UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number:0-28498
PARADIGM MEDICAL INDUSTRIES, INC.
---------------------------------
Exact Name of Registrant.
DELAWARE 87-0459536
------------------------------- ------------------
(State or other jurisdiction IRS Identification
of incorporation or organization) Number
1127 West 2320 South, Suite A, Salt Lake City, Utah 84119
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including Area Code (801) 977-8970
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for 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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity as of the close of the period covered by this report.
Common Stock, $.001 par value 4,348,701
- ----------------------------- ------------
Title of Class Number of Shares
Outstanding as of
September 30, 1998
Series A Preferred, $.001 par value 36,122
- ----------------------------------- ------------
Title of Class Number of Shares
Outstanding as of
September 30, 1998
Series B Preferred, $.001 par value 31,236
- ------------------------------------ ------------
Title of Class Number of Shares
Outstanding as of
September 30, 1998
Series C Preferred, $.001 par value 25,079
- ------------------------------------ ------------
Title of Class Number of Shares
Outstanding as of
September 30, 1998
Transitional Small Business Disclosure Format
YES NO X
--- ---
(1)
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
FORM 10-QSB
QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
No.
----
Item 1. Financial Statements
- -------
Balance Sheets (unaudited) - September 30, 1998 and
December 31, 1997 ...................................................... 3
Statements of Operations (unaudited) for the three months and the nine
months ended September 30, 1998 and September 30, 1997 ................. 4
Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1998 and September 30, 1997 ........................ 5
Notes to Financial Statements (unaudited) .............................. 6
Item 2.
- -------
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................................. 7
PART II - OTHER INFORMATION
Other Information ..................................................... 11
Signature Page ........................................................ 14
(2)
<PAGE>
<TABLE>
<CAPTION>
PARADIGM MEDICAL INDUSTRIES, INC.
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1998 1997
------- -------
(Unaudited) (Audited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 683,921 $ 886,558
Trade accounts receivable 531,252 120,853
Inventories 969,145 833,930
Prepaid expenses 35,770 15,787
------------ ------------
Total current assets 2,220,088 1,857,128
Prepaid financing costs -- 425,029
Capitalized engineering and design charges 253,704 309,396
Ultrasound production rights and engineering 374,000 --
Property and equipment, net 120,720 121,274
------------ ------------
Total assets $ 2,968,512 $ 2,712,827
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 52,471 $ 243,206
Accounts payable - related parties 61,583 458,467
Accrued expenses 99,015 349,930
Note payable to bank - current 3,896 3,620
Purchase Deposits 10,500 --
------------ ------------
Total current liabilities 227,465 1,055,223
Note payable, less current portion 9,065 1,081,996
------------ ------------
Total liabilities 236,530 2,137,219
------------ ------------
Stockholders' equity:
Preferred stock, authorized:
5,000,000 shares, $.001 par value
Series A
Authorized: 500,000 shares; issued and
outstanding: 36,122 shares at June 30, 1998 and
50,122 shares at December 31, 1997 36 50
Series B
Authorized: 500,000 shares; issued and
outstanding: 31,236 shares at September 30, 1998
and 45,383 shares at December 31, 1997 31 45
Series C
Authorized: 30,000 shares; issued and
outstanding: 25,079 shares at September 30, 1998 25 --
Common stock, authorized: 20,000,000 shares, $.001 per value;
issued and outstanding: 4,348,701 shares at September 30, 1998
and 3,798,931 shares at December 31, 1997 4,349 3,799
Additional paid-in-capital 17,265,487 8,833,897
Treasury stock, 2,600 shares, at cost (3,777) (3,777)
Accumulated deficit (14,534,169) (8,258,406)
------------ -------------
Total stockholders' equity 2,731,982 575,608
------------ -------------
Total liabilities and stockholders' equity $ 2,968,512 $ 2,712,827
============ =============
</TABLE>
(3)
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
------
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 60,395 $ 18,203 $ 1,037,781 $ 378,610
------------ ------------ ------------ ------------
Cost of sales 29,755 12,213 499,816 207,277
Amortization of capitalized engineering and
and design charges 18,564 18,564 55,692 42,876
------------ ------------ ------------ ------------
Net cost of sales 48,319 30,777 555,508 250,153
------------ ------------ ------------ ------------
Gross profit (loss) 12,076 (12,574) 482,273 128,457
------------ ------------ ------------ ------------
Operating expenses:
Marketing and selling 207,254 182,277 566,237 434,029
General and administrative 361,245 481,042 1,071,923 1,256,098
Research and development 38,111 55,973 264,282 569,887
------------ ------------ ------------ ------------
Total operating expenses 606,610 719,292 1,902,442 2,260,014
------------ ------------ ------------ ------------
Operating loss (594,534) (731,866) (1,420,169) (2,131,557)
------------ ------------ ------------ ------------
Other income (expense):
Interest income 12,381 11,369 44,568 53,807
Interest expense (3,520) (19,023) (31,724) (19,929)
Other (502) -- 1,586 --
------------ ------------ ------------ ------------
Total other income (expense) 8,359 (7,654) 14,430 33,878
------------ ------------ ------------ ------------
Net loss $ (586,175) $ (739,520) $(1,405,739) $(2,097,679)
------------ ------------ ------------ ------------
Net operating loss per common share $ (0.14) $ (0.20) $ (0.36) $ (0.58)
============ ============ ============ ============
Non-cash preferred stock dividend on Series "C" $(4,870,023) $ --
------------ ------------
Net loss attributable to common shareholders, after
non-cash preferred dividend $(6,275,762) $(2,097,679)
Net loss per common share, after non-cash
preferred dividend $ (1.61) $ (0.58).
============ =============
Shares used in computing net loss per common share 4,046,000 3,751,000 3,892,000 3,638,000
</TABLE>
- -------------------------
<F1>Based on EITF D-60, the difference between the conversion price per share of
the Series "C" Preferred stock and the grant dates' market price per share of
the Common into which the preferred stock is convertible, multiplied by the
number of common shares into which the preferred stock is convertible, must be
recognized as a non-cash dividend.
(4)
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------
1998 1997
---- ----
(Unaudited) (Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net loss $(1,405,739) $(2,097,679)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 78,449 65,362
Issuance of common stock for compensation, services and
payables 410,250 125,272
(Increase) decrease from changes in:
Trade accounts receivable (410,399) (21,644)
Inventories (135,215) (718,026)
Prepaid expenses (19,983) 330
Deferred charges -- (360,836)
Debt financing cost 164,776 --
Increase (decrease) from changes in:
Trade accounts payable (190,735) 176,009
Trade accounts payable - related parties (396,884) 211,067
Purchase deposits 10,500 33,500
Accrued expenses (29,438) (7,740)
------------ -----------
Net cash used in operatingactivities (1,924,419) (2,594,385)
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment (22,203) (12,747)
Proceeds from the sale of marketable debt securities - available for sale -- 499,469
------------ -----------
Net cash used in investing activities (22,203) 486,722
------------ -----------
Cash flows from financing activities:
Proceeds from exercise of warrants -- 41,632
Principle payments on notes payable (2,655) (3,403)
Net Proceeds for Series "C" Stock Issue 1,746,640 --
------------ -----------
Net cash provided by financing activities 1,743,985 38,229
------------ -----------
Net increase (decrease) in cash and cash equivalents (202,637) (2,069,434)
Cash and cash equivalents at beginning of period 886,558 2,468,988
------------ -----------
Cash and cash equivalents at end of period $ 683,921 $ 399,554
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 31,724 $ 19,023
</TABLE>
(5)
<PAGE>
PARADIGM MEDICAL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
-----------
1.Significant Accounting Policies:
--------------------------------
In the opinion of management, the accompanying financial statements contain
all adjustments (consisting only of normal recurring items) necessary to
present fairly the financial position of Paradigm Medical Industries, Inc.
"the Company" as of September 30, 1998, and the results of its operations
for the three months and the nine months ended September 30, 1997 and 1998,
and its cash flows for the nine months ended September 30, 1997 and 1998.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year period.
Net Loss Per Share
------------------
Net loss per common share is computed on the weighted average number of
common and common equivalent shares outstanding during each period. Common
stock equivalents consist of convertible preferred stock, common stock
options and warrants. Common equivalent shares are excluded from the
computation when their effect is anti-dilutive. Other common stock
equivalents have not been included in loss years because they are
anti-dilutive.
2.Legal Proceedings:
------------------
The company is not a party to any legal proceedings.
3.Preferred Stock Conversions:
----------------------------
Under the Company's Articles of Incorporation, holders of the Company's
Class A and Class B Preferred Stock have the right to convert such stock
into shares of the Company's common stock at the rate of 1.2 shares of
common stock for each share of preferred stock. During the three month
period ended September 30, 1998 2,000 shares of Series B Preferred Stock
and no Series A Preferred Stock were converted into 2,400 shares of common
stock.
In January 1998, the Company's Board of Directors authorized the issuance
of a total of 30,000 shares of non-voting Class C Preferred Stock, $.001
par value, $100 stated value. Each share is convertible into approximately
57.14 shares of common stock at an initial conversion price, subject to
adjustments for stock splits, stock dividends and certain combinations or
recapitalizations of the Common stock, equal to $1.75 per share of common
stock. Holders of the shares of Series C Preferred stock are entitled to
12% non-cumulative dividends. However, the shares shall be entitled to
dividends declared on the Company's common stock on an as-converted basis.
In March 1998, the Company closed a private placement of Series C Preferred
Stock, selling 20,030 shares at a price of $100 per share. The net proceeds
to the Company from the private placement were approximately $1.7 million.
In January 1998, the Company offered to the holders of the Notes, through
an exchange offer, the right to exchange their Notes for shares of Series C
Preferred Stock. In March 1998, Notes totaling $995,000 were exchanged for
9,950 shares of Series C Preferred Stock, at $100 per share, totaling
$995,000. The exchange offer has now expired.
In September 1998, the Company filed a registration statement with the
Securities and Exchange Commission on Form SB-2 under the Securities Act of
1933, registering for resale the common shares underlying the Series C
Preferred Stock issue.
(6)
<PAGE>
5. Warrants:
--------
In connection with the private placement of Series C Preferred Stock, the
Company issued to Win Capital a warrant to purchase 100,000 shares of the
Company's common stock at a price of $3.00 per share, expiring March 3,
2001. The Company has recorded the fair value of the warrant at $336,000,
which is being recognized as a cost of raising the capital in the private
placement.
6.Related Party Transactions:
---------------------------
The Company has subcontracted the manufacturing of its Precisionist and
Photon laser cataract systems to Zevex International, Inc. ("Zevex"), a
shareholder. On June 29, 1998 the Company issued 90,000 shares of common
stock at $4.44 per share to Zevex in exchange for extinguishment of
$399,000 of debt owed to Zevex. As of September 30, 1998, the Company owed
Zevex $61,583, which is included in trade accounts payable- related
parties.
A law firm, of which a former director of the Company is a partner, had
rendered legal services to the Company. During the three month period ended
September 30, 1998, the Company paid this firm $23,624 for legal services,
and as of September 30, 1998, owed this firm $7,443, which is included in
accounts payable.
In August, 1997, the Company entered into an investment banking agreement
with Win Capital Corp. (Win Capital) for a two-year period that may be
extended for an additional year. The Company pays a retainer to Win Capital
of $2,000 per month for the first six months, $4,000 per month for the
second six months, and $6,000 per month for the remainder of the contract.
The Company also issued a warrant to Win Capital to purchase up to 191,000
shares of common stock at a purchase price of $3.00 per share. The warrant
expires on August 19, 2000. A director of Win Capital became a director of
the Company in November 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and results of Operations contains forward looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated in these forward looking statements as a result of
certain factors discussed in this section. The Company's fiscal year runs from
January 1 to and including December 31.
General
The Company is engaged in the design, development, manufacture and sale of
high technology eyecare products. The Company's surgical equipment is designed
to perform minimally invasive cataract surgery and is comprised of surgical
devices and related instruments and accessories, including disposable products.
The Company's diagnostic instrument is designed to measure intraocular pressure
and ocular blood flow for the detection and treatment of glaucoma. Paradigm's
activities for the nine months ended September 30, 1998 include domestic and
international sales of the Precisionist 3000 Plus(TM); and the Precisionist
ThirtyThousand(TM); Ocular Surgery Workstation(TM); cataract surgery
systems, domestic sales of the Blood Flow Analyzer(TM);, and research and
development on the Photon(TM); laser cataract removal system which received
FDA approval for expansion to Phase II Clinical Trials on May 19, 1998. Paradigm
activities also included primary research for other new products.
In July 1998, the Company announced the acquisition of the exclusive
manufacturing rights to four FDA-approved ophthalmic diagnostic instruments from
Humphrey Systems, a division of Carl Zeiss, Inc., which complement the Company's
cataract surgical equipment and its ocular Blood Flow Analyzer(TM);.
(7)
<PAGE>
Results of Operations
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997
Sales increased by $42,192, or 232%, to $60,395 for the three months ended
September 30, 1998, from $18,203 for the comparable period in 1997. This modest
increase in sales was primarily due to higher sales of disposable products and
accessories used in surgeries performed with the Precisionist ThiryThousand
Ocular Surgery Workstation(TM);. Net cost of sales increased $17,542, or 57%,
to $48,319 for the three months ended September 30, 1998, from $30,777 for the
comparable period in 1997, as a result of the increased shipment of disposable
products.
The gross margin for the three months ended September 30, 1998 of 20%, was
higher than the gross margin for the comparable period in 1997, which was a
negative percentage. If the amortization of capitalized engineering and design
charges of $18,564, a non-cash expense, is excluded for the three months ended
September 30, 1998 and 1997, the gross margin was 51%, compared with 33% for the
same period in 1997. The sales performance for the quarter ended September 30,
1997 was due primarily to certain software and hardware revisions on the
Precisionist ThirtyThousand(TM); that were made before shipments could be
resumed. A restructuring of the Company's sales force in the third quarter of
1998, moreover, adversely affected sales.
