state and is unenforceable.
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<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by HYCOR BIOMEDICAL INC., a Delaware corporation ("Company"), and REGINALD P.
JONES ("Jones).
WHEREAS, the Company desires to employ Jones in an executive
capacity, Jones desires to accept such employment, and the parties desire to
memorialize the terms and conditions of their employment relationship,
NOW, THEREFORE, in consideration of the promises and covenants
set forth in this Agreement and for other valuable consideration, the parties
agree as follows:
1. Employment: Jones shall be employed as a Vice President of the
Company reporting to the President, and shall faithfully and diligently perform
all duties and responsibilities required of such position or assigned by the
President from time to time, including service on behalf of the Company's
subsidiary and affiliated companies and as a member of the Board of Directors.
2. Term: This Agreement and Jones' employment shall be for a term
of three (3) years commencing on June 20, 1997 and expiring on June 19, 2000,
but shall be automatically renewed for successive one-year periods thereafter
unless either party gives written notice to the other party of nonrenewal at
least three (3) months in advance of the expiration date.
3. Compensation: In consideration for all services to be
performed under this Agreement, Jones shall receive the following compensation:
A. Salary: Jones shall be paid base salary at the rate of One
Hundred Eighty-Four Thousand Thousand One Hundred Dollars ($184,100) per year.
Annually, the Board of Directors, upon the recommendation of the President,
shall review Jones' performance with a view toward increasing his salary.
B. Bonus: Jones shall be entitled to participate in the
Company's Annual Executive Incentive Plan and the Long Term Executive Incentive
Plan, subject to all of the terms and conditions set forth in said plans, as
amended from time to time, as long as such plans remain in effect, and to
participate in any successor or similar incentive plan available to management
personnel of comparable status with the Company or its affiliates. Nothing
herein or in said plans shall constitute a guarantee of Jones' employment by the
Company, or a limitation on the Company's rights under this Agreement, or
limitation on the Company's rights to amend or terminate any plan.
C. Employee Benefit Plans: Jones shall be entitled to
participate in all employee benefit plans, including group medical, dental,
visual, and life insurance, pension, profit sharing, group and individual
disability income, stock option, vacation, and other benefit plans, on terms
commensurate with the benefits awarded management personnel of comparable status
with the Company or any affiliate of the Company, but subject, on any
termination, to Section 4.E below.
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<PAGE> 2
D. Expense Reimbursement: The Company shall reimburse Jones
for all reasonable expenses that he necessarily incurs in connection with his
employment and for which he presents adequate documentation in accordance with
Company policies in effect from time to time.
4. Termination: This Agreement and Jones' employment are subject
to immediate termination at any time as follows:
A. Death: This Agreement shall terminate immediately upon
Jones' death, in which event the Company's only obligations shall be (i) to pay
all compensation owing for services rendered by Jones prior to the date of his
death; (ii) to continue paying Jones' base salary to his estate for a period of
thirty (30) days after his death; and (iii) to make periodic recoverable
advances to Jones' estate equivalent to Jones' base salary for ninety (90) days
after said thirty (30) day period has lapsed, or until the proceeds from the
life insurance policy on Jones' life referred to in this Agreement become
available, whichever occurs first, with such advances to be repaid when said
insurance proceeds become available.
B. Disability: In the event that Jones is disabled from
performing his assigned duties under this Agreement due to illness or injury for
a period in excess of one hundred eighty (180) days, the Company may place Jones
on an unpaid leave of absence for a period not to exceed six (6) months, in
which case the Company's only obligation shall be (i) to continue Jones' group
medical and life insurance for the duration of the leave; (ii) to pay the bonus,
if any, that Jones would be entitled to under the terms of the bonus plans
referred to in Section 3B of this Agreement; and (iii) to allow Jones to
continue receiving benefits under the disability insurance and other employee
benefit plans in effect at the time of his disability in accordance with the
terms and conditions of such plans. The granting of a leave of absence does not
guarantee that Jones will be returned to employment, and the Company reserves
the right to replace Jones or to take other action in his absence due to
business necessity. If Jones is certified to return to work before his leave of
absence expires, and desires to do so, the following provisions shall apply: (i)
the Company will attempt to return Jones to his same or similar position,
provided this does not result in undue hardship to the Company; and (ii) if the
Company is unable to reinstate Jones because his position has been filled, then
as a special severance benefit, the Company shall pay a lump-sum severance
payment equal to twelve (12) months of Jones' base salary as in effect
immediately prior to the commencement of Jones' leave of absence. If Jones is
not certified to return to work before his leave of absence expires, or does not
desire to return, his employment and this Agreement shall terminate upon the
expiration of his leave of absence.
C. Termination For Cause: The Company may terminate this
Agreement for cause immediately upon written notice to Jones in the event Jones
(i) engages in any material misconduct, willful breach, or habitual neglect of
his duties as an officer or director of the Company, or (ii) is finally
convicted of a felony. In either event, the Company's sole obligation to Jones
in lieu of all claims for compensation or damages shall be to pay all
compensation owing for services rendered by Jones prior to the date of
termination under this subsection.
D. Termination Without Cause: The Company in its sole
discretion may terminate this Agreement without cause or prior warning
immediately upon written notice to Jones. For purposes of this Section 4D, any
failure to renew this Agreement and any resignation following a substantial
reduction in Jones' salary, duties or responsibilities shall constitute an
involuntary termination without cause for the convenience of the Company. In the
event of a termination under this Section 4D
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<PAGE> 3
the Company shall pay all compensation owing for services rendered by Jones
prior to the date of termination, shall pay a lump-sum severance benefit equal
to twelve (12) months of Jones' base salary at the time of termination, and
shall continue to provide Jones at Company expense all medical, disability and
insurance benefits available to him at the time of termination for a period of
twelve (12) months after the termination or, if shorter, the maximum period
allowed under the Company's policies as then in effect or under applicable law.
As an additional severance payment, if the Company has in effect at the time of
any termination without cause under this Section 4D any bonus or incentive plan
which provides for awards in cash and is based on the Company's revenues or
results of operations for a fiscal year or other period, Jones shall be entitled
to an amount equal to a pro rata award based on the portion of the fiscal year
or other period for which he was employed if a termination under this Section 4D
occurs after the completion of three fiscal quarters or an equivalent portion of
such other period. Such severance shall be payable at the same time, and
computed on the same terms, as awards under the plan in question, except for
periods of service. In addition, any termination under this Section 4D shall
constitute a termination for the convenience of the Company and shall extend the
post-termination exercise period for all stock options granted to Jones under
Company's stock option and other benefit plans so that all such options will be
exercisable for the longer of three months following the date of termination or
any longer period provided in such plan. Such payments and benefits shall not
entitle Jones to any other benefits or compensation program available to Company
employees.
E. Termination Following Change In Control: If either the
Company elects to terminate Jones without cause pursuant to Section 4(D) within
ninety (90) days before or twenty four (24) months after a change in control or
Jones elects to resign with good reason within twenty four (24) months after a
change in control of the Company, then as a severance benefit and in lieu of all
compensation or damages the Company shall (i) pay Jones a lump sum equal to 200%
of the average of the annual base salary plus bonuses paid to Jones during each
of the three years prior to the time of such termination or resignation, (ii)
continue to provide Jones at Company expense all medical, disability and
insurance benefits available to him at the time of such termination or
resignation for a period of twenty four (24) months after such termination or
resignation, or, if shorter, the maximum period allowed under the Company's
policies as then in effect or under applicable law, (iii) accelerate the vesting
of all unvested stock options granted to Jones under the Company's stock option
or other benefit plans so that all such stock options will vest and be fully
exercisable on the date of such termination or resignation, and (iv) extend the
post-termination exercise period for all stock options granted to Jones under
the Company's stock option and other benefit plans so that all such stock
options will be exercisable for the longer of three months after the date of
such termination or resignation or any longer post-termination exercise period
provided in such plan.
For purposes of this subsection, the term "change in
control" shall mean any change in control that the Company would be required to
report in response to Item 5(f) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Without limiting the foregoing, a change in control shall also be deemed to have
occurred if (i) any "person" as defined in Section 13(d) and 14(d) of the
Exchange Act is or becomes, directly or indirectly, the "beneficial owner" as
defined in Rule 13 (d-3) under the Exchange Act of securities of the Company
which represent 25% or more of the combined voting power of the Company's then
outstanding securities; or (ii) during any period of two consecutive years,
individuals who at the beginning of said two year period constituted the Board
of Directors of the Company cease for any reason to
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<PAGE> 4
constitute at least a majority of the Board unless the election or nomination of
each new director was approved by a vote of at least two-thirds of the directors
who were in office at the beginning of said two year period.
For purposes of this subsection, Jones shall be deemed to
have resigned "with good reason" if he does so following a change in control as
a result of the Company having done any or all of the following without Jones'
express written consent: (i) assigned Jones different duties or made changes in
his reporting responsibilities, title, or office that are substantially
inconsistent with Jones' duties, responsibilities, titles, or offices
immediately prior to the change in control; (ii) reduced Jones' base salary from
that in effect at the time of the change in control; (iii) failed to continue
any bonus plan in substantially the same form as it existed prior to the change
in control; (iv) required Jones to be based more than fifty (50) miles from his
present office location, except for required travel consistent with Jones'
present business travel obligations; (v) failed to continue any plan or program
for compensation, employee benefits, stock purchase or ownership, life
insurance, group medical, disability, or vacation in substantially the same form
as immediately prior to the change in control, or otherwise made any material
reduction in Jones' fringe benefits, or (vi) failed to obtain the assumption of
this Agreement by any successor to the Company.
Jones shall not be entitled to the benefits of this
Section 4(E) if this Agreement and his employment are terminated pursuant to
Section 4(A), (B) or (C). If Jones institutes legal proceedings to enforce any
provision of this Section 4E or any other provision of this Agreement providing
rights or benefits after a change of control, he shall be entitled to recover
from the Company all costs, fees and expenses of such proceeding if he is the
prevailing party.
F. Company's Obligations Under This Agreement Exclusive: The
benefits set forth in subsections A through E above (which benefits, in the
event of termination pursuant to subsections A, C, D or E, include payment for
services rendered prior to termination as provided in such subsections), as
applicable, constitute the sole obligations of the Company to Jones upon a
termination and are in lieu of any damages or other compensation that Jones may
claim under other Company policies in connection with this Agreement. The
benefits on termination in this Agreement are in substitution for any severance
or termination benefits otherwise available under Company policies of general
application. Jones expressly acknowledges that certain Company benefit or
incentive plans provide for vesting in, or award of, benefits based on
employment on or through particular dates and that nothing in this Agreement
entitles him to partial vesting or partial awards under such plans. Any payments
under Section 4D relating to any incentive or bonus plan are expressly
acknowledged to be benefits under this Agreement and not an interpretation or
modification of any such plan.
G. Resignation As Officer and Director: In the event of any
termination pursuant to this Section 4, Jones shall be deemed to have resigned
as an officer and director of the Company if he was serving in such capacity at
the time of termination.
5. Confidentiality: Jones acknowledges and agrees that he has
been and will continue to be entrusted with trade and proprietary information
regarding the products, processes, methods of manufacture and delivery,
know-how, designs, formula, work in progress, research and development, computer
software and data bases, copyrights, trademarks, patents, marketing techniques,
and future business
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<PAGE> 5
plans, as well as customer lists and information concerning the identity, needs,
and desires of actual and potential customers of the Company and its
subsidiaries, joint venturers, partners, and other affiliated persons and
entities ("Confidential Information"), all of which derive significant economic
value from not being generally known to others outside the Company.
A. During the entire term of his employment with the
Company and for two years thereafter, Jones shall not disclose or
exploit any Confidential Information except for the sole benefit of the
Company or with its express written consent.
B. During the entire term of his employment by the
Company and for one year thereafter, Jones shall not directly or
indirectly solicit any actual or potential customer of the Company or
its subsidiary and affiliated companies for any business that competes
directly or indirectly with the Company, except for the sole benefit of
the Company or with its express written consent.
C. During the entire term of his employment by the
Company and for one year thereafter, Jones shall not induce or attempt
to induce any employee of the Company to leave the Company's employ
except for the sole benefit of the Company or with its express written
consent.
D. In the event any provision in this Section 5 is
more restrictive than allowed by the law of any jurisdiction in which
the Company seeks enforcement, such provision shall be deemed amended
and shall then be fully enforceable to the extent permitted by such law.