Marketing and selling expenses increased by $24,977, or 14%, to $207,254
for the three months ended September 30, 1998, from $182,277 for the comparable
period in 1997. The increase was a result of the Company adding a national sales
manager and restructuring its sales force.
General and administrative expenses decreased by $119,797, or 25%, to
$361,245 for the three months ended September 30, 1998, from $481,042 for the
comparable period in 1997. (The decrease was primarily the result of reduction
in officers' salaries, the elimination of two positions, reduction in directors'
compensation and retired inventory expense recognized in the 1997 period.)
Research and development expenses decreased by $17,862, or 32%, to $38,111
for the three months ended September 30, 1998, from $55,973 for the comparable
period in 1997. (The decrease was primarily the result of the completion of a
substantial part of the engineering and design changes on the Precisionist
Thirty Thousand Ocular Surgery Workstation.)
Other income increased $16,013 to $8,359 for the three months ended
September 30, 1998, compared to the same period in 1997. This is primarily due
to the conversion of promissory notes into convertible preferred stock.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September
30, 1997
Sales increased by $659,171, or 174%, to $1,037,781 for the nine months
ended September 30, 1998, from $378,610 for the comparable period in 1997. The
increase in sales was the result of the Company launching the Blood Flow
Analyzer System(TM); and increased sales of the Precisionist
ThirtyThousand(TM); Ocular Surgery Workstation(TM);. Net cost of sales
increased $305,355, or 122%, to $555,508 for the nine months ended September 30,
1998, from $250,153 for the comparable period in 1997.
As a result of increased sales, the gross margin for the nine months ended
September 30, 1998 of 46%, was higher than the gross margin for the comparable
period in 1997 of 34%. If the amortization of capitalized engineering and design
charges for the nine months ended September 30, 1998 of $55,692 and $42,876 for
the nine months ended September 30, 1997, non-cash expenses, are excluded, the
gross margin was 52% and 45%, respectively. The poor sales performance for the
nine months ended September 30, 1997 was due primarily to certain software and
hardware revisions on the Precisionist ThirtyThousand(TM); that were made
before shipments could be resumed in the first quarter of 1998.
Marketing and selling expenses increased by $132,208, or 30%, to $566,237
for the nine months ended September 30, 1998, from $434,029 for the comparable
period in 1997. The increase was a result of the Company adding a sales manager
and two additional sales representatives, and of increased promotional
activities in anticipation of launching the Blood Flow Analyzer(TM); and
increased sales of the Precisionist Thirty Thousand(TM); Ocular Surgery
Workstation(TM);.
(8)
<PAGE>
General and administrative expenses decreased by $184,175, or 15%,to
$1,071,922 for the nine months ended September 30, 1998, from $1,256,098 for the
comparable period in 1997. The primary reasons for the decrease were a reduction
in officers' salaries and the elimination of two positions.
Research and development expenses decreased by $305,605, or 54%, to
$264,282 for the nine months ended September 30, 1998, from $569,887 for the
comparable period in 1997. The principal reason for the decrease in research and
development expenses was the completion of a substantial part of the engineering
and design changes on the Precisionist ThirtyThousand(TM); Ocular Surgery
Workstation(TM);.
Other income for the nine months ended September 30, 1998 decreased
$19,448, or 57%, to $14,430, from $33,878 for the same period in 1997, as a
result of interest paid on the 12% convertible notes.
Upgrades
To garner sales, the Company offers the ultrasonic Precisionist(TM);
system with an unconditional arrangement under which the customer may trade in
their Precisionist(TM); system to upgrade to a Precisionist
ThirtyThousand(TM); Ocular Surgery System(TM); or, upon FDA clearance, a
Photon(TM); laser cataract system, when that system becomes available. Under
this arrangement, the customer receives full credit for the trade-in purchase
price of the Precisionist(TM); system against the price of the new
Precisionist ThirtyThousand(TM); Ocular Surgery System(TM); or Photon(TM);
laser cataract system.
In the September 30, 1998 quarter, and the September 30, 1997 quarter,
there were no trade-in sales, in which the customer has upgraded a
Precisionist(TM); system to the Precisionist ThirtyThousand(TM); Ocular Surgery
System(TM);. For the first nine months ended September 30, 1998, there were two
trade-in sales totaling $76,000, compared with two trade-in sales totaling
$94,000 for the nine months ended September 30, 1997.
(9)
<PAGE>
Liquidity and Capital Resources
The Company's ratio of inventory to quarterly sales for the period ended
September 30, 1998 was 16.0, compared to 45.8 in the same 1997 quarter. With the
launching of two new products within the past eighteen months, management has
had to build inventory in anticipation of sales. As a result, the ratio of
inventory to quarterly sales had tended to fluctuate widely depending on the
Company's purchase orders with the manufacturers; the time lags between purchase
orders, delivery and sales, the number of demonstration units in the field, the
accuracy of the sales forecast, and seasonal factors.
As of September 30, 1998 working capital was $1,992,899, compared with
$801,905 as of December 31, 1997. This represented an increase of 149%.
Long-term debt experienced a 99% decline to $9,341 as of September 30, 1998,
versus $1,081,996 as of December 31, 1997. The reason for the improvement in
working capital and the decline in long-term debt was the sale of 20,030 shares
of Class C Preferred Stock at $100 per share, the exchange of $995,000 of notes
for 9,950 shares of Class C Preferred Stock at $100 per share and the conversion
of a $75,000 note into common stock.
The Company used cash in operating activities of $1,924,419 for the nine
months ended September 30, 1998, compared to $2,594,385 for the same period in
1997. The Company used cash in investing activities of $22,203 for the nine
months ended September 30, 1998, compared to $486,722 received from the sale of
marketable securities for the same period in 1997. The net cash provided by
financing activities for the nine months ended September 30, 1998 was
$1,743,985, compared with $38,229 for a similar period in 1997. The financing
activities for the nine months ended September 30, 1998 included net proceeds of
$1,746,640 from the sale of 20,030 shares of Series "C" Preferred Stock. As a
result of these financing transactions, cash and cash equivalents as of
September 30, 1998 totaled $683,921, compared to $886,558 on December 31, 1997,
a decrease of $202,637, or 23%.
In view of the acquisition of four ultrasonic diagnostic instruments from
Humphrey Systems in July 1998, management believes that additional financing
will be required in the next six months to support the manufacturing and sales
activities of this product line.
At September 30, 1998 the Company had net operating loss carryforwards
(NOLs) of approximately $7,600,000 and research and development tax credit
carryforwards of approximately $64,000. These carryforwards are available to
offset future taxable income, if any, and expire in the years 2005 through 2011.
Because the Company has yet to recognize significant revenue from the sale of
its Photon(TM); laser cataract system, a 100% valuation allowance has been
provided for these deferred tax assets. The Company's ability to use its NOLs to
offset future income taxes may be subject to restrictions enacted in the United
States Internal Revenue Code of 1986, as amended. These restrictions could limit
the Company's future use of its NOLs if there is a cumulative ownership change
of more than 50%, which would include the changes of ownership related to the
offering.
Effect of Inflation and Foreign Currency Exchange
The Company has not realized a reduction in the selling price of the
Precisionist phaco system as a result of domestic inflation. Nor has the Company
experienced unfavorable profit reductions due to currency exchange fluctuations
or inflation with its foreign customers.
Impact of New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 130 ("SFAS 130"),
"Reporting Comprehensive Income", and SFAS No. 131 ("SFAS 131"), "Disclosures
About Segments of an Enterprise and Related Information". SFAS 130 establishes
standards for reporting and display of comprehensive income in the financial
statements. Comprehensive income is the total of net income and all other
non-owner changes in equity. SFAS 131 requires that companies disclose segment
data based on how management makes decisions about allocating resources to
segments and measuring their performance. In addition, in February 1998 the FASB
issued SFAS No. 132 ("SFAS 132"), "Employers' Disclosures About Pensions and
Other Postretirement Benefits", concerning employer disclosure about pension
plans and other postretirement benefits. SFAS 130, SFAS 131 and SFAS 132 are
effective for fiscal years beginning after December 15, 1997. Adoption of the
standards is not expected to have an effect on the Company's financial
statements, financial position or results of operations.
(10)
<PAGE>
The Company has reviewed all recently issued accounting standards in order
to determine their effects, if any, on the results of operations or financial
position of the Company. Based on that review, the Company believes that none of
these pronouncements will have a significant effect on current or future
earnings or operations.
Year 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Management of the
Company does not anticipate that any significant modification or replacement of
the Company's software will be necessary for its computer systems to properly
utilize dates beyond December 31, 1999 or that the Company will incur
significant operating expenses to make any such computer system improvements.
The Company is not able to determine, however, whether any of its suppliers,
lenders, or service providers will need to make any such software modifications
or replacements or whether the failure to make such software corrections will
have an effect on the Company's operations or financial condition.
Part II: Other Information
Item 5. Other Information
On June 26, 1998, the Company entered into a Co-Distribution Agreement (the
"Co-Distribution Agreement") with Pharmacia & Upjohn Company ("Pharmacia &
Upjohn") and National Healthcare Manufacturing Corporation ("National
Healthcare") which provides for the marketing and sale of a range of ophthalmic
products. Under the terms of the Co-Distribution Agreement, the Company,
Pharmacia & Upjohn, and National Healthcare, will offer a comprehensive package
of products to cataract surgeons, including cataract surgical equipment,
intraocular lens implants, intraocular pharmaceuticals, surgical instruments and
sterile procedural packs. The Company will provide the Precisionist Thirty
Thousand TM for distribution and sale under the Co-Distribution Agreement. The
Pharmacia & Upjohn products to be distributed as part of the Co-Distribution
Agreement include the Healon® and Healongv® viscoelastic solution and
the CeeOn line of foldable, small intraocular lens implants, designed to replace
the natural lens removed during cataract surgery.
On July 23, 1998, the Company entered into an Agreement for Purchase and
Sale of Assets (the "Agreement") with the Humphrey Systems Division of Carl
Zeiss, Inc. ("Humphrey Systems") to acquire the ownership and manufacturing
rights to certain assets of Humphrey Systems that are diagnostic instruments,
including the Ultrasonic Biometer Model 820, the A/B Scan System Model 837, the
Ultrasound Pachymeter Model 855, and the Ultrasound Biomicroscope Model 840, and
all accessories, packaging, and end-user collateral materials for each of the
product lines for the sum of $500,000, payable in the form of 78,947 shares of
Common Stock which were issued to Humphrey Systems, and 26,316 shares of Common
Stock which were issued to Douglas Adams. However, if the net proceeds received
by Humphrey Systems from the sale of the shares issued pursuant to the Agreement
is less than $375,000 (after payment of commissions, transfer taxes and other
expenses relating to the sale of such shares), then the Company is required to
issue additional shares of Common Stock, or pay additional funds to Humphrey
Systems as is necessary to increase Humphrey Systems' net proceeds from the sale
of the assets to $375,000. Since Humphrey Systems realized only $162,818 from
the sale of 78,947 shares of Paradigm's common stock, Paradigm will probably
have to issue approximately 80,000 additional shares at current market prices to
enable Humphrey Systems to receive its guaranteed amount.
The rights to the ophthalmic diagnostic instruments that have been
purchased from Humphrey Systems under the Agreement complement both the
Company's cataract surgical equipment and its ocular Blood Flow Analyzer(TM);.
The Ultrasonic Biometer calculates the prescription for the intraocular lens to
be implanted during cataract surgery. The Ultrasound Pachymeter measures corneal
thickness for the new refractive surgical applications that eliminate the need
for eyeglasses and for the optometric applications including contact lense
fitting. The A/B Scan System combines the Ultrasonic Biometer and ultrasound
imaging for advanced diagnostic testing throughout the eye, and is a viable tool
for retinal specialists. The Ultrasound Biomicroscope utilizes microscopic
digital ultrasound resolution for detection of tumors and improved glaucoma
management.
(11)
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-B or are incorporated by reference to previous filings.