E. Jones acknowledges and agrees that any violation
of this Section 5 would cause immediate irreparable damage to the
Company, and that it would be extremely difficult or impossible to
determine the amount of damage caused to the Company. Jones therefore
agrees that the Company's remedies at law are inadequate, and hereby
consents to issuance of a temporary restraining order, preliminary and
permanent injunction, and other appropriate relief to restrain any
actual or threatened violation of this Section, without limiting any
remedies the Company may have at law or in equity.
6. Inventions: Any and all patents, copyrights, trademarks,
inventions, discoveries, developments, or trade secrets developed or perfected
by Jones during or as the result of his employment with the Company shall
constitute the sole and exclusive property of the Company. Jones shall disclose
all such matters to the Company, assign all right, title and interest he may
have in them, and cooperate with the Company in obtaining and perfecting any
patent, copyright, trademark, or other legal protection. This Section 6 shall
not apply to any invention which qualifies fully under California Labor Code
Section 2870, a true copy of which is attached to this Agreement as Exhibit A.
7. Conflict Of Interest: During the term of this Agreement,
Jones shall devote his time, ability, and attention to the business of the
Company, and shall not accept other employment or engage in any other outside
business activity which interferes with the performance of his duties and
responsibilities under this Agreement or which involves actual or potential
competition with the business of the Company, except with the express written
consent of the President.
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<PAGE> 6
8. Employee Benefit Plans: All of the employee benefit plans
referred to or contemplated by this Agreement shall be governed solely by the
terms of the underlying plan documents and by applicable law. Nothing in this
Agreement shall impair the Company's right to amend, modify, replace and
terminate any and all such plans in its sole discretion as provided by law, or
to terminate this Agreement in accordance with its terms. This Agreement is for
the sole benefit of Jones and the Company, and is not intended to create an
employee benefit plan or to modify the term of existing plans.
9. Parachute Limitation:
A. If the payments and benefits Jones is entitled to under
this Agreement and all other contracts, arrangements, or programs upon a
change in control shall, in the aggregate, exceed the maximum amount
that may be paid to Jones without triggering golden parachute penalties
under Section 280G and related provisions of the Internal Revenue Code,
as determined in good faith by the Company's independent auditors (the
"280G Ceiling"), then the cash amounts paid to Jones shall be increased
to the extent necessary to compensate Jones for all excise taxes
resulting from exceeding the 280G Ceiling, and all income and other
taxes due on such increased amounts, until Jones has received all
amounts he would have received if no excise taxes were due under Section
280G.
B. Although the Company does not believe it possible under the
terms of this Agreement, if the payments and benefits Jones would be
entitled to receive upon a termination would exceed the 280G Ceiling and
there has been no change in control, Jones' benefits shall be cut back
in the priority order designated by Jones or, if Jones fails promptly to
designate an order, in the priority order designated by the Company, to
an amount $1 less than the 280G Ceiling. If an amount in excess of the
limit set forth in this Section is paid to Jones and there has been no
change in control, Jones must repay the excess amount to the Company
upon demand. Jones and the Company agree reasonably to cooperate with
each other in connection with any administrative or judicial proceedings
concerning the existence or amount of golden parachute penalties with
respect to payments or benefits Jones receives.
10. Assignment: This Agreement may not be assigned by Jones, but
may be assigned by the Company to any successor in interest to its business. In
the event the Company does not survive any merger, acquisition, or other
reorganization, it shall make a reasonable effort to obtain an assumption of
this Agreement by the surviving entity in such merger, acquisition, or other
reorganization, but the failure to obtain such assumption shall not prevent or
delay such merger, acquisition, or other reorganization or relieve the Company
of its other obligations under this Agreement. This Agreement shall bind and
inure to the benefit of the Company's successors and assigns, as well as Jones'
heirs, executors, administrators, and legal representatives.
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11. Notices: All notices required by this Agreement may be
delivered by first class mail at the following addresses:
To the Company: Hycor Biomedical Inc.
18800 Von Karman Avenue
Irvine, California 92715
To Jones: Reginald P. Jones
26891 Venado
Mission Viejo, California 92691
12. Amendment: This Agreement may be modified only by written
agreement signed by the party against whom any amendment is to be enforced.
13. Choice Of Law: This Agreement shall be governed by the laws
of the State of California.
14. Partial Invalidity: In the event any provision of this
Agreement is void or unenforceable, the remaining provisions shall continue in
full force and effect.
15. Waiver: No waiver of any breach of this Agreement shall
constitute a waiver of any subsequent breach.
16. Complete Agreement: This Agreement contains the entire
agreement between the parties, and supersedes any and all prior and
contemporaneous oral and written agreements, including Jones' previous
employment contracts, which shall have no further force and effect.
"Jones" "Company"
REGINALD P. JONES HYCOR BIOMEDICAL INC.
______________________________ By:______________________________
Name:____________________________
Dated:________________________ Dated:___________________________
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EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RENTS
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer;
or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by HYCOR BIOMEDICAL INC., a Delaware corporation ("Company"), and THOMAS M. LI
("Li").
WHEREAS, the Company desires to employ Li in an executive
capacity, Li desires to accept such employment, and the parties desire to
memorialize the terms and conditions of their employment relationship,
NOW, THEREFORE, in consideration of the promises and covenants
set forth in this Agreement and for other valuable consideration, the parties
agree as follows:
1. Employment: Li shall be employed as a Vice President of the
Company reporting to the President, and shall faithfully and diligently perform
all duties and responsibilities required of such position or assigned by the
President from time to time, including service on behalf of the Company's
subsidiary and affiliated companies.
2. Term. This Agreement and Li's employment shall be for a term
of three (3) years commencing on June 20, 1997, and expiring on June 19, 2000,
but shall be automatically renewed for successive one-year periods thereafter
unless either party gives written notice to the other party of nonrenewal at
least three (3) months in advance of the expiration date.
3. Compensation: In consideration for all services to be
performed under this Agreement, Li shall receive the following compensation:
A. Salary: Li shall be paid base salary at the rate of One
Hundred Fifty Eight Thousand Six Hundred Dollars ($158,600) per year.
Annually, the Board of Directors, upon the recommendation of the
President, shall review Li's performance with a view toward increasing
his salary.
B. Bonus: Li shall be entitled to participate in the Company's
Annual Executive Incentive Plan and the Long Term Executive Incentive
Plan, subject to all of the terms and conditions set forth in said
plans, as amended from time to time, as long as such plans remain in
effect, and to participate in any successor or similar incentive plan
available to management personnel of comparable status with the Company
or its affiliates. Nothing herein or in said plans shall constitute a
guarantee of Li's employment by the Company, or a limitation on the
Company's rights under this Agreement, or limitation on the Company's
rights to amend or terminate any plan.
C. Employee Benefit Plans: Li shall be entitled to participate
in all employee benefit plans, including group medical, dental, visual,
and life insurance, pension, profit sharing, group and individual
disability income, stock option, vacation, and other benefit plans, on
terms commensurate with the benefits awarded management personnel of
comparable status with the Company or any affiliate of the Company, but
subject, on any termination, to Section 4.E below.
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<PAGE> 2
D. Expense Reimbursement: The Company shall reimburse Li for
all reasonable expenses that he necessarily incurs in connection with
his employment and for which he presents adequate documentation in
accordance with Company policies in effect from time to time.
4. Termination: This Agreement and Li's employment are subject to
immediate termination at any time as follows:
A. Death: This Agreement shall terminate immediately upon Li's
death, in which event the Company's only obligations shall be (i) to pay
all compensation owing for services rendered by Li prior to the date of
his death; (ii) to continue paying Li's base salary to his estate for a
period of thirty (30) days after his death; and (iii) to make periodic
recoverable advances to Li's estate equivalent to Li's base salary for
ninety (90) days after said thirty (30) day period has lapsed, or until
the proceeds from the life insurance policy on Li's life referred to in
this Agreement become available, whichever occurs first, with such
advances to be repaid when said insurance proceeds become available.
B. Disability: In the event that Li is disabled from
performing his assigned duties under this Agreement due to illness or
injury for a period in excess of one hundred eighty (180) days, the
Company may place Li on an unpaid leave of absence for a period not to
exceed six (6) months, in which case the Company's only obligation shall
be (i) to continue Li's group medical and life insurance for the
duration of the leave; (ii) to pay the bonus, if any, that Li would be
entitled to under the terms of the bonus plans referred to in Section 3B
of this Agreement; and (iii) to allow Li to continue receiving benefits
under the disability insurance and other employee benefit plans in
effect at the time of his disability in accordance with the terms and
conditions of such plans. The granting of a leave of absence does not
guarantee that Li will be returned to employment, and the Company
reserves the right to replace Li or to take other action in his absence
due to business necessity. If Li is certified to return to work before
his leave of absence expires, and desires to do so, the following
provisions shall apply: (i) the Company will attempt to return Li to his
same or similar position, provided this does not result in undue
hardship to the Company; and (ii) if the Company is unable to reinstate
Li because his position has been filled, then as a special severance
benefit, the Company shall pay a lump-sum severance payment equal to
twenty (20) months of Li's base salary as in effect immediately prior to
the commencement of Li's leave of absence. If Li is not certified to
return to work before his leave of absence expires, or does not desire
to return, his employment and this Agreement shall terminate upon the
expiration of his leave of absence.
C. Termination For Cause: The Company may terminate this
Agreement for cause immediately upon written notice to Li in the event
Li (i) engages in any material misconduct, willful breach, or habitual
neglect of his duties as an officer of the Company, or (ii) is finally
convicted of a felony. In either event, the Company's sole obligation to
Li in lieu of all claims for compensation or damages shall be to pay all
compensation owing for services rendered by Li prior to the date of
termination under this subsection.
D. Termination Without Cause: The Company in its sole
discretion may terminate this Agreement without cause or prior warning
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<PAGE> 3
immediately upon written notice to Li. For purposes of this Section 4D,
any failure to renew this Agreement and any resignation following a
substantial reduction in Li's salary, duties or responsibilities shall
constitute an involuntary termination without cause. In the event of a
termination under this Section 4D the Company shall pay all compensation
owing for services rendered by Li prior to the date of termination,
shall pay a lump-sum severance benefit equal to twelve (12) months of
Li's base salary at the time of termination, and shall continue to
provide Li at Company expense all medical, disability and insurance
benefits available to him at the time of termination for a period of
twelve (12) months after the termination or, if shorter, the maximum
period allowed under the Company's policies as then in effect or under
applicable law. As an additional severance payment, if the Company has
in effect at the time of any termination without cause under this
Section 4D any bonus or incentive plan which provides for awards in cash
and is based on the Company's revenues or results of operations for a
fiscal year, Li shall be entitled to an amount equal to a pro rata award
based on the period of the fiscal year for which he was employed if a
termination under this Section 4D occurs after the completion of three
fiscal quarters. Such severance shall be payable at the same time, and
computed on the same terms, as awards under the plan in question, except
for periods of service. Such payments and benefits shall not entitle Li
to any other benefits or compensation program available to Company
employees.
E. Termination Following Change In Control: If either the
Company elects to terminate Li without cause pursuant to Section 4(D)
within ninety (90) days before or twenty four (24) months after a change
in control or Li elects to resign with good reason within twenty four
(24) months after a change in control of the Company, then as a
severance benefit and in lieu of all compensation or damages the Company
shall (i) pay Li a lump sum equal to 200% of the average of the annual
base salary plus bonuses paid to Li during each of the three years prior
to the time of such termination or resignation, (ii) continue to provide
Li at Company expense all medical, disability and insurance benefits
available to him at the time of such termination or resignation for a
period of twenty four (24) months after such termination or resignation,
or, if shorter, the maximum period allowed under the Company's policies
as then in effect or under applicable law, (iii) accelerate the vesting
of all unvested stock options granted to Li under the Company's stock
option or other benefit plans so that all such stock options will vest
and be fully exercisable on the date of such termination or resignation,
and (iv) extend the post-termination exercise period for all stock
options granted to Li under the Company's stock option and other benefit
plans so that all such stock options will be exercisable for a period of
three months after the date of such termination or resignation (except
that with respect to any stock options having a post-termination
exercise period in excess of three months, such longer post-termination
exercise period shall remain in effect).
For purposes of this subsection, the term "change in control"
shall mean any change in control that the Company would be required to
report in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Without limiting the foregoing, a change in control
shall also be deemed to have occurred if (i) any "person" as defined in
Section 13(d) and 14(d) of the Exchange Act is or becomes, directly or
indirectly, the "beneficial owner" as defined in Rule 13 (d-3) under the
Exchange Act of securities of the Company which represent 25% or more of
the combined voting power of the Company's
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then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of said two year
period constituted the Board of Directors of the Company cease for any
reason to constitute at least a majority of the Board unless the
election or nomination of each new director was approved by a vote of at
least two-thirds of the directors who were in office at the beginning of
said two year period.