Table No. Document
2.1 Amended Agreement and Plan of Merger between Paradigm Medical
Industries,Inc., a California corporation and Paradigm Medical
Industries, Inc., a Delaware corporation(1)
3.1 Certificate of Incorporation(1)
3.2 Bylaws(1)
4.1 Warrant Agency Agreement with Continental Stock Transfer & Trust
Company(3)
4.2 Specimen Common Stock Certificate (2)
4.3 Specimen Class A Warrant Certificate(2)
4.4 Form of Class A Warrant Agreement(2)
4.5 Underwriter's Warrant with Kenneth Jerome & Co., Inc.(3)
4.6 Attorney's Warrant with Mackey Price & Williams(1)
4.7 Warrant to Purchase Common Stock with Win Capital Corp.
4.8 Specimen Series C Convertible Preferred Stock Certificate
4.9 Certificate of the Designations, Powers, Preferences and Rights of
the Series C Convertible Preferred Stock
10.1 Exclusive Patent License Agreement with Photomed(1)
10.2 Consulting Agreement with Dr. Daniel M. Eichenbaum(1)
10.3 Confidential DisclosureAgreement with Zevex, Inc.(1)
10.4 Indemnity Agreement with Zevex International, Inc.(1)
10.5 Manufacturing Agreement with Sunrise Technologies, Inc.(1)
10.6 Royalty Agreement dated January 30,1992, with Dennis L.Oberkamp Design
Services(1)
10.7 Indemnity Agreement dated January 30, 1992, with Dennis L.
Oberkamp Design Services(1)
10.8 Royalty Agreement (for Ultrasonic Phaco Handpiece) with Dennis L.
Oberkamp Design Services(1)
10.9 Lease Agreement with Eden Roc
10.10 Settlement and Release Agreement with Douglas A. MacLeod(1)
10.11 Form of Indemnification Agreement(1)
10.12 1995 Stock Option Plan and forms of
Stock Option Grant Agreements(1)
10.13 Form of Promissory Note between the Company and third parties(1)
10.14 Form of Warrant to Purchase Common Stock between the Company and third
parties(1)
10.15 Employee's Lock-Up Agreement(1)
10.16 Registering Shareholders Lock-Up Agreement(3)
10.17 Amendment of Settlement and Release Agreement with Douglas A. MacLeod(3)
10.18 Design, Engineering andManufacturing Agreement with Zevex, Inc.(5)
10.19 License and ManufacturingAgreement with O.B.F. Labs, Ltd.(6)
10.20 Settlement Agreement with Estate ofH.L Federman(6)
10.21 Agreement with Win Capital Corp.(6)
10.22 12%Convertible, Redeemable Promissory Note(6)
10.23 Securities ExchangeAgreement(6)
10.24 Stock Exchange for Satisfaction of Debt Agreement with Zevex
International, Inc (7)
(12)
<PAGE>
10.25 Co-Distribution Agreement with Pharmacia & UpjohnCompany and National
Healthcare Manufacturing Corporation(7)
10.26 Agreement forPurchase and Sale of Assets with Humphrey Systems Division
of Carl Zeiss, Inc. (7)
10.27 Employment Agreement with Thomas F. Motter
10.28 Employment Agreement with Robert W. Millar
10.29 Employment Agreement with John W. Hemmer
10.30 Employment Agreement with Michael W. Stelzer
10.31 Change of Control Termination Agreement with Thomas F. Motter
10.32 Change of Control Termination Agreement with Robert W. Millar
10.33 Change of Control Termination Agreement with John W. Hemmer
10.34 Change of Control Termination Agreement with Michael W. Stelzer
23.1 Consent of Medical Laser Insight(3)
23.2 Consent of Frost & Sullivan(3)
23.3 Consent of Ophthalmologists Times(3)
27 Financial Data Schedule
- --------
(1) Incorporated by reference from Registration Statement on Form SB-2, as
filed on March 19, 1996.
(2) Incorporated by reference from Amendment No. 1 to Registration Statement
on Form SB-2, as filed on May 14, 1996.
(3) Incorporatedby reference from Amendment No. 2 to Registration Statement
on Form SB-2, as filed on June 13, 1996.
(4) Incorporated by reference from Amendment No. 3 toRegistration Statement on
Form SB-2, as filed on June 28, 1996.
(5) Incorporated by reference from Annual Report on Form 10-KSB, as filed
on December 30, 1996.
(6) Incorporated by reference from Annual Report on Form 10-KSB, as filed
on April 16, 1998.
(7) Incorporated by reference from Quarter Report on Form 10-QSB, as filed on
August 19,1998.
(b) Reports on Form 8-K
-------------------
On January 7, 1998, the Company filed a report on Form 8-K regarding pro
forma financial statements as of November 30, 1997.
On February 18, 1998, the Company filed a report on Form 8-K regarding pro
forma financial statements as of December 31, 1997.
On February 27, 1998, the Company filed a report on Form 8-K regarding pro
forma financial statements as of January 31, 1998.
(13)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT
PARADIGM MEDICAL INDUSTRIES, INC.
---------------------------------
Registrant
DATED: November 10, 1998 By: Michael W. Stelzer
----------------------
Michael W. Stelzer
Vice President of Operations, Secretary
and Chief Operating Officer
DATED: November 10, 1998 By: John W. Hemmer
---------------------
John W. Hemmer
Vice President of Finance, Treasurer and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
(14)
Exhibit 10.27
PARADIGM MEDICAL INDUSTRIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 14th day of September, 1998, by and between PARADIGM MEDICAL INDUSTRIES,
INC., a Delaware corporation (the "Company") and THOMAS F. MOTTER (the
"Employee") , effective as of January 1, 1998 (the "Effective Date").
NOW THEREFORE, In consideration of Employee's employment by the Company,
and the mutual promises and covenants contained in, and the mutual benefits to
be derived from this Agreement, and to set forth and establish the terms and
conditions upon which Employee shall be employed by the Company, the parties
hereto agree as follows:
1. Employment.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions set forth herein.
2. Terms and Conditions of Employment.
(a) Employee shall be employed in the position of Chief
Executive Officer, President and Chairman of the Board of Directors and
shall supervise, control and be responsible for all aspects of the
business activities of the Company and its subsidiaries, including
direct supervision of the day-to-day operations of the Company and its
subsidiaries. Employee shall also serve as a member of the Executive
Committee. Employee shall also perform such related services and duties
for the Company as are from time to time assigned or delegated to him
from time to time by the Board of Directors.
(b) Throughout his employment hereunder, Employee shall devote
his full time, energy and skill to perform the duties of his employment
(reasonable vacations in accordance with this Agreement and reasonable
absences due to illness excepted) , shall faithfully and industriously
perform such duties, and shall use his best efforts to follow, and
implement all management policies and decisions of the Board of
Directors.
3. Compensation and Benefits.
As the entire consideration for the services to be performed and the
obligations incurred by the Employee hereunder, and subject to the
terms and conditions hereof, during the term of this Agreement
Employee shall be entitled to the following:
(a) Salary. Commencing from the effective date of this
Agreement, the Company shall pay Employee an annual salary ("Annual
Salary") of $135,000. Such Annual Salary, which shall be pro-rated for
<PAGE>
any partial employment period, will be payable in equal bi-weekly
installments or at such other intervals as may be established for the
Company's customary pay schedule. The Annual Salary is subject to such
incremental increases as the Board of Directors may determine from time
to time in its sole discretion.
(b) Bonus. As further compensation to Employee for his
entering into this Agreement for services to be rendered by Employee,
the Company may pay Employee annually following the end of each fiscal
year, a cash bonus. Such bonus shall be paid to Employee upon the
satisfaction by the Company of the performance objectives that shall be
determined by the Board of Directors of the Company on an annual basis.
Employee shall have the right to direct any portion of the bonus to be
paid into a deferred compensation fund.
(c) Additional Benefits. Employee shall be entitled to
participate, to the extent of Employee's eligibility, in any employee
benefit plans made available by the Company to its employees during the
term of this Agreement, including, without limitation, such profit
sharing plans, 401K and cafeteria plans, and health, life,
hospitalization, dental, disability or other insurance plans as may be
in effect from time to time. Such participation shall be in accordance
with the terms established from time to time by the Company for
individual participation in any such plans.
(d) Life Insurance. The Company shall provide the Employee
with a life insurance policy in an amount equal to twice his Annual
Salary.
(e) Vacation, Sick Leave, and Holidays. Employee shall be
entitled to four (4) weeks of vacation, and also sick leave and
holidays at full pay in accordance with the Company's policies
established and in effect from time to time.
(f) Car Allowance. Employee shall be entitled to an automobile
allowance of $500 per month payable on the first day of each month. The
Company shall also be responsible for the payment of insurance and
property taxes relating to such automobile.
(g) Deductions. The Company shall have the right to deduct and
withhold from the compensation due to Employee hereunder, including
Employee's Annual Salary and Compensation Bonus, if any, such taxes and
other amounts as may be customary or required by law.
4. Business Expenses.
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in performing Employee's duties
hereunder, in accordance with the Company's policies with respect thereto in
effect from time to time (including without limitation policies regarding prior
consent for significant expenditures), provided that Employee promptly furnishes
to the Company adequate records and other documentary evidence required by all
federal and state statutes and regulations issued by the appropriate taxing
<PAGE>
authorities for the substantiation of each such business expense as a deduction
on the federal and state income tax returns of the Company.
5. Term and Termination.
(a) Term. The term of this Agreement shall commence on the
Effective Date of this Agreement, and subject to earlier termination as
provided below, and except for the provisions of this Agreement and the
Exhibits hereto which, by their terms, continue in force beyond the
termination hereof, the term of this Agreement shall end on the fifth
anniversary of the Effective Date (January 1, 2003).
(b) Termination on Death and for Cause. This Agreement, and
Employee's employment hereunder, shall terminate upon Employee's death
and is otherwise immediately terminable for cause (as defined below)
upon written notice from the Company to Employee. As used in this
Agreement, "cause" shall include: (i) habitual neglect of or deliberate
or intentional refusal to perform any of Employee's duties or
obligations under this Agreement or to follow Company policies or
procedures; (ii) fraudulent or criminal activities; (iii) any grossly
negligent or dishonest or unethical activity; (iv) breach of fiduciary
duty, deliberate breach of Company rules resulting in loss or damage to
the Company, or unauthorized disclosure of Company trade secrets or
confidential information; or (v) if Employee fails to fulfill for two
(2) consecutive years the annual performance goals and objectives,
which shall be mutually determined by the Employee and the Board of
Directors. A determination of whether Employee's actions justify
termination for cause and the date such termination is effective shall
be made by the Board of Directors in its sole discretion.
(c) Termination for Disability. The Company's Board of
Directors may terminate this Agreement, upon written notice to
Employee, for the "disability" (as defined below) of Employee at the
expiration of a consecutive twenty-six (26) week period of disability
if the Board of Directors determines in its sole discretion that
Employee's disability will prevent Employee from substantially
performing Employee's duties hereunder. As used in this Agreement,
"disability" shall be defined as (i) Employee's inability, by reason of
physical or mental illness or other cause, to perform substantially
Employee's duties hereunder; or (ii) , in the discretion of the Board
of Directors, as it is defined in any disability insurance policy in
effect at the Company during the time in question. Employee shall
receive full compensation, benefits, and reimbursement of expenses
pursuant to the terms of this Agreement from the date disability begins
until the date Employee receives notice of termination under this
paragraph or until Employee begins to receive disability benefits
pursuant to a Company disability insurance policy, whichever occurs
first.
(d) Effect of Termination. In the event Employee's employment
is terminated hereunder, all obligations of the Company and all
obligations of Employee shall cease except as otherwise provided herein
or in the Exhibits hereto. Upon such termination, Employee or
Employee's representative or estate shall be entitled to receive only
<PAGE>
the compensation, benefits, and reimbursement earned or accrued by
Employee under the terms of this Agreement prior to the date of
termination computed pro rata up to and including the date of
termination, but shall not be entitled to any further compensation,
benefits, or reimbursement from such date.
6. Covenant Not to Compete
(a) Covenant. Employee hereby covenants and agrees that during
the term of this Agreement and for a period of two (2) years
thereafter, he will not, except as a director, officer, employee or
consultant of the Company, or any subsidiary or affiliate of the
Company, directly or indirectly own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or
be connected with (as director, officer, employee, consultant, agent,
independent contractor of otherwise) in any other manner with any
business engaged in the Defined Business (as described below) which is
the same or substantially similar in nature to the business engaged in
by the Company in the State of Utah, and each of the other states in
the United States, and each foreign country, in which the Company may
engage (whether directly or indirectly through subsidiaries,
affiliates, franchisees, licensees, representatives, agents or
otherwise) during the term of this Agreement and Employee's employment
with the Company.
(b) Definition of Defined Business. As used herein, the term
"Defined Business" shall any business currently engaged in by the
Company or contemplated by the Company.
(c) Non-Solicitation Agreement. Employee shall not, directly
or indirectly, employ, solicit for employment, or advise or recommend
to any other person that they employ or solicit for employment, any
employee of the Company (or any subsidiary or affiliate), during the
term of this Agreement and Employee's employment with the Company and
for a term of two years thereafter; provided however, that this
paragraph shall not preclude Employee from giving an employment
reference at the request of any employee of the Company or at the
request of a prospective employer of such employee.
(d) Conflicting Employment. Employee shall not, during the
term of his employment with the Company, engage in any other
employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes
involved during the term of his employment, nor will Employee engage in
any other activities that conflict with his obligations to the Company.
(e) Unique and Essential Nature of Services of Employee.
Employee understands and acknowledges that the Company is entering into
this Agreement in reliance upon the unique and essential nature of the
personal services the Employee is to perform as an employee of the
Company and that irreparable injury would befall the Company or its
subsidiaries or affiliates should Employee serve a competitor of, or
compete, with the Company or any of its subsidiaries or affiliates.
(f) Injunctive and Equitable Relief. Employee covenants and
agrees that the Company's remedy at law for any breach or violation of
<PAGE>
the provisions of this Section 6 are inadequate and that, in the event
of any such breach or violation, the Company shall be entitled to
injunctive relief in addition to any other remedy, at law or in equity,
to which it may be entitled.
(g) Acknowledgment of Reasonableness of Restrictions. Employee
specifically acknowledges and agrees that the two year post-employment
limitation upon his activities as specified above, together with the
geographical limitations set forth above, are reasonable limitations as
to time and place upon Employee's post-employment activities and that
the restrictions are necessary to preserve, promote and protect the
business, accounts and good-will of the Company and impose no greater
restraint than is reasonably necessary to secure such protection.
h) Limitation on Scope or Duration. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall
not affect or render invalid or unenforceable any other provision of
this Section 6 and, to the fullest extent permitted by law, this
Section shall be construed as if the geographic or business scope or
the duration of such provision had been more narrowly drafted so as not
to be invalid or unenforceable but rather to provide the broadest
protection to the Company permitted by law.
7. Confidential Information Agreement.
Employee agrees that Employee will keep confidential and will not,
during or after this Agreement, disclose, divulge, furnish or make accessible to
any person, firm, corporation or other business entity, any information, trade
secrets, customer information, marketing information, sales information, cost
information, technical data, know-how, secret processes, discoveries, methods,
patentable or unpatentable ideas, formulae, processing techniques or technical
operations relating to the business, business practices, methods, products,
processes, equipment or any confidential or secret aspect of the business of the
Company (collectively, the "Confidential Information") without the prior written
consent of the Company. Upon the termination of this Agreement for any reason,
and at any time prior thereto upon request by the Company, Employee shall return
to the Company all written records of any Confidential Information, together
with any and all copies of such records, in Employee's possession. Any
Confidential Information which Employee may conceive of or make during the term
of this Agreement shall be and remain the property of the Company. Employee
agrees promptly to communicate and disclose all such Confidential Information to
the Company and to execute and deliver to the Company any instruments deemed
necessary by the Company to effect disclosure and assignment thereof to it.
8. Assignment.
<PAGE>
This Agreement is for the unique personal services of Employee and is
not assignable or delegable in whole or in part by Employee without the consent
of the Board of Directors of the Company. This Agreement may be assigned or
delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
9. Inventions
(a) Disclosure of Inventions. The Employee hereby agrees that
if he conceives, learns, makes, or first reduces to practice, either alone or
jointly with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, techniques, know-how, or data relating
to the Defined Business (hereinafter referred to collectively as "Inventions")
while he is employed by the Company, he will promptly disclose such Inventions
to the Company or to any person designated by it. Notwithstanding the fact that
the Employee may determine that the Company has no right to such Invention, he
shall nevertheless promptly disclose any such Invention to the Company or to any
person designated by it upon reasonable request.
(b) Ownership, Assignment, Assistance, and Power of
Attorney. All Inventions related to ophthalmic instrumentation shall be the sole
and exclusive property of the Company, and the Company shall have the right to
use and to apply for patents, copyrights, or other statutory or common law
protection for such Inventions in any country. The Employee hereby assigns to he
Company any rights which he may acquire in such Inventions. Furthermore, the
Employee agrees to assist the Company in every proper way at the Company's
expense to obtain patents, copyrights, and other statutory common law
protections for such Inventions in any country and to enforce such rights from
time to time. Specifically, the Employee agrees to execute all documents as the
Company may desire for use in applying for and in obtaining or enforcing such
patents, copyrights, and other statutory or common law protections together with
any assignments thereof to the Company or to any person designated by the
Company. In the event the Company is unable for any reason whatsoever to secure
the Employee's signature to any lawful document required to apply for or to
enforce any patent, copyright, or other statutory or common law protections for
such Inventions, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act in his stead to execute such documents and to do such
other lawful and necessary acts to further the issuance and protection of such
patents, copyrights, or other statutory or common law protection, such documents
or such acts to have the same legal force and effect as if such documents were
executed by or such acts were done by the Employee.
10. Waiver or Modification.
Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision hereof or any subsequent breach of the same provision
hereof.
<PAGE>
11. Severability.
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
12. Notices.
Any notice required or permitted hereunder to be given by either party
shall be in writing and shall be delivered personally or sent by certified or
registered mail, postage prepaid, or by private courier, or by telex or telegram
to the party to the address set forth below or to such other address as either
party may designate from time to time according to the terms of this paragraph:
To Employee at: Thomas F. Motter
11634 South 2220 East
Sandy, UT 84092
To the Company at: Paradigm Medical Industries, Inc.
1127 West 2320 South
Salt Lake City, Utah 84119
With a copy to:
A notice delivered personally shall be effective upon receipt. A notice
sent by facsimile or telegram shall be effective 24 hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the 3rd day after the day of mailing.
13. Attorney's Fees.
In the event of any action at law or equity to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees and court costs in addition to any other relief to which such
party may be entitled.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah applicable to contracts entered into and to be
performed within such State.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first set forth above.
EMPLOYEE:
Thomas F. Motter
_________________________________
Thomas F. Motter
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC., a
Delaware corporation
Michael W. Stelzer
________________________________
By: Michael W. Stelzer
Title: Vice President of Operations
and Chief Operating Officer
Exhibit 10.28
PARADIGM MEDICAL INDUSTRIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 14th day of September, 1998, by and between PARADIGM MEDICAL INDUSTRIES,
INC., a Delaware corporation (the "Company") and ROBERT W. MILLAR (the
"Employee") , effective as of January 1, 1998 (the "Effective Date").
NOW THEREFORE, In consideration of Employee's employment by the Company,
and the mutual promises and covenants contained in, and the mutual benefits to
be derived from this Agreement, and to set forth and establish the terms and
conditions upon which Employee shall be employed by the Company, the parties
hereto agree as follows:
1. Employment.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions set forth herein.
2. Terms and Conditions of Employment.
(a) Employee shall be employed in the position of Vice
President of Engineering and Manufacturing and shall supervise, control
and be responsible for all aspects of the business activities of the
Company and its subsidiaries, including direct supervision of the
day-to-day operations of the Company and its subsidiaries. Employee
shall also serve as a member of the Executive Committee. Employee shall
also perform such related services and duties for the Company as are
from time to time assigned or delegated to him from time to time by the
Board of Directors.
(b) Throughout his employment hereunder, Employee shall devote
his full time, energy and skill to perform the duties of his employment
(reasonable vacations in accordance with this Agreement and reasonable
absences due to illness excepted) , shall faithfully and industriously
perform such duties, and shall use his best efforts to follow, and
implement all management policies and decisions of the Board of
Directors.
3. Compensation and Benefits.
As the entire consideration for the services to be performed and the
obligations incurred by the Employee hereunder, and subject to the
terms and conditions hereof, during the term of this Agreement Employee
shall be entitled to the following:
(a) Salary. Commencing from the effective date of this
Agreement, the Company shall pay Employee an annual salary ("Annual
Salary") of $125,000. Such Annual Salary, which shall be pro-rated for
any partial employment period, will be payable in equal bi-weekly
installments or at such other intervals as may be established for the
<PAGE>
Company's customary pay schedule. The Annual Salary is subject to such
incremental increases as the Board of Directors may determine from time
to time in its sole discretion.
(b) Bonus. As further compensation to Employee for his
entering into this Agreement for services to be rendered by Employee,
the Company may pay Employee annually following the end of each fiscal
year, a cash bonus. Such bonus shall be paid to Employee upon the
satisfaction by the Company of the performance objectives that shall be
determined by the Board of Directors of the Company on an annual basis.
Employee shall have the right to direct any portion of the bonus to be
paid into a deferred compensation fund.
(c) Additional Benefits. Employee shall be entitled to
participate, to the extent of Employee's eligibility, in any employee
benefit plans made available by the Company to its employees during the
term of this Agreement, including, without limitation, such profit
sharing plans, 401K and cafeteria plans, and health, life,
hospitalization, dental, disability or other insurance plans as may be
in effect from time to time. Such participation shall be in accordance
with the terms established from time to time by the Company for
individual participation in any such plans.
(d) Life Insurance. The Company shall provide the Employee
with a life insurance policy in an amount equal to twice his Annual
Salary.
(e) Vacation, Sick Leave, and Holidays. Employee shall be
entitled to four (4) weeks of vacation, and also sick leave and
holidays at full pay in accordance with the Company's policies
established and in effect from time to time.
(f) Car Allowance. Employee shall be entitled to an automobile
allowance of $500 per month payable on the first day of each month. The
Company shall also be responsible for the payment of insurance and
property taxes relating to such automobile.
(g) Deductions. The Company shall have the right to deduct and
withhold from the compensation due to Employee hereunder, including
Employee's Annual Salary and Compensation Bonus, if any, such taxes and
other amounts as may be customary or required by law.
4. Business Expenses.
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in performing Employee's duties
hereunder, in accordance with the Company's policies with respect thereto in
effect from time to time (including without limitation policies regarding prior
consent for significant expenditures), provided that Employee promptly furnishes
to the Company adequate records and other documentary evidence required by all
federal and state statutes and regulations issued by the appropriate taxing
<PAGE>
authorities for the substantiation of each such business expense as a deduction
on the federal and state income tax returns of the Company.
5. Term and Termination.
(a) Term. The term of this Agreement shall commence on the
Effective Date of this Agreement, and subject to earlier termination as
provided below, and except for the provisions of this Agreement and the
Exhibits hereto which, by their terms, continue in force beyond the
termination hereof, the term of this Agreement shall end on the fifth
anniversary of the Effective Date (January 1, 2003).
(b) Termination on Death and for Cause. This Agreement, and
Employee's employment hereunder, shall terminate upon Employee's death
and is otherwise immediately terminable for cause (as defined below)
upon written notice from the Company to Employee. As used in this
Agreement, "cause" shall include: (i) habitual neglect of or deliberate
or intentional refusal to perform any of Employee's duties or
obligations under this Agreement or to follow Company policies or
procedures; (ii) fraudulent or criminal activities; (iii) any grossly
negligent or dishonest or unethical activity; (iv) breach of fiduciary
duty, deliberate breach of Company rules resulting in loss or damage to
the Company, or unauthorized disclosure of Company trade secrets or
confidential information; or (v) if Employee fails to fulfill for two
(2) consecutive years the annual performance goals and objectives,
which shall be mutually determined by the Employee and the Board of
Directors. A determination of whether Employee's actions justify
termination for cause and the date such termination is effective shall
be made by the Board of Directors in its sole discretion.
(c) Termination for Disability. The Company's Board of
Directors may terminate this Agreement, upon written notice to
Employee, for the "disability" (as defined below) of Employee at the
expiration of a consecutive twenty-six (26) week period of disability
if the Board of Directors determines in its sole discretion that
Employee's disability will prevent Employee from substantially
performing Employee's duties hereunder. As used in this Agreement,
"disability" shall be defined as (i) Employee's inability, by reason of
physical or mental illness or other cause, to perform substantially
Employee's duties hereunder; or (ii) , in the discretion of the Board
of Directors, as it is defined in any disability insurance policy in
effect at the Company during the time in question. Employee shall
receive full compensation, benefits, and reimbursement of expenses
pursuant to the terms of this Agreement from the date disability begins
until the date Employee receives notice of termination under this
paragraph or until Employee begins to receive disability benefits
pursuant to a Company disability insurance policy, whichever occurs
first.
(d) Effect of Termination. In the event Employee's employment
is terminated hereunder, all obligations of the Company and all
obligations of Employee shall cease except as otherwise provided herein
or in the Exhibits hereto. Upon such termination, Employee or
Employee's representative or estate shall be entitled to receive only
the compensation, benefits, and reimbursement earned or accrued by
<PAGE>
Employee under the terms of this Agreement prior to the date of
termination computed pro rata up to and including the date of
termination, but shall not be entitled to any further compensation,
benefits, or reimbursement from such date.
6. Covenant Not to Compete
(a) Covenant. Employee hereby covenants and agrees that during
the term of this Agreement and for a period of two (2) years
thereafter, he will not, except as a director, officer, employee or
consultant of the Company, or any subsidiary or affiliate of the
Company, directly or indirectly own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or
be connected with (as director, officer, employee, consultant, agent,
independent contractor of otherwise) in any other manner with any
business engaged in the Defined Business (as described below) which is
the same or substantially similar in nature to the business engaged in
by the Company in the State of Utah, and each of the other states in
the United States, and each foreign country, in which the Company may
engage (whether directly or indirectly through subsidiaries,
affiliates, franchisees, licensees, representatives, agents or
otherwise) during the term of this Agreement and Employee's employment
with the Company.
(b) Definition of Defined Business. As used herein, the term
"Defined Business" shall any business currently engaged in by the
Company or contemplated by the Company.
(c) Non-Solicitation Agreement. Employee shall not, directly
or indirectly, employ, solicit for employment, or advise or recommend
to any other person that they employ or solicit for employment, any
employee of the Company (or any subsidiary or affiliate), during the
term of this Agreement and Employee's employment with the Company and
for a term of two years thereafter; provided however, that this
paragraph shall not preclude Employee from giving an employment
reference at the request of any employee of the Company or at the
request of a prospective employer of such employee.
(d) Conflicting Employment. Employee shall not, during the
term of his employment with the Company, engage in any other
employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes
involved during the term of his employment, nor will Employee engage in
any other activities that conflict with his obligations to the Company.
(e) Unique and Essential Nature of Services of Employee.
Employee understands and acknowledges that the Company is entering into
this Agreement in reliance upon the unique and essential nature of the
personal services the Employee is to perform as an employee of the
Company and that irreparable injury would befall the Company or its
subsidiaries or affiliates should Employee serve a competitor of, or
compete, with the Company or any of its subsidiaries or affiliates.
(f) Injunctive and Equitable Relief. Employee covenants and
agrees that the Company's remedy at law for any breach or violation of
<PAGE>
the provisions of this Section 6 are inadequate and that, in the event
of any such breach or violation, the Company shall be entitled to
injunctive relief in addition to any other remedy, at law or in equity,
to which it may be entitled.
(g) Acknowledgment of Reasonableness of Restrictions. Employee
specifically acknowledges and agrees that the two year post-employment
limitation upon his activities as specified above, together with the
geographical limitations set forth above, are reasonable limitations as
to time and place upon Employee's post-employment activities and that
the restrictions are necessary to preserve, promote and protect the
business, accounts and good-will of the Company and impose no greater
restraint than is reasonably necessary to secure such protection.
h) Limitation on Scope or Duration. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall
not affect or render invalid or unenforceable any other provision of
this Section 6 and, to the fullest extent permitted by law, this
Section shall be construed as if the geographic or business scope or
the duration of such provision had been more narrowly drafted so as not
to be invalid or unenforceable but rather to provide the broadest
protection to the Company permitted by law.
7. Confidential Information Agreement.
Employee agrees that Employee will keep confidential and will not,
during or after this Agreement, disclose, divulge, furnish or make accessible to
any person, firm, corporation or other business entity, any information, trade
secrets, customer information, marketing information, sales information, cost
information, technical data, know-how, secret processes, discoveries, methods,
patentable or unpatentable ideas, formulae, processing techniques or technical
operations relating to the business, business practices, methods, products,
processes, equipment or any confidential or secret aspect of the business of the
Company (collectively, the "Confidential Information") without the prior written
consent of the Company. Upon the termination of this Agreement for any reason,
and at any time prior thereto upon request by the Company, Employee shall return
to the Company all written records of any Confidential Information, together
with any and all copies of such records, in Employee's possession. Any
Confidential Information which Employee may conceive of or make during the term
of this Agreement shall be and remain the property of the Company. Employee
agrees promptly to communicate and disclose all such Confidential Information to
the Company and to execute and deliver to the Company any instruments deemed
necessary by the Company to effect disclosure and assignment thereof to it.