For purposes of this subsection, Li shall be deemed to have
resigned "with good reason" if he does so following a change in control
as a result of the Company having done any or all of the following
without Li's express written consent: (i) assigned Li different duties
or made changes in his reporting responsibilities, title, or office that
are substantially inconsistent with Li's duties, responsibilities,
titles, or offices immediately prior to the change in control; (ii)
reduced Li's base salary from that in effect at the time of the change
in control; (iii) failed to continue any bonus plan in substantially the
same form as it existed prior to the change in control; (iv) required Li
to be based more than fifty (50) miles from his present office location,
except for required travel consistent with Li's present business travel
obligations; (v) failed to continue any plan or program for
compensation, employee benefits, stock purchase or ownership, life
insurance, group medical, disability, or vacation in substantially the
same form as immediately prior to the change in control, or otherwise
made any material reduction in Li's fringe benefits, or (vi) failed to
obtain the assumption of this Agreement by any successor to the Company.
Li shall not be entitled to the benefits of this Section 4(E)
if this Agreement and his employment are terminated pursuant to Section
4(A), (B) or (C).
F. Company's Obligations Under This Agreement Exclusive: The
benefits set forth in subsections A through E above (which benefits, in
the event of termination pursuant to subsections A, C, D or E, include
payment for services rendered prior to termination as provided in such
subsections), as applicable, constitute the sole obligations of the
Company to Li upon a termination and are in lieu of any damages or other
compensation that Li may claim under other Company policies in
connection with this Agreement. The benefits on termination in this
Agreement are in substitution for any severance or termination benefits
otherwise available under Company policies of general application. Li
expressly acknowledges that certain Company benefit or incentive plans
provide for vesting in, or award of, benefits based on employment on or
through particular dates and that nothing in this Agreement entitles him
to partial vesting or partial awards under such plans. Any payments
under Section 4D relating to any incentive or bonus plan are expressly
acknowledged to be benefits under this Agreement and not an
interpretation or modification of any such plan.
G. Resignation As Officer: In the event of any termination
pursuant to this Section 4, Li shall be deemed to have resigned as an
officer of the Company if he was serving in such capacity at the time of
termination.
5. Confidentiality: Li acknowledges and agrees that he has been
and will continue to be entrusted with trade and proprietary information
regarding the products, processes, methods of manufacture and delivery,
know-how, designs, formula, work in progress, research and development, computer
software and data bases, copyrights, trademarks, patents, marketing techniques,
and future business
Page 38
<PAGE> 5
plans, as well as customer lists and information concerning
the identity, needs, and desires of actual and potential customers of the
Company and its subsidiaries, joint venturers, partners, and other affiliated
persons and entities ("Confidential Information"), all of which derive
significant economic value from not being generally known to others outside the
Company.
A. During the entire term of his employment with the Company
and for two years thereafter, Li shall not disclose or exploit any
Confidential Information except for the sole benefit of the Company or
with its express written consent.
B. During the entire term of his employment by the Company and
for one year thereafter, Li shall not directly or indirectly solicit any
actual or potential customer of the Company or its subsidiary and
affiliated companies for any business that competes directly or
indirectly with the Company, except for the sole benefit of the Company
or with its express written consent.
C. During the entire term of his employment by the Company and
for one year thereafter, Li shall not induce or attempt to induce any
employee of the Company to leave the Company's employ except for the
sole benefit of the Company or with its express written consent.
D. In the event any provision in this Section 5 is more
restrictive than allowed by the law of any jurisdiction in which the
Company seeks enforcement, such provision shall be deemed amended and
shall then be fully enforceable to the extent permitted by such law.
E. Li acknowledges and agrees that any violation of this
Section 5 would cause immediate irreparable damage to the Company, and
that it would be extremely difficult or impossible to determine the
amount of damage caused to the Company. Li therefore agrees that the
Company's remedies at law are inadequate, and hereby consents to
issuance of a temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any actual or
threatened violation of this Section, without limiting any remedies the
Company may have at law or in equity.
6. Inventions: Any and all patents, copyrights, trademarks,
inventions, discoveries, developments, or trade secrets developed or perfected
by Li during or as the result of his employment with the Company shall
constitute the sole and exclusive property of the Company. Li shall disclose all
such matters to the Company, assign all right, title and interest he may have in
them, and cooperate with the Company in obtaining and perfecting any patent,
copyright, trademark, or other legal protection. This Section 6 shall not apply
to any invention which qualifies fully under California Labor Code Section 2870,
a true copy of which is attached to this Agreement as Exhibit A.
7. Conflict Of Interest: During the term of this Agreement, Li
shall devote his time, ability, and attention to the business of the Company,
and shall not accept other employment or engage in any other outside business
activity which interferes with the performance of his duties and
responsibilities under this Agreement or which involves actual or potential
competition with the business of the Company, except with the express written
consent of the President.
Page 39
<PAGE> 6
8. Employee Benefit Plans: All of the employee benefit plans
referred to or contemplated by this Agreement shall be governed solely by the
terms of the underlying plan documents and by applicable law. Nothing in this
Agreement shall impair the Company's right to amend, modify, replace and
terminate any and all such plans in its sole discretion as provided by law, or
to terminate this Agreement in accordance with its terms. This Agreement is for
the sole benefit of Li and the Company, and is not intended to create an
employee benefit plan or to modify the term of existing plans.
9. Parachute Limitation: The payments and benefits Li is entitled
to under this Agreement and all other contracts, arrangements, or programs shall
not, in the aggregate, exceed the maximum amount that may be paid to Li without
triggering golden parachute penalties under Section 280G and related provisions
of the Internal Revenue Code, as determined in good faith by the Company's
independent auditors. If Li's benefits must be cut back to avoid triggering such
penalties, Li's benefits shall be cut back in the priority order designated by
Li or, if Li fails promptly to designate an order, in the priority order
designated by the Company. If an amount in excess of the limit set forth in this
Section is paid to Li, Li must repay the excess amount to the Company upon
demand, with interest at the rate provided for in Internal Revenue Code Section
1274(b)(2)(B). Li and the Company agree reasonably to cooperate with each other
in connection with any administrative or judicial proceedings concerning the
existence or amount of golden parachute penalties with respect to payments or
benefits Li receives.