8. Assignment.
<PAGE>
This Agreement is for the unique personal services of Employee and is
not assignable or delegable in whole or in part by Employee without the consent
of the Board of Directors of the Company. This Agreement may be assigned or
delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
9. Inventions
(a) Disclosure of Inventions. The Employee hereby agrees that
if he conceives, learns, makes, or first reduces to practice, either alone or
jointly with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, techniques, know-how, or data relating
to the Defined Business (hereinafter referred to collectively as "Inventions")
while he is employed by the Company, he will promptly disclose such Inventions
to the Company or to any person designated by it. Notwithstanding the fact that
the Employee may determine that the Company has no right to such Invention, he
shall nevertheless promptly disclose any such Invention to the Company or to any
person designated by it upon reasonable request.
(b) Ownership, Assignment, Assistance, and Power of
Attorney. All Inventions related to ophthalmic instrumentation shall be the sole
and exclusive property of the Company, and the Company shall have the right to
use and to apply for patents, copyrights, or other statutory or common law
protection for such Inventions in any country. The Employee hereby assigns to he
Company any rights which he may acquire in such Inventions. Furthermore, the
Employee agrees to assist the Company in every proper way at the Company's
expense to obtain patents, copyrights, and other statutory common law
protections for such Inventions in any country and to enforce such rights from
time to time. Specifically, the Employee agrees to execute all documents as the
Company may desire for use in applying for and in obtaining or enforcing such
patents, copyrights, and other statutory or common law protections together with
any assignments thereof to the Company or to any person designated by the
Company. In the event the Company is unable for any reason whatsoever to secure
the Employee's signature to any lawful document required to apply for or to
enforce any patent, copyright, or other statutory or common law protections for
such Inventions, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act in his stead to execute such documents and to do such
other lawful and necessary acts to further the issuance and protection of such
patents, copyrights, or other statutory or common law protection, such documents
or such acts to have the same legal force and effect as if such documents were
executed by or such acts were done by the Employee.
10. Waiver or Modification.
Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision hereof or any subsequent breach of the same provision
hereof.
<PAGE>
11. Severability.
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
12. Notices.
Any notice required or permitted hereunder to be given by either party
shall be in writing and shall be delivered personally or sent by certified or
registered mail, postage prepaid, or by private courier, or by telex or telegram
to the party to the address set forth below or to such other address as either
party may designate from time to time according to the terms of this paragraph:
To Employee at: Robert W. Millar
8557 S. Kings Hill Drive
Salt Lake City, Utah 84121
To the Company at: Paradigm Medical Industries, Inc.
1127 West 2320 South
Salt Lake City, Utah 84119
With a copy to:
A notice delivered personally shall be effective upon receipt. A notice
sent by facsimile or telegram shall be effective 24 hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the 3rd day after the day of mailing.
13. Attorney's Fees.
In the event of any action at law or equity to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees and court costs in addition to any other relief to which such
party may be entitled.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah applicable to contracts entered into and to be
performed within such State.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first set forth above.
EMPLOYEE:
Robert W. Millar
__________________________
Robert W. Millar
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC., a
Delaware corporation
Thomas F. Motter
__________________________
By: Thomas F. Motter
Title: Chief Executive Officer & President
Exhibit 10.29
PARADIGM MEDICAL INDUSTRIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 14th day of September, 1998, by and between PARADIGM MEDICAL INDUSTRIES,
INC., a Delaware corporation (the "Company") and JOHN W. HEMMER (the
"Employee"), effective as of January 1, 1998 (the "Effective Date").
NOW THEREFORE, In consideration of Employee's employment by the Company,
and the mutual promises and covenants contained in, and the mutual benefits to
be derived from this Agreement, and to set forth and establish the terms and
conditions upon which Employee shall be employed by the Company, the parties
hereto agree as follows:
1. Employment.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions set forth herein.
2. Terms and Conditions of Employment.
(a) Employee shall be employed in the position of Treasurer
and Chief Financial Officer and shall supervise, control and be
responsible for all aspects of the business activities of the Company
and its subsidiaries, including direct supervision of the day-to-day
operations of the Company and its subsidiaries. Employee shall also
serve as a member of the Executive Committee. Employee shall also
perform such related services and duties for the Company as are from
time to time assigned or delegated to him from time to time by the
Board of Directors.
(b) Throughout his employment hereunder, Employee shall devote
his full time, energy and skill to perform the duties of his employment
(reasonable vacations in accordance with this Agreement and reasonable
absences due to illness excepted) , shall faithfully and industriously
perform such duties, and shall use his best efforts to follow, and
implement all management policies and decisions of the Board of
Directors.
3. Compensation and Benefits.
As the entire consideration for the services to be performed and the
obligations incurred by the Employee hereunder, and subject to the
terms and conditions hereof, during the term of this Agreement Employee
shall be entitled to the following:
(a) Salary. Commencing from the effective date of this
Agreement, the Company shall pay Employee an annual salary ("Annual
Salary") of $120,000. Such Annual Salary, which shall be pro-rated for
any partial employment period, will be payable in equal bi-weekly
installments or at such other intervals as may be established for the
<PAGE>
Company's customary pay schedule. The Annual Salary is subject to such
incremental increases as the Board of Directors may determine from time
to time in its sole discretion.
(b) Bonus. As further compensation to Employee and in
recognition of the services previously rendered by Employee hereunder,
the Company shall issue a total of 50,000 shares of the Company's stock
to Employee with 25,000 shares being issued in 1998 and the remaining
25,000 shares being issued in 1999. As additional compensation and as
further consideration for his entering into this Agreement for services
to be rendered by Employee, the Company may pay Employee annually
following the end of each fiscal year, a cash bonus. Such bonus shall
be paid to Employee upon the satisfaction by the Company of the
performance objectives that shall be determined by the Board of
Directors of the Company on an annual basis. Employee shall have the
right to direct any portion of the bonus to be paid into a deferred
compensation fund.
(c) Additional Benefits. Employee shall be entitled to
participate, to the extent of Employee's eligibility, in any employee
benefit plans made available by the Company to its employees during the
term of this Agreement, including, without limitation, such profit
sharing plans, 401K and cafeteria plans, and health, life,
hospitalization, dental, disability or other insurance plans as may be
in effect from time to time. Such participation shall be in accordance
with the terms established from time to time by the Company for
individual participation in any such plans.
(d) Life Insurance. The Company shall provide the Employee
with a life insurance policy in an amount equal to twice his Annual
Salary.
(e) Vacation, Sick Leave, and Holidays. Employee shall be
entitled to four (4) weeks of vacation, and also sick leave and
holidays at full pay in accordance with the Company's policies
established and in effect from time to time.
(f) Car Allowance. Employee shall be entitled to an automobile
allowance of $500 per month payable on the first day of each month. The
Company shall also be responsible for the payment of insurance and
property taxes relating to such automobile.
(g) Deductions. The Company shall have the right to deduct and
withhold from the compensation due to Employee hereunder, including
Employee's Annual Salary and Compensation Bonus, if any, such taxes and
other amounts as may be customary or required by law.
4. Business Expenses.
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in performing Employee's duties
hereunder, in accordance with the Company's policies with respect thereto in
effect from time to time (including without limitation policies regarding prior
consent for significant expenditures), provided that Employee promptly furnishes
<PAGE>
to the Company adequate records and other documentary evidence required by all
federal and state statutes and regulations issued by the appropriate taxing
authorities for the substantiation of each such business expense as a deduction
on the federal and state income tax returns of the Company.
5. Term and Termination.
(a) Term. The term of this Agreement shall commence on the
Effective Date of this Agreement, and subject to earlier termination as
provided below, and except for the provisions of this Agreement and the
Exhibits hereto which, by their terms, continue in force beyond the
termination hereof, the term of this Agreement shall end on the fifth
anniversary of the Effective Date (January 1, 2003).
(b) Termination on Death and for Cause. This Agreement, and
Employee's employment hereunder, shall terminate upon Employee's death
and is otherwise immediately terminable for cause (as defined below)
upon written notice from the Company to Employee. As used in this
Agreement, "cause" shall include: (i) habitual neglect of or deliberate
or intentional refusal to perform any of Employee's duties or
obligations under this Agreement or to follow Company policies or
procedures; (ii) fraudulent or criminal activities; (iii) any grossly
negligent or dishonest or unethical activity; (iv) breach of fiduciary
duty, deliberate breach of Company rules resulting in loss or damage to
the Company, or unauthorized disclosure of Company trade secrets or
confidential information; or (v) if Employee fails to fulfill for two
(2) consecutive years the annual performance goals and objectives,
which shall be mutually determined by the Employee and the Board of
Directors. A determination of whether Employee's actions justify
termination for cause and the date such termination is effective shall
be made by the Board of Directors in its sole discretion.
(c) Termination for Disability. The Company's Board of
Directors may terminate this Agreement, upon written notice to
Employee, for the "disability" (as defined below) of Employee at the
expiration of a consecutive twenty-six (26) week period of disability
if the Board of Directors determines in its sole discretion that
Employee's disability will prevent Employee from substantially
performing Employee's duties hereunder. As used in this Agreement,
"disability" shall be defined as (i) Employee's inability, by reason of
physical or mental illness or other cause, to perform substantially
Employee's duties hereunder; or (ii) , in the discretion of the Board
of Directors, as it is defined in any disability insurance policy in
effect at the Company during the time in question. Employee shall
receive full compensation, benefits, and reimbursement of expenses
pursuant to the terms of this Agreement from the date disability begins
until the date Employee receives notice of termination under this
paragraph or until Employee begins to receive disability benefits
pursuant to a Company disability insurance policy, whichever occurs
first.
(d) Effect of Termination. In the event Employee's employment
is terminated hereunder, all obligations of the Company and all
obligations of Employee shall cease except as otherwise provided herein
or in the Exhibits hereto. Upon such termination, Employee or
<PAGE>
Employee's representative or estate shall be entitled to receive only
the compensation, benefits, and reimbursement earned or accrued by
Employee under the terms of this Agreement prior to the date of
termination computed pro rata up to and including the date of
termination, but shall not be entitled to any further compensation,
benefits, or reimbursement from such date.
6. Covenant Not to Compete
(a) Covenant. Employee hereby covenants and agrees that during
the term of this Agreement and for a period of two (2) years
thereafter, he will not, except as a director, officer, employee or
consultant of the Company, or any subsidiary or affiliate of the
Company, directly or indirectly own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or
be connected with (as director, officer, employee, consultant, agent,
independent contractor of otherwise) in any other manner with any
business engaged in the Defined Business (as described below) which is
the same or substantially similar in nature to the business engaged in
by the Company in the State of Utah, and each of the other states in
the United States, and each foreign country, in which the Company may
engage (whether directly or indirectly through subsidiaries,
affiliates, franchisees, licensees, representatives, agents or
otherwise) during the term of this Agreement and Employee's employment
with the Company.
(b) Definition of Defined Business. As used herein, the term
"Defined Business" shall any business currently engaged in by the
Company or contemplated by the Company.
(c) Non-Solicitation Agreement. Employee shall not, directly
or indirectly, employ, solicit for employment, or advise or recommend
to any other person that they employ or solicit for employment, any
employee of the Company (or any subsidiary or affiliate), during the
term of this Agreement and Employee's employment with the Company and
for a term of two years thereafter; provided however, that this
paragraph shall not preclude Employee from giving an employment
reference at the request of any employee of the Company or at the
request of a prospective employer of such employee.
(d) Conflicting Employment. Employee shall not, during the
term of his employment with the Company, engage in any other
employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes
involved during the term of his employment, nor will Employee engage in
any other activities that conflict with his obligations to the Company.
(e) Unique and Essential Nature of Services of Employee.
Employee understands and acknowledges that the Company is entering into
this Agreement in reliance upon the unique and essential nature of the
personal services the Employee is to perform as an employee of the
Company and that irreparable injury would befall the Company or its
subsidiaries or affiliates should Employee serve a competitor of, or
compete, with the Company or any of its subsidiaries or affiliates.
<PAGE>
(f) Injunctive and Equitable Relief. Employee covenants and
agrees that the Company's remedy at law for any breach or violation of
the provisions of this Section 6 are inadequate and that, in the event
of any such breach or violation, the Company shall be entitled to
injunctive relief in addition to any other remedy, at law or in equity,
to which it may be entitled.
(g) Acknowledgment of Reasonableness of Restrictions. Employee
specifically acknowledges and agrees that the two year post-employment
limitation upon his activities as specified above, together with the
geographical limitations set forth above, are reasonable limitations as
to time and place upon Employee's post-employment activities and that
the restrictions are necessary to preserve, promote and protect the
business, accounts and good-will of the Company and impose no greater
restraint than is reasonably necessary to secure such protection.
h) Limitation on Scope or Duration. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall
not affect or render invalid or unenforceable any other provision of
this Section 6 and, to the fullest extent permitted by law, this
Section shall be construed as if the geographic or business scope or
the duration of such provision had been more narrowly drafted so as not
to be invalid or unenforceable but rather to provide the broadest
protection to the Company permitted by law.