10. Assignment: This Agreement may not be assigned by Li, but may
be assigned by the Company to any successor in interest to its business. In the
event the Company does not survive any merger, acquisition, or other
reorganization, it shall make a reasonable effort to obtain an assumption of
this Agreement by the surviving entity in such merger, acquisition, or other
reorganization, but the failure to obtain such assumption shall not prevent or
delay such merger, acquisition, or other reorganization or relieve the Company
of its other obligations under this Agreement. This Agreement shall bind and
inure to the benefit of the Company's successors and assigns, as well as Li's
heirs, executors, administrators, and legal representatives.
11. Notices: All notices required by this Agreement may be
delivered by first class mail at the following addresses:
To the Company: Hycor Biomedical Inc.
18800 Von Karman Avenue
Irvine, California 92715
To Li: Thomas M. Li
6772 Findley Circle
Huntington Beach, California 92648
12. Amendment. This Agreement may be modified only by written
agreement signed by the party against whom any amendment is to be enforced.
13. Choice Of Law: This Agreement shall be governed by the laws
of the State of California.
14. Partial Invalidity: In the event any provision of this
Agreement is void or unenforceable, the remaining provisions shall continue in
full force and effect.
Page 40
<PAGE> 7
15. Waiver: No waiver of any breach of this Agreement shall
constitute a waiver of any subsequent breach.
16. Complete Agreement: This Agreement contains the entire
agreement between the parties, and supersedes any and all prior and
contemporaneous oral and written agreements, including Li's previous employment
contracts, which shall have no further force and effect.
THOMAS M. LI
_____________________________ Dated: __________________
HYCOR BIOMEDICAL INC.
By:___________________________ Dated: __________________
Name: _____________________
Title: _______________________
Page 41
<PAGE> 8
EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RENTS
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer;
or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
Page 42
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
by HYCOR BIOMEDICAL INC., a Delaware corporation ("Company"), and NELSON F.
THUNE ("Thune").
WHEREAS, the Company desires to employ Thune in an executive
capacity, Thune desires to accept such employment, and the parties desire to
memorialize the terms and conditions of their employment relationship,
NOW, THEREFORE, in consideration of the promises and covenants
set forth in this Agreement and for other valuable consideration, the parties
agree as follows:
1. Employment: Thune shall be employed as a Vice President of the
Company reporting to the President, and shall faithfully and diligently perform
all duties and responsibilities required of such position or assigned by the
President from time to time, including service on behalf of the Company's
subsidiary and affiliated companies.
2. Term. This Agreement and Thune's employment shall be for a
term of three (3) years commencing on June 20, 1997, and expiring on June 19,
2000, but shall be automatically renewed for successive one-year periods
thereafter unless either party gives written notice to the other party of
nonrenewal at least three (3) months in advance of the expiration date.
3. Compensation: In consideration for all services to be
performed under this Agreement, Thune shall receive the following compensation:
A. Salary: Thune shall be paid base salary at the rate of One
Hundred Sixty-One Thousand Seven Hundred Dollars ($161,700) per year.
Annually, the Board of Directors, upon the recommendation of the
President, shall review Thune's performance with a view toward
increasing his salary.
B. Bonus: Thune shall be entitled to participate in the
Company's Annual Executive Incentive Plan and the Long Term Executive
Incentive Plan, subject to all of the terms and conditions set forth in
said plans, as amended from time to time, as long as such plans remain
in effect, and to participate in any successor or similar incentive plan
available to management personnel of comparable status with the Company
or its affiliates. Nothing herein or in said plans shall constitute a
guarantee of Thune's employment by the Company, or a limitation on the
Company's rights under this Agreement, or limitation on the Company's
rights to amend or terminate any plan.
C. Employee Benefit Plans: Thune shall be entitled to
participate in all employee benefit plans, including group medical,
dental, visual, and life insurance, pension, profit sharing, group and
individual disability income, stock option, vacation, and other benefit
plans, on terms commensurate with the benefits awarded management
personnel of comparable status with the Company or any affiliate of the
Company, but subject, on any termination, to Section 4.E below.
Page 43
<PAGE> 2
D. Expense Reimbursement: The Company shall reimburse Thune
for all reasonable expenses that he necessarily incurs in connection
with his employment and for which he presents adequate documentation in
accordance with Company policies in effect from time to time.
4. Termination: This Agreement and Thune's employment are subject
to immediate termination at any time as follows:
A. Death: This Agreement shall terminate immediately upon
Thune's death, in which event the Company's only obligations shall be
(i) to pay all compensation owing for services rendered by Thune prior
to the date of his death; (ii) to continue paying Thune's base salary to
his estate for a period of thirty (30) days after his death; and (iii)
to make periodic recoverable advances to Thune's estate equivalent to
Thune's base salary for ninety (90) days after said thirty (30) day
period has lapsed, or until the proceeds from the life insurance policy
on Thune's life referred to in this Agreement become available,
whichever occurs first, with such advances to be repaid when said
insurance proceeds become available.
B. Disability: In the event that Thune is disabled from
performing his assigned duties under this Agreement due to illness or
injury for a period in excess of one hundred eighty (180) days, the
Company may place Thune on an unpaid leave of absence for a period not
to exceed six (6) months, in which case the Company's only obligation
shall be (i) to continue Thune's group medical and life insurance for
the duration of the leave; (ii) to pay the bonus, if any, that Thune
would be entitled to under the terms of the bonus plans referred to in
Section 3B of this Agreement; and (iii) to allow Thune to continue
receiving benefits under the disability insurance and other employee
benefit plans in effect at the time of his disability in accordance with
the terms and conditions of such plans. The granting of a leave of
absence does not guarantee that Thune will be returned to employment,
and the Company reserves the right to replace Thune or to take other
action in his absence due to business necessity. If Thune is certified
to return to work before his leave of absence expires, and desires to do
so, the following provisions shall apply: (i) the Company will attempt
to return Thune to his same or similar position, provided this does not
result in undue hardship to the Company; and (ii) if the Company is
unable to reinstate Thune because his position has been filled, then as
a special severance benefit, the Company shall pay a lump-sum severance
payment equal to twenty (20) months of Thune's base salary as in effect
immediately prior to the commencement of Thune's leave of absence. If
Thune is not certified to return to work before his leave of absence
expires, or does not desire to return, his employment and this Agreement
shall terminate upon the expiration of his leave of absence.