7. Confidential Information Agreement.
Employee agrees that Employee will keep confidential and will not,
during or after this Agreement, disclose, divulge, furnish or make accessible to
any person, firm, corporation or other business entity, any information, trade
secrets, customer information, marketing information, sales information, cost
information, technical data, know-how, secret processes, discoveries, methods,
patentable or unpatentable ideas, formulae, processing techniques or technical
operations relating to the business, business practices, methods, products,
processes, equipment or any confidential or secret aspect of the business of the
Company (collectively, the "Confidential Information") without the prior written
consent of the Company. Upon the termination of this Agreement for any reason,
and at any time prior thereto upon request by the Company, Employee shall return
to the Company all written records of any Confidential Information, together
with any and all copies of such records, in Employee's possession. Any
Confidential Information which Employee may conceive of or make during the term
of this Agreement shall be and remain the property of the Company. Employee
agrees promptly to communicate and disclose all such Confidential Information to
the Company and to execute and deliver to the Company any instruments deemed
necessary by the Company to effect disclosure and assignment thereof to it.
<PAGE>
8. Assignment.
This Agreement is for the unique personal services of Employee and is
not assignable or delegable in whole or in part by Employee without the consent
of the Board of Directors of the Company. This Agreement may be assigned or
delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
9. Inventions
(a) Disclosure of Inventions. The Employee hereby agrees that
if he conceives, learns, makes, or first reduces to practice, either alone or
jointly with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, techniques, know-how, or data relating
to the Defined Business (hereinafter referred to collectively as "Inventions")
while he is employed by the Company, he will promptly disclose such Inventions
to the Company or to any person designated by it. Notwithstanding the fact that
the Employee may determine that the Company has no right to such Invention, he
shall nevertheless promptly disclose any such Invention to the Company or to any
person designated by it upon reasonable request.
(b) Ownership, Assignment, Assistance, and Power of
Attorney. All Inventions related to ophthalmic instrumentation shall be the sole
and exclusive property of the Company, and the Company shall have the right to
use and to apply for patents, copyrights, or other statutory or common law
protection for such Inventions in any country. The Employee hereby assigns to he
Company any rights which he may acquire in such Inventions. Furthermore, the
Employee agrees to assist the Company in every proper way at the Company's
expense to obtain patents, copyrights, and other statutory common law
protections for such Inventions in any country and to enforce such rights from
time to time. Specifically, the Employee agrees to execute all documents as the
Company may desire for use in applying for and in obtaining or enforcing such
patents, copyrights, and other statutory or common law protections together with
any assignments thereof to the Company or to any person designated by the
Company. In the event the Company is unable for any reason whatsoever to secure
the Employee's signature to any lawful document required to apply for or to
enforce any patent, copyright, or other statutory or common law protections for
such Inventions, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act in his stead to execute such documents and to do such
other lawful and necessary acts to further the issuance and protection of such
patents, copyrights, or other statutory or common law protection, such documents
or such acts to have the same legal force and effect as if such documents were
executed by or such acts were done by the Employee.
10. Waiver or Modification.
Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. The waiver by either party of a breach of any provision of this
<PAGE>
Agreement by the other party shall not operate or be construed as a waiver of
any other provision hereof or any subsequent breach of the same provision
hereof.
11. Severability.
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
12. Notices.
Any notice required or permitted hereunder to be given by either party
shall be in writing and shall be delivered personally or sent by certified or
registered mail, postage prepaid, or by private courier, or by telex or telegram
to the party to the address set forth below or to such other address as either
party may designate from time to time according to the terms of this paragraph:
To Employee at: John W. Hemmer
88 Meadow Road
Briarcliff Manor, New York 10510
To the Company at: Paradigm Medical Industries, Inc.
1127 West 2320 South
Salt Lake City, Utah 84119
With a copy to:
A notice delivered personally shall be effective upon receipt. A notice
sent by facsimile or telegram shall be effective 24 hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the 3rd day after the day of mailing.
13. Attorney's Fees.
In the event of any action at law or equity to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees and court costs in addition to any other relief to which such
party may be entitled.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah applicable to contracts entered into and to be
performed within such State.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first set forth above.
EMPLOYEE:
John W. Hemmer
____________________________
John W. Hemmer
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC., a
Delaware corporation
Thomas F. Motter
_____________________________
By: Thomas F. Motter
Title: Chief Executive Officer & President
Exhibit 10.30
PARADIGM MEDICAL INDUSTRIES, INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
this 14th day of September, 1998, by and between PARADIGM MEDICAL INDUSTRIES,
INC., a Delaware corporation (the "Company") and MICHAEL W. STELZER (the
"Employee"), effective as of January 1, 1998 (the "Effective Date").
NOW THEREFORE, In consideration of Employee's employment by the Company,
and the mutual promises and covenants contained in, and the mutual benefits to
be derived from this Agreement, and to set forth and establish the terms and
conditions upon which Employee shall be employed by the Company, the parties
hereto agree as follows:
1. Employment.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions set forth herein.
2. Terms and Conditions of Employment.
(a) Employee shall be employed in the position of Vice
President-Operations and Chief Operating Officer and shall supervise,
control and be responsible for all aspects of the business activities
of the Company and its subsidiaries, including direct supervision of
the day-to-day operations of the Company and its subsidiaries. Employee
shall also serve as a member of the Executive Committee. Employee shall
also perform such related services and duties for the Company as are
from time to time assigned or delegated to him from time to time by the
Board of Directors.
(b) Throughout his employment hereunder, Employee shall devote
his full time, energy and skill to perform the duties of his employment
(reasonable vacations in accordance with this Agreement and reasonable
absences due to illness excepted) , shall faithfully and industriously
perform such duties, and shall use his best efforts to follow, and
implement all management policies and decisions of the Board of
Directors.
3. Compensation and Benefits.
As the entire consideration for the services to be performed and the
obligations incurred by the Employee hereunder, and subject to the
terms and conditions hereof, during the term of this Agreement Employee
shall be entitled to the following:
(a) Salary. Commencing from the effective date of this
Agreement, the Company shall pay Employee an annual salary ("Annual
Salary") of $100,000. Such Annual Salary, which shall be pro-rated for
any partial employment period, will be payable in equal bi-weekly
installments or at such other intervals as may be established for the
<PAGE>
Company's customary pay schedule. The Annual Salary is subject to such
incremental increases as the Board of Directors may determine from time
to time in its sole discretion.
(b) Bonus. As further compensation to Employee for his
entering into this Agreement for services to be rendered by Employee,
the Company may pay Employee annually following the end of each fiscal
year, a cash bonus. Such bonus shall be paid to Employee upon the
satisfaction by the Company of the performance objectives that shall be
determined by the Board of Directors of the Company on an annual basis.
Employee shall have the right to direct any portion of the bonus to be
paid into a deferred compensation fund.
(c) Additional Benefits. Employee shall be entitled to
participate, to the extent of Employee's eligibility, in any employee
benefit plans made available by the Company to its employees during the
term of this Agreement, including, without limitation, such profit
sharing plans, 401K and cafeteria plans, and health, life,
hospitalization, dental, disability or other insurance plans as may be
in effect from time to time. Such participation shall be in accordance
with the terms established from time to time by the Company for
individual participation in any such plans.
(d) Life Insurance. The Company shall provide the Employee
with a life insurance policy in an amount equal to twice his Annual
Salary.
(e) Vacation, Sick Leave, and Holidays. Employee shall be
entitled to four (4) weeks of vacation, and also sick leave and
holidays at full pay in accordance with the Company's policies
established and in effect from time to time.
(f) Car Allowance. Employee shall be entitled to an automobile
allowance of $500 per month payable on the first day of each month. The
Company shall also be responsible for the payment of insurance and
property taxes relating to such automobile.
(g) Deductions. The Company shall have the right to deduct and
withhold from the compensation due to Employee hereunder, including
Employee's Annual Salary and Compensation Bonus, if any, such taxes and
other amounts as may be customary or required by law.
4. Business Expenses.
The Company shall promptly reimburse Employee for all reasonable
out-of-pocket business expenses incurred in performing Employee's duties
hereunder, in accordance with the Company's policies with respect thereto in
effect from time to time (including without limitation policies regarding prior
consent for significant expenditures), provided that Employee promptly furnishes
to the Company adequate records and other documentary evidence required by all
federal and state statutes and regulations issued by the appropriate taxing
<PAGE>
authorities for the substantiation of each such business expense as a deduction
on the federal and state income tax returns of the Company.
5. Term and Termination.
(a) Term. The term of this Agreement shall commence on the
Effective Date of this Agreement, and subject to earlier termination as
provided below, and except for the provisions of this Agreement and the
Exhibits hereto which, by their terms, continue in force beyond the
termination hereof, the term of this Agreement shall end on the fifth
anniversary of the Effective Date (January 1, 2003).
(b) Termination on Death and for Cause. This Agreement, and
Employee's employment hereunder, shall terminate upon Employee's death
and is otherwise immediately terminable for cause (as defined below)
upon written notice from the Company to Employee. As used in this
Agreement, "cause" shall include: (i) habitual neglect of or deliberate
or intentional refusal to perform any of Employee's duties or
obligations under this Agreement or to follow Company policies or
procedures; (ii) fraudulent or criminal activities; (iii) any grossly
negligent or dishonest or unethical activity; (iv) breach of fiduciary
duty, deliberate breach of Company rules resulting in loss or damage to
the Company, or unauthorized disclosure of Company trade secrets or
confidential information; or (v) if Employee fails to fulfill for two
(2) consecutive years the annual performance goals and objectives,
which shall be mutually determined by the Employee and the Board of
Directors. A determination of whether Employee's actions justify
termination for cause and the date such termination is effective shall
be made by the Board of Directors in its sole discretion.
(c) Termination for Disability. The Company's Board of
Directors may terminate this Agreement, upon written notice to
Employee, for the "disability" (as defined below) of Employee at the
expiration of a consecutive twenty-six (26) week period of disability
if the Board of Directors determines in its sole discretion that
Employee's disability will prevent Employee from substantially
performing Employee's duties hereunder. As used in this Agreement,
"disability" shall be defined as (i) Employee's inability, by reason of
physical or mental illness or other cause, to perform substantially
Employee's duties hereunder; or (ii) , in the discretion of the Board
of Directors, as it is defined in any disability insurance policy in
effect at the Company during the time in question. Employee shall
receive full compensation, benefits, and reimbursement of expenses
pursuant to the terms of this Agreement from the date disability begins
until the date Employee receives notice of termination under this
paragraph or until Employee begins to receive disability benefits
pursuant to a Company disability insurance policy, whichever occurs
first.
(d) Effect of Termination. In the event Employee's employment
is terminated hereunder, all obligations of the Company and all
obligations of Employee shall cease except as otherwise provided herein
or in the Exhibits hereto. Upon such termination, Employee or
Employee's representative or estate shall be entitled to receive only
<PAGE>
the compensation, benefits, and reimbursement earned or accrued by
Employee under the terms of this Agreement prior to the date of
termination computed pro rata up to and including the date of
termination, but shall not be entitled to any further compensation,
benefits, or reimbursement from such date.
6. Covenant Not to Compete
(a) Covenant. Employee hereby covenants and agrees that during
the term of this Agreement and for a period of two (2) years
thereafter, he will not, except as a director, officer, employee or
consultant of the Company, or any subsidiary or affiliate of the
Company, directly or indirectly own, manage, operate, join, control, or
participate in the ownership, management, operation or control of, or
be connected with (as director, officer, employee, consultant, agent,
independent contractor of otherwise) in any other manner with any
business engaged in the Defined Business (as described below) which is
the same or substantially similar in nature to the business engaged in
by the Company in the State of Utah, and each of the other states in
the United States, and each foreign country, in which the Company may
engage (whether directly or indirectly through subsidiaries,
affiliates, franchisees, licensees, representatives, agents or
otherwise) during the term of this Agreement and Employee's employment
with the Company.
(b) Definition of Defined Business. As used herein, the term
"Defined Business" shall any business currently engaged in by the
Company or contemplated by the Company.
(c) Non-Solicitation Agreement. Employee shall not, directly
or indirectly, employ, solicit for employment, or advise or recommend
to any other person that they employ or solicit for employment, any
employee of the Company (or any subsidiary or affiliate), during the
term of this Agreement and Employee's employment with the Company and
for a term of two years thereafter; provided however, that this
paragraph shall not preclude Employee from giving an employment
reference at the request of any employee of the Company or at the
request of a prospective employer of such employee.
(d) Conflicting Employment. Employee shall not, during the
term of his employment with the Company, engage in any other
employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes
involved during the term of his employment, nor will Employee engage in
any other activities that conflict with his obligations to the Company.
(e) Unique and Essential Nature of Services of Employee.
Employee understands and acknowledges that the Company is entering into
this Agreement in reliance upon the unique and essential nature of the
personal services the Employee is to perform as an employee of the
Company and that irreparable injury would befall the Company or its
subsidiaries or affiliates should Employee serve a competitor of, or
compete, with the Company or any of its subsidiaries or affiliates.
(f) Injunctive and Equitable Relief. Employee covenants and
agrees that the Company's remedy at law for any breach or violation of
the provisions of this Section 6 are inadequate and that, in the event
<PAGE>
of any such breach or violation, the Company shall be entitled to
injunctive relief in addition to any other remedy, at law or in equity,
to which it may be entitled.
(g) Acknowledgment of Reasonableness of Restrictions. Employee
specifically acknowledges and agrees that the two year post-employment
limitation upon his activities as specified above, together with the
geographical limitations set forth above, are reasonable limitations as
to time and place upon Employee's post-employment activities and that
the restrictions are necessary to preserve, promote and protect the
business, accounts and good-will of the Company and impose no greater
restraint than is reasonably necessary to secure such protection.
h) Limitation on Scope or Duration. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall
not affect or render invalid or unenforceable any other provision of
this Section 6 and, to the fullest extent permitted by law, this
Section shall be construed as if the geographic or business scope or
the duration of such provision had been more narrowly drafted so as not
to be invalid or unenforceable but rather to provide the broadest
protection to the Company permitted by law.
7. Confidential Information Agreement.
Employee agrees that Employee will keep confidential and will not,
during or after this Agreement, disclose, divulge, furnish or make accessible to
any person, firm, corporation or other business entity, any information, trade
secrets, customer information, marketing information, sales information, cost
information, technical data, know-how, secret processes, discoveries, methods,
patentable or unpatentable ideas, formulae, processing techniques or technical
operations relating to the business, business practices, methods, products,
processes, equipment or any confidential or secret aspect of the business of the
Company (collectively, the "Confidential Information") without the prior written
consent of the Company. Upon the termination of this Agreement for any reason,
and at any time prior thereto upon request by the Company, Employee shall return
to the Company all written records of any Confidential Information, together
with any and all copies of such records, in Employee's possession. Any
Confidential Information which Employee may conceive of or make during the term
of this Agreement shall be and remain the property of the Company. Employee
agrees promptly to communicate and disclose all such Confidential Information to
the Company and to execute and deliver to the Company any instruments deemed
necessary by the Company to effect disclosure and assignment thereof to it.
8. Assignment.
<PAGE>
This Agreement is for the unique personal services of Employee and is
not assignable or delegable in whole or in part by Employee without the consent
of the Board of Directors of the Company. This Agreement may be assigned or
delegated in whole or in part by the Company and, in such case, the terms of
this Agreement shall inure to the benefit of, be assumed by, and be binding upon
the entity to which this Agreement is assigned.
9. Inventions
(a) Disclosure of Inventions. The Employee hereby agrees that
if he conceives, learns, makes, or first reduces to practice, either alone or
jointly with others, any inventions, improvements, original works of authorship,
formulas, processes, computer programs, techniques, know-how, or data relating
to the Defined Business (hereinafter referred to collectively as "Inventions")
while he is employed by the Company, he will promptly disclose such Inventions
to the Company or to any person designated by it. Notwithstanding the fact that
the Employee may determine that the Company has no right to such Invention, he
shall nevertheless promptly disclose any such Invention to the Company or to any
person designated by it upon reasonable request.
(b) Ownership, Assignment, Assistance, and Power of
Attorney. All Inventions related to ophthalmic instrumentation shall be the sole
and exclusive property of the Company, and the Company shall have the right to
use and to apply for patents, copyrights, or other statutory or common law
protection for such Inventions in any country. The Employee hereby assigns to he
Company any rights which he may acquire in such Inventions. Furthermore, the
Employee agrees to assist the Company in every proper way at the Company's
expense to obtain patents, copyrights, and other statutory common law
protections for such Inventions in any country and to enforce such rights from
time to time. Specifically, the Employee agrees to execute all documents as the
Company may desire for use in applying for and in obtaining or enforcing such
patents, copyrights, and other statutory or common law protections together with
any assignments thereof to the Company or to any person designated by the
Company. In the event the Company is unable for any reason whatsoever to secure
the Employee's signature to any lawful document required to apply for or to
enforce any patent, copyright, or other statutory or common law protections for
such Inventions, the Employee hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as his agents and
attorneys-in-fact to act in his stead to execute such documents and to do such
other lawful and necessary acts to further the issuance and protection of such
patents, copyrights, or other statutory or common law protection, such documents
or such acts to have the same legal force and effect as if such documents were
executed by or such acts were done by the Employee.
10. Waiver or Modification.
Any waiver, modification or amendment of any provision of this
Agreement shall be effective only if in writing in a document that specifically
refers to this Agreement and such document is signed by the party against whom
enforcement of any waiver, change, modification, extension, or discharge is
sought. The waiver by either party of a breach of any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision hereof or any subsequent breach of the same provision
hereof.
<PAGE>
11. Severability.
If any provision of this Agreement is found to be unenforceable by a
court of competent jurisdiction, the remaining provisions shall nevertheless
remain in full force and effect.
12. Notices.
Any notice required or permitted hereunder to be given by either party
shall be in writing and shall be delivered personally or sent by certified or
registered mail, postage prepaid, or by private courier, or by telex or telegram
to the party to the address set forth below or to such other address as either
party may designate from time to time according to the terms of this paragraph:
To Employee at: Michael W. Stelzer
3310 Mountain Lane
Park City, Utah 84060
To the Company at: Paradigm Medical Industries, Inc.
1127 West 2320 South
Salt Lake City, Utah 84119
With a copy to:
A notice delivered personally shall be effective upon receipt. A notice
sent by facsimile or telegram shall be effective 24 hours after the dispatch
thereof. A notice delivered by mail or by private courier shall be effective on
the 3rd day after the day of mailing.
13. Attorney's Fees.
In the event of any action at law or equity to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees and court costs in addition to any other relief to which such
party may be entitled.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah applicable to contracts entered into and to be
performed within such State.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first set forth above.
EMPLOYEE:
Michael W. Stelzer
___________________________
Michael W. Stelzer
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC., a
Delaware corporation
Thomas F. Motter
_________________________
By: Thomas F. Motter
Title: Chief Executive Officer & President
Exhibit 10.31
Change of Control Termination Agreement
This Change of Control Termination Agreement (the "Agreement") is entered into
on September 14, 1998, between PARADIGM MEDICAL INDUSTRIES, INC. a Delaware
corporation, with its principal place of business located at 1127 West 2320
South, Salt Lake City, Utah referred to as the Corporation, and Thomas F.
Motter.
Recitals
A. The Corporation considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel. In
this connection, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to the assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
C. To induce you to remain in the employ of the Corporation, a member of the
Executive Committee, and in consideration of your agreement set forth below, the
Corporation agrees that you shall receive the severance benefits set forth in
this Agreement in the event your employment with the Corporation is terminated
subsequent to a '.change in control of the Corporation" (as defined in Section 2
below) under the circumstances described below. This Agreement is meant to
supersede any other specific written agreements that may have been entered into
between yourself and the Corporation concerning termination of employment.
Therefore, in consideration of your continued employment and the parties'
agreement to be bound by the terms contained in this Agreement, the parties
agree as follows:
1. Term of Agreement. This Agreement shall commence on January 1, 1998 and
shall continue in effect through December 31, 2002. However, commencing on
December 31, 2002 , and each December 31 afterwards, the term of this Agreement
shall automatically be extended for 1 additional year unless, no later than the
preceding November 1, the Corporation shall have given notice that it does not
wish to extend this Agreement. If a change in control of the Corporation shall
have occurred during the original or any extended term of this Agreement, this
Agreement shall continue in effect for a period of 12 months beyond the month in
which the change in control occurred. Notwithstanding the foregoing, and
provided no change of control shall have occurred, this Agreement shall
automatically terminate on the earlier to occur of (i) your termination of
employment with the Corporation, or (ii) the Corporation's furnishing you with
notice of termination, irrespective of the effective date of the termination.
2. Change in Control. No benefits shall be payable under this Agreement unless
there shall have been a change in control of the Corporation, as set forth
<PAGE>
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply with that regulation, provided
that, without limitation, such a change in control shall be deemed to have
occurred if (A) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
thirty percent (30%) or more of the combined voting power of the Corporation's
then out-standing securities; or (B) during any period of 2 consecutive years
(not including any period prior to the execution of this Agreement), individuals
who at the beginning of the period constitute the Board and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in clauses (A) or (D) of
this Section) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority; (C) the Corporation enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Corporation; (D) the Board eliminates or otherwise
reduces the authority, duties and/or responsibilities of the Executive Committee
which is ultimately responsible for operation of the company on a day to day
basis; or (E) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least thirty percent (30%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after the merger or consolidation, or the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. Termination Following Change in Control. If any of the events described
in Section 2 above constituting a change in control of the Corporation shall
have occurred, you shall be entitled to the benefits provided in Subsection
4(iii) below on the subsequent termination of your employment during the term
of this Agreement, unless the termination is (A) because of your death,
Disability or Retirement, (B) by the Corporation for Cause, or (C) by you
other than for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity due physical
or mental illness, you shall have been absent from the full-time performance
of your duties with the Corporation for 6 consecutive months, and within
thirty (30) days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your employment may
be terminated for "Disability"' Termination by the Corporation or you of your
employment based on "Retirement" shall mean termination in accordance with the
Corporation's retirement policy, including early retirement, generally
<PAGE>
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Corporation of your employment for "Cause"
shall mean termination on (A) the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance by you of a Notice
of Termination for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties; or
(B) the willful engaging by you in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without a
reasonable belief that your action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting of the
Board called and hold for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (A) or (B) of the first sentence of this
Subsection and specifying the particulars in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Corporation of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G), or (H), the circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination, as
defined in Subsections 3(v) and 3(iv), respectively, given in respect of them:
(A),the assignment to you of any duties inconsistent with your status and
position as it exists immediately prior to the change in control of the
Corporation or a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change in control
of the Corporation;
(B) a reduction by the Corporation in your annual base salary as in effect on
this date or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all key employees of the
Corporation and all key employees of any person in control of the Corporation;
(C) your relocation to a location not within twenty-five [25] miles of your
present office or job location, except for required travel on the Corporation's
business to an extent substantially consistent with your present business travel
obligations;
(D) the failure by the Corporation, without your consent, to pay to you any
part of your current compensation, or to pay to you any part of an installment
<PAGE>
of deferred compensation under any deferred compensation program of the
Corporation, within seven [7] days of the date the compensation is due;
(E) the failure by the Corporation to continue in effect any bonus to which
you were entitled, or any compensation plan in which you participate immediately
prior to the change in control of the Corporation that is material to your total
compensation, including but not limited to the Corporation's 1995 Stock Option
Plans, 401 (K) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or
any substitute plans adopted prior to the change of control in the Corporation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to the plan, or the failure by the
Corporation to continue your participation in it (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the ' level of your participation relative to
other participants, as existed at the time of the change in control;
(F) the failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation's
life insurance, medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the Corporation, the
failure to continue to provide you with a Corporation automobile or allowance in
lieu of it, if you were provided with such an automobile or an allowance in lieu
of it at the time of the change of control of the Corporation, the taking of any
action by the Corporation that would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Corporation, or the failure by
the Corporation to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at the time
of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 of this Agreement; or
(H) any purported termination of your employment that is not effected pursuant
to a Notice of Termination satisfying the requirements of Subsection (iv) below
(and, if applicable, the requirements of Subsection (II) above); for purposes of
this Agreement, no such purported termination shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with, respect to, any circumstance constituting Good Reason under this
Agreement. In the event you deliver Notice of Termination based on circumstances
set forth in Paragraphs (A), (E), (F), (G), or (H) above, which are fully
corrected prior to the Date of Termination set forth in your Notice of
Termination, the Notice of Termination shall be deemed withdrawn and of no
further force or effect.
(iv) Notice of Termination. Any purported termination of your employment by
the Corporation or by you shall be communicated by written Notice of
Termination to the other party to this Agreement in accordance with Section 6 of
this Agreement. For purposes of this Agreement, a "Notice of Termination" shall
<PAGE>
mean a notice that shall indicate the specific termination provision in this
Agreement relied on, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty [30] days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty [30]-day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty [30] days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen [15] nor more
than sixty [60] days, respectively, from the date the Notice of Termination is
given). However, if within fifteen [I 5] days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this provision), the party receiving the Notice of Termination
notifies the other party that a dispute exists concerning the termination, then
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order, or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal has expired and no appeal has been perfected). The Date of
Termination shall be extended by a notice of dispute only if the notice is given
in good faith and the party giving the notice pursues the resolution of the
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit, and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement except to the
extent otherwise provided in subsection 4(iv).
4. Compensation on Termination or During Disability. Following a change in
control of the Corporation, as defined by Section 2, on termination of your
employment or during a period of disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with the
Corporation as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all amounts payable to you under
any compensation plan of the Corporation during the period, until this Agreement
is terminated pursuant to Section 3(i) above. Thereafter, or in the event your
employment shall be terminated by the Corporation or by you for Retirement, or
by reason of your death, your benefits shall be determined under the
Corporation's retirement, insurance, and other compensation programs then in
effect in accordance with the terms of those programs.
(ii) If your employment shall be terminated by the Corporation for Cause or by
you other than for Good Reason, Disability, death, or Retirement, the
Corporation shall pay you your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given, plus all other
<PAGE>
amounts and benefits to which you are entitled under any compensation plan of
the Corporation at the time the payments are due. The Corporation shall have no
obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Disability, or (b) by you for
Good Reason, then you shall be entitled to the benefits provided below:
(A) The Corporation shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts and benefits to which you are entitled under any
compensation plan of the Corporation, at the time the payments are due, except
as otherwise provided below.
(B) In lieu of any further salary payments to you for periods subsequent to
the Date of Termination, the Corporation shall pay as severance pay to you a
lump sum severance payment together with the payments provided in paragraphs C
and D, below, the "Severance Payments") equal to 2.99 times the sum of your
annual base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect of them.
(C) The Corporation shall pay to you any deferred compensation, including, but
not limited to deferred bonuses, allocated or credited to you or your account as
of the Date of Termination.
(D) In lieu of shares of common stock of the Corporation (the "Corporation's
Shares") issuable on the exercise of outstanding options ("Options"), if any,
granted to you under the Corporation's Stock Option Plans (which Options shall
be canceled on the making of the payment referred to below), you shall receive
an amount in cash equal to the product of (i) the excess of the closing price of
the Corporation's Shares as reported on the NASDAQ-NMS Automatic Quotation
System on or nearest the Date of Termination (or, if not so reported, on the
basis of the average of the lowest asked and highest bid prices on or nearest
the Date of Termination), over the per share exercise price of each Option held
by you (whether or not then fully exercisable) plus the amount of any applicable
cash appreciation rights, times (ii) the number of the Corporation's Shares
covered by each such Option.
(E) The Corporation shall also pay to you all legal fees and expenses incurred
by you as a result of the termination (including all such fees and expenses
incurred by you as a result of the termination (including all such fees and
expenses, if any, incurred in contesting or disputing any termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment or benefit provided under this Agreement)).