C. Termination For Cause: The Company may terminate this
Agreement for cause immediately upon written notice to Thune in the
event Thune (i) engages in any material misconduct, willful breach, or
habitual neglect of his duties as an officer of the Company, or (ii) is
finally convicted of a felony. In either event, the Company's sole
obligation to Thune in lieu of all claims for compensation or damages
shall be to pay all compensation owing for services rendered by Thune
prior to the date of termination under this subsection.
Page 44
<PAGE> 3
D. Termination Without Cause: The Company in its sole
discretion may terminate this Agreement without cause or prior warning
immediately upon written notice to Thune. For purposes of this Section
4D, any failure to renew this Agreement and any resignation following a
substantial reduction in Thune's salary, duties or responsibilities
shall constitute an involuntary termination without cause. In the event
of a termination under this Section 4D, the Company shall pay all
compensation owing for services rendered by Thune prior to the date of
termination, shall pay a lump-sum severance benefit equal to twelve (12)
months of Thune's base salary at the time of termination, and shall
continue to provide Thune at Company expense all medical, disability and
insurance benefits available to him at the time of termination for a
period of twelve (12) months after the termination or, if shorter, the
maximum period allowed under the Company's policies as then in effect or
under applicable law. As an additional severance payment, if the Company
has in effect at the time of any termination without cause under this
Section 4D any bonus or incentive plan which provides for awards in cash
and is based on the Company's revenues or results of operations for a
fiscal year, Thune shall be entitled to an amount equal to a pro rata
award based on the period of the fiscal year for which he was employed
if a termination under this Section 4D occurs after the completion of
three fiscal quarters. Such severance shall be payable at the same time,
and computed on the same terms, as awards under the plan in question,
except for periods of service. Such payments and benefits shall not
entitle Thune to any other benefits or compensation program available to
Company employees.
E. Termination Following Change In Control: If either the
Company elects to terminate Thune without cause pursuant to Section 4(D)
within ninety (90) days before or twenty four (24) months after a change
in control or Thune elects to resign with good reason within twenty four
(24) months after a change in control of the Company, then as a
severance benefit and in lieu of all compensation or damages the Company
shall (i) pay Thune a lump sum equal to 200% of the average of the
annual base salary plus bonuses paid to Thune during each of the three
years prior to the time of such termination or resignation, (ii)
continue to provide Thune at Company expense all medical, disability and
insurance benefits available to him at the time of such termination or
resignation for a period of twenty four (24) months after such
termination or resignation, or, if shorter, the maximum period allowed
under the Company's policies as then in effect or under applicable law,
(iii) accelerate the vesting of all unvested stock options granted to
Thune under the Company's stock option or other benefit plans so that
all such stock options will vest and be fully exercisable on the date of
such termination or resignation, and (iv) extend the post-termination
exercise period for all stock options granted to Thune under the
Company's stock option and other benefit plans so that all such stock
options will be exercisable for a period of three months after the date
of such termination or resignation (except that with respect to any
stock options having a post-termination exercise period in excess of
three months, such longer post-termination exercise period shall remain
in effect).
For purposes of this subsection, the term "change in control"
shall mean any change in control that the Company would be required to
report in response to Item 5(f) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Without limiting the foregoing, a change in control
shall also be deemed to have occurred if (i) any "person" as defined in
Section 13(d) and 14(d) of the Exchange Act is or becomes, directly or
indirectly, the "beneficial owner" as
Page 45
<PAGE> 4
defined in Rule 13 (d-3) under the Exchange Act of securities of the
Company which represent 25% or more of the combined voting power of the
Company's then outstanding securities; or (ii) during any period of two
consecutive years, individuals who at the beginning of said two year
period constituted the Board of Directors of the Company cease for any
reason to constitute at least a majority of the Board unless the
election or nomination of each new director was approved by a vote of at
least two-thirds of the directors who were in office at the beginning of
said two year period.
For purposes of this subsection, Thune shall be deemed to have
resigned "with good reason" if he does so following a change in control
as a result of the Company having done any or all of the following
without Thune's express written consent: (i) assigned Thune different
duties or made changes in his reporting responsibilities, title, or
office that are substantially inconsistent with Thune's duties,
responsibilities, titles, or offices immediately prior to the change in
control; (ii) reduced Thune's base salary from that in effect at the
time of the change in control; (iii) failed to continue any bonus plan
in substantially the same form as it existed prior to the change in
control; (iv) required Thune to be based more than fifty (50) miles from
his present office location, except for required travel consistent with
Thune's present business travel obligations; (v) failed to continue any
plan or program for compensation, employee benefits, stock purchase or
ownership, life insurance, group medical, disability, or vacation in
substantially the same form as immediately prior to the change in
control, or otherwise made any material reduction in Thune's fringe
benefits, or (vi) failed to obtain the assumption of this Agreement by
any successor to the Company.
Thune shall not be entitled to the benefits of this Section
4(E) if this Agreement and his employment are terminated pursuant to
Section 4(A), (B) or (C).
F. Company's Obligations Under This Agreement Exclusive: The
benefits set forth in subsections A through E above (which benefits, in
the event of termination pursuant to Subsections A, C, D or E, include
payment for services rendered prior to termination as provided in such
subsections), as applicable, constitute the sole obligations of the
Company to Thune upon a termination and are in lieu of any damages or
other compensation that Thune may claim under other Company policies in
connection with this Agreement. The benefits on termination in this
Agreement are in substitution for any severance or termination benefits
otherwise available under Company policies of general application. Thune
expressly acknowledges that certain Company benefit or incentive plans
provide for vesting in, or award of, benefits based on employment on or
through particular dates and that nothing in this Agreement entitles him
to partial vesting or partial awards under such plans. Any payments
under Section 4D relating to any incentive or bonus plan are expressly
acknowledged to be benefits under this Agreement and not an
interpretation or modification of any such plan.
G. Resignation As Officer: In the event of any termination
pursuant to this Section 4, Thune shall be deemed to have resigned as an
officer of the Company if he was serving in such capacity at the time of
termination.
5. Confidentiality: Thune acknowledges and agrees that he has
been and will continue to be entrusted with trade and proprietary information
regarding the
Page 46
<PAGE> 5
products, processes, methods of manufacture and delivery, know-how, designs,
formula, work in progress, research and development, computer software and data
bases, copyrights, trademarks, patents, marketing techniques, and future
business plans, as well as customer lists and information concerning the
identity, needs, and desires of actual and potential customers of the Company
and its subsidiaries, joint venturers, partners, and other affiliated persons
and entities ("Confidential Information"), all of which derive significant
economic value from not being generally known to others outside the Company.
A. During the entire term of his employment with the Company
and for two years thereafter, Thune shall not disclose or exploit any
Confidential Information except for the sole benefit of the Company or
with its express written consent.
B. During the entire term of his employment by the Company and
for one year thereafter, Thune shall not directly or indirectly solicit
any actual or potential customer of the Company or its subsidiary and
affiliated companies for any business that competes directly or
indirectly with the Company, except for the sole benefit of the Company
or with its express written consent.
C. During the entire term of his employment by the Company and
for one year thereafter, Thune shall not induce or attempt to induce any
employee of the Company to leave the Company's employ except for the
sole benefit of the Company or with its express written consent.
D. In the event any provision in this Section 5 is more
restrictive than allowed by the law of any jurisdiction in which the
Company seeks enforcement, such provision shall be deemed amended and
shall then be fully enforceable to the extent permitted by such law.
E. Thune acknowledges and agrees that any violation of this
Section 5 would cause immediate irreparable damage to the Company, and
that it would be extremely difficult or impossible to determine the
amount of damage caused to the Company. Thune therefore agrees that the
Company's remedies at law are inadequate, and hereby consents to
issuance of a temporary restraining order, preliminary and permanent
injunction, and other appropriate relief to restrain any actual or
threatened violation of this Section, without limiting any remedies the
Company may have at law or in equity.
6. Inventions: Any and all patents, copyrights, trademarks,
inventions, discoveries, developments, or trade secrets developed or perfected
by Thune during or as the result of his employment with the Company shall
constitute the sole and exclusive property of the Company. Thune shall disclose
all such matters to the Company, assign all right, title and interest he may
have in them, and cooperate with the Company in obtaining and perfecting any
patent, copyright, trademark, or other legal protection. This Section 6 shall
not apply to any invention which qualifies fully under California Labor Code
Section 2870, a true copy of which is attached to this Agreement as Exhibit A.
7. Conflict Of Interest: During the term of this Agreement, Thune
shall devote his time, ability, and attention to the business of the Company,
and shall not accept other employment or engage in any other outside business
activity which interferes with the performance of his duties and
responsibilities under this Agreement
Page 47
<PAGE> 6
or which involves actual or potential competition with the business of the
Company, except with the express written consent of the President.
8. Employee Benefit Plans: All of the employee benefit plans
referred to or contemplated by this Agreement shall be governed solely by the
terms of the underlying plan documents and by applicable law. Nothing in this
Agreement shall impair the Company's right to amend, modify, replace and
terminate any and all such plans in its sole discretion as provided by law, or
to terminate this Agreement in accordance with its terms. This Agreement is for
the sole benefit of Thune and the Company, and is not intended to create an
employee benefit plan or to modify the term of existing plans.
9. Parachute Limitation: The payments and benefits Thune is
entitled to under this Agreement and all other contracts, arrangements, or
programs shall not, in the aggregate, exceed the maximum amount that may be paid
to Thune without triggering golden parachute penalties under Section 280G and
related provisions of the Internal Revenue Code, as determined in good faith by
the Company's independent auditors. If Thune's benefits must be cut back to
avoid triggering such penalties, Thune's benefits shall be cut back in the
priority order designated by Thune or, if Thune fails promptly to designate an
order, in the priority order designated by the Company. If an amount in excess
of the limit set forth in this Section is paid to Thune, Thune must repay the
excess amount to the Company upon demand, with interest at the rate provided for
in Internal Revenue Code Section 1274(b)(2)(B). Thune and the Company agree
reasonably to cooperate with each other in connection with any administrative or
judicial proceedings concerning the existence or amount of golden parachute
penalties with respect to payments or benefits Thune receives.
10. Assignment: This Agreement may not be assigned by Thune, but
may be assigned by the Company to any successor in interest to its business. In
the event the Company does not survive any merger, acquisition, or other
reorganization, it shall make a reasonable effort to obtain an assumption of
this Agreement by the surviving entity in such merger, acquisition, or other
reorganization, but the failure to obtain such assumption shall not prevent or
delay such merger, acquisition, or other reorganization or relieve the Company
of its other obligations under this Agreement. This Agreement shall bind and
inure to the benefit of the Company's successors and assigns, as well as Thune's
heirs, executors, administrators, and legal representatives.
11. Notices: All notices required by this Agreement may be
delivered by first class mail at the following addresses:
To the Company: Hycor Biomedical Inc.
18800 Von Karman Avenue
Irvine, California 92715
To Thune: Nelson F. Thune
14 Brentano
Coto de Caza, California 92679
12. Amendment. This Agreement may be modified only by written
agreement signed by the party against whom any amendment is to be enforced.
13. Choice Of Law: This Agreement shall be governed by the laws
of the State of California.
Page 48
<PAGE> 7
14. Partial Invalidity: In the event any provision of this
Agreement is void or unenforceable, the remaining provisions shall continue in
full force and effect.
15. Waiver: No waiver of any breach of this Agreement shall
constitute a waiver of any subsequent breach.
16. Complete Agreement: This Agreement contains the entire
agreement between the parties, and supersedes any and all prior and
contemporaneous oral and written agreements, including Thune's previous
employment contracts, which shall have no further force and effect.
NELSON F. THUNE
Dated:___________
HYCOR BIOMEDICAL INC.
By:_____________________________ Dated:___________
Name:________________________
Title:_______________________
Page 49
<PAGE> 8
EXHIBIT A
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RENTS
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or
demonstrably anticipated research or development of the employer;
or
(2) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
Page 50
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 662,565
<SECURITIES> 2,009,006
<RECEIVABLES> 3,133,934
<ALLOWANCES> 76,934
<INVENTORY> 4,306,588
<CURRENT-ASSETS> 11,980,546
<PP&E> 12,543,636
<DEPRECIATION> 7,397,883
<TOTAL-ASSETS> 22,538,136
<CURRENT-LIABILITIES> 3,109,831
<BONDS> 0
0
0
<COMMON> 71,219
<OTHER-SE> 17,198,659
<TOTAL-LIABILITY-AND-EQUITY> 22,538,136
<SALES> 14,126,566
<TOTAL-REVENUES> 14,126,566
<CGS> 6,484,235
<TOTAL-COSTS> 6,484,235
<OTHER-EXPENSES> 11,951,434
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,158,493)
<INCOME-TAX> (349,818)
<INCOME-CONTINUING> (3,808,675)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,808,675)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
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