(F) The payments provided for in Paragraphs (B), (C), and (D) above, shall be
made no later than the fifth day following the Date of Termination. However, if
the amounts of the payments cannot be finally determined on or before that day,
the Corporation shall pay to you on that day an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and shall pay
the remainder of those payments (together with interest at the rate provided in
<PAGE>
Section 12747(b)(2)(B) of the Code) as soon as the amount can be determined but
in no event later than the thirtieth [30th] day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, the excess shall constitute a loan by
the Corporation to you payable on the fifth [5thl day after demand by the
Corporation (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(iv) In the event that you are a "disqualified individual" within the meaning
of Section 28OG of the Code, the parties expressly agree that the payments
described in this Section 4 and all other payments to you under any other
agreements or arrangements with any persons that constitute "parachute payments"
within the meaning of Section 28OG of the Code are collectively subject to an
overall maximum limit. The maximum limit shall be [One] Dollar ($1 .00) less
than the aggregate amount that would otherwise cause any such payments to be
considered a "parachute payment" within the meaning of Section 28OG of the Code,
as determined by the Corporation. Accordingly, to the extent that the payments
would be considered a "parachute payment" with respect to you, then the portions
of such payments shall be reduced or eliminated in the following order until the
remaining change of control termination payments with respect to you is within
the maximum described in this Subsection (iv):
(A) First, any cash payment to you;
(B) Second, any change of control termination payments not described in this
Agreement; and
(C) Third, any forgiveness of indebtedness of yours to the Corporation.
You expressly and irrevocably waive any and all rights to receive any change
of control termination payments that exceed the maximum limit described in this
Subsection (iv).
(v) You shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed by you
to the Corporation, or otherwise except as specifically provided in this Section
4.
(vi) In addition to all other amounts payable to you under this Section 4, you
shall be entitled to receive all benefits payable to you under the Corporation's
401 (K) Pre-Tax Retirement Savings Plan and any other plan or agreement relating
to retirement benefits.
5. Successors; Binding Agreement. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or.
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
the assumption and agreement prior to the effectiveness of any succession shall
be a breach of this Agreement and shall entitle you to compensation from the
<PAGE>
Corporation in the same amount and on the same terms as you would have been
entitled to under this Agreement if you had terminated your employment for Good
Reason following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Corporation" shall mean the Corporation as defined above and any
successor to its business and/or assets that assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If you should die while any amount would still be
payable to you if you had continued to live, all such amounts, unless otherwise
provided in this Agreement, shall be paid in accordance with the terms of this
Agreement to your legatee or other designee or, if there is no such designee, to
your estate.
6. Notice. For the purpose of this Agreement, all notices and other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance this Agreement, except that notice of a change of address shall be
effective only on receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless the waiver, modification, or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party to this Agreement at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement have been made by
either party that are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of Utah. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
<PAGE>
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Salt Lake
City, Utah in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection this Agreement.
11. Entire Agreement. This Agreement sets forth the entire understanding of the
parties with respect to its subject matter and supersedes all prior written or
oral agreements or understandings with respect to the subject matter.
In witness whereof, the parties have executed this agreement at Salt Lake City,
Utah the day and year first above written.
EMPLOYEE:
Thomas F. Motter
_______________________
Thomas F. Motter
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC.
Delaware corporation
Michael W. Stelzer
_______________________
by: Michael W. Stelzer
Title: Vice President of Operations,
Secretary, and Chief Operations Officer
Exhibit 10.32
Change of Control Termination Agreement
This Change of Control Termination Agreement (the "Agreement") is entered into
on September 14, 1998, between PARADIGM MEDICAL INDUSTRIES, INC. a Delaware
corporation, with its principal place of business located at 1127 West 2320
South, Salt Lake City, Utah referred to as the Corporation, and Robert W.
Millar.
Recitals
A. The Corporation considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel. In
this connection, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to the assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
C. To induce you to remain in the employ of the Corporation, a member of the
Executive Committee, and in consideration of your agreement set forth below, the
Corporation agrees that you shall receive the severance benefits set forth in
this Agreement in the event your employment with the Corporation is terminated
subsequent to a '.change in control of the Corporation" (as defined in Section 2
below) under the circumstances described below. This Agreement is meant to
supersede any other specific written agreements that may have been entered into
between yourself and the Corporation concerning termination of employment.
Therefore, in consideration of your continued employment and the parties'
agreement to be bound by the terms contained in this Agreement, the parties
agree as follows:
1. Term of Agreement. This Agreement shall commence on January 1, 1998 and
shall continue in effect through December 31, 2002. However, commencing on
December 31, 2002 , and each December 31 afterwards, the term of this Agreement
shall automatically be extended for 1 additional year unless, no later than the
preceding November 1, the Corporation shall have given notice that it does not
wish to extend this Agreement. If a change in control of the Corporation shall
have occurred during the original or any extended term of this Agreement, this
Agreement shall continue in effect for a period of 12 months beyond the month in
which the change in control occurred. Notwithstanding the foregoing, and
provided no change of control shall have occurred, this Agreement shall
automatically terminate on the earlier to occur of (i) your termination of
employment with the Corporation, or (ii) the Corporation's furnishing you with
notice of termination, irrespective of the effective date of the termination.
2. Change in Control. No benefits shall be payable under this Agreement unless
there shall have been a change in control of the Corporation, as set forth
<PAGE>
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply with that regulation, provided
that, without limitation, such a change in control shall be deemed to have
occurred if (A) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
thirty percent (30%) or more of the combined voting power of the Corporation's
then out-standing securities; or (B) during any period of 2 consecutive years
(not including any period prior to the execution of this Agreement), individuals
who at the beginning of the period constitute the Board and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in clauses (A) or (D) of
this Section) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority; (C) the Corporation enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Corporation; (D) the Board eliminates or otherwise
reduces the authority, duties and/or responsibilities of the Executive Committee
which is ultimately responsible for operation of the company on a day to day
basis; or (E) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least thirty percent (30%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after the merger or consolidation, or the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. Termination Following Change in Control. If any of the events described in
Section 2 above constituting a change in control of the Corporation shall have
occurred, you shall be entitled to the benefits provided in Subsection 4(iii)
below on the subsequent termination of your employment during the term of this
Agreement, unless the termination is (A) because of your death, Disability or
Retirement, (B) by the Corporation for Cause, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If, as a result of your incapacity due physical
or mental illness, you shall have been absent from the full-time performance
of your duties with the Corporation for 6 consecutive months, and within
thirty (30) days after written notice of termination is given you shall not
have returned to the full-time performance of your duties, your employment may
be terminated for "Disability"' Termination by the Corporation or you of your
employment based on "Retirement" shall mean termination in accordance with the
Corporation's retirement policy, including early retirement, generally
<PAGE>
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Corporation of your employment for "Cause"
shall mean termination on (A) the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance by you of a Notice
of Termination for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your duties; or
(B) the willful engaging by you in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise. For purposes of this
Subsection, no act, or failure to act, on your part shall be deemed "willful"
unless done, or omitted to be done, by you not in good faith and without a
reasonable belief that your action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting of the
Board called and hold for such purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty of
conduct set forth above in clauses (A) or (B) of the first sentence of this
Subsection and specifying the particulars in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a change in control of the
Corporation of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G), or (H), the circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination, as
defined in Subsections 3(v) and 3(iv), respectively, given in respect of them:
(A),the assignment to you of any duties inconsistent with your status and
position as it exists immediately prior to the change in control of the
Corporation or a substantial adverse alteration in the nature or status of
your responsibilities from those in effect immediately prior to the change in
control of the Corporation;
(B) a reduction by the Corporation in your annual base salary as in effect
on this date or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all key employees of
the Corporation and all key employees of any person in control of the
Corporation;
(C) your relocation to a location not within twenty-five [25] miles of your
present office or job location, except for required travel on the
Corporation's business to an extent substantially consistent with your present
business travel obligations;
(D) the failure by the Corporation, without your consent, to pay to you any
part of your current compensation, or to pay to you any part of an installment
<PAGE>
of deferred compensation under any deferred compensation program of the
Corporation, within seven [7] days of the date the compensation is due;
(E) the failure by the Corporation to continue in effect any bonus to which
you were entitled, or any compensation plan in which you participate
immediately prior to the change in control of the Corporation that is material
to your total compensation, including but not limited to the Corporation's
1995 Stock Option Plans, 401 (K) Pre-Tax Retirement Savings Plan, and Flexible
Benefit Plan, or any substitute plans adopted prior to the change of control
in the Corporation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to the plan, or the
failure by the Corporation to continue your participation in it (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the ' level of your
participation relative to other participants, as existed at the time of the
change in control;
(F) the failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation's
life insurance, medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the Corporation,
the failure to continue to provide you with a Corporation automobile or
allowance in lieu of it, if you were provided with such an automobile or an
allowance in lieu of it at the time of the change of control of the
Corporation, the taking of any action by the Corporation that would directly
or indirectly materially reduce any of such benefits or deprive you of any
material fringe benefit enjoyed by you at the time of the change in control of
the Corporation, or the failure by the Corporation to provide you with the
number of paid vacation days to which you are entitled on the basis of years
of service with the Corporation in accordance with the Corporation's normal
vacation policy in effect at the time of the change in control of the
Corporation;
(G) the failure of the Corporation to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated
in Section 5 of this Agreement; or
(H) any purported termination of your employment that is not effected
pursuant to a Notice of Termination satisfying the requirements of Subsection
(iv) below (and, if applicable, the requirements of Subsection (II) above);
for purposes of this Agreement, no such purported termination shall be
effective.
Your rights to terminate your employment pursuant to this Subsection shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with, respect to, any circumstance constituting Good Reason under this
Agreement. In the event you deliver Notice of Termination based on
circumstances set forth in Paragraphs (A), (E), (F), (G), or (H) above, which
are fully corrected prior to the Date of Termination set forth in your Notice
of Termination, the Notice of Termination shall be deemed withdrawn and of no
further force or effect. (iv) Notice of Termination. Any purported termination
of your employment by the Corporation or by you shall be communicated by
written Notice of Termination to the other party to this Agreement in
accordance with Section 6 of this Agreement. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
<PAGE>
termination provision in this Agreement relied on, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty [30] days after Notice of
Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty [30]-day period), and
(B) if your employment is terminated pursuant to Subsection (ii) or (iii)
above or for any other reason (other than Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
Subsection (ii) above shall not be less than thirty [30] days, and in the case
of a termination pursuant to Subsection (iii) above shall not be less than
fifteen [15] nor more than sixty [60] days, respectively, from the date the
Notice of Termination is given). However, if within fifteen [I 5] days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this provision), the party
receiving the Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order, or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal has expired and no
appeal has been perfected). The Date of Termination shall be extended by a
notice of dispute only if the notice is given in good faith and the party
giving the notice pursues the resolution of the dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Corporation
will continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit, and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance
with this Subsection. Amounts paid under this Subsection are in addition to
all other amounts due under this Agreement and shall not be offset against or
reduce any other amounts due under this Agreement except to the extent
otherwise provided in subsection 4(iv).
4. Compensation on Termination or During Disability. Following a change in
control of the Corporation, as defined by Section 2, on termination of your
employment or during a period of disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with
the Corporation as a result of incapacity due to physical or mental illness,
you shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all amounts payable to you
under any compensation plan of the Corporation during the period, until this
Agreement is terminated pursuant to Section 3(i) above. Thereafter, or in the
event your employment shall be terminated by the Corporation or by you for
Retirement, or by reason of your death, your benefits shall be determined
under the Corporation's retirement, insurance, and other compensation programs
then in effect in accordance with the terms of those programs.
(ii) If your employment shall be terminated by the Corporation for Cause or
by you other than for Good Reason, Disability, death, or Retirement, the
Corporation shall pay you your full base salary through the Date of
<PAGE>
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts and benefits to which you are entitled under any
compensation plan of the Corporation at the time the payments are due. The
Corporation shall have no obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Disability, or (b) by you for
Good Reason, then you shall be entitled to the benefits provided below:
(A) The Corporation shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts and benefits to which you are entitled under any
compensation plan of the Corporation, at the time the payments are due, except
as otherwise provided below.
(B) In lieu of any further salary payments to you for periods subsequent to
the Date of Termination, the Corporation shall pay as severance pay to you a
lump sum severance payment together with the payments provided in paragraphs C
and D, below, the "Severance Payments") equal to 2.99 times the sum of your
annual base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect of
them.
(C) The Corporation shall pay to you any deferred compensation, including,
but not limited to deferred bonuses, allocated or credited to you or your
account as of the Date of Termination.
(D) In lieu of shares of common stock of the Corporation (the "Corporation's
Shares") issuable on the exercise of outstanding options ("Options"), if any,
granted to you under the Corporation's Stock Option Plans (which Options shall
be canceled on the making of the payment referred to below), you shall receive
an amount in cash equal to the product of (i) the excess of the closing price
of the Corporation's Shares as reported on the NASDAQ-NMS Automatic Quotation
System on or nearest the Date of Termination (or, if not so reported, on the
basis of the average of the lowest asked and highest bid prices on or nearest
the Date of Termination), over the per share exercise price of each Option
held by you (whether or not then fully exercisable) plus the amount of any
applicable cash appreciation rights, times (ii) the number of the
Corporation's Shares covered by each such Option.
(E) The Corporation shall also pay to you all legal fees and expenses
incurred by you as a result of the termination (including all such fees and
expenses incurred by you as a result of the termination (including all such
fees and expenses, if any, incurred in contesting or disputing any termination
or in seeking to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code") to any payment or benefit provided under this
Agreement)).
(F) The payments provided for in Paragraphs (B), (C), and (D) above, shall
be made no later than the fifth day following the Date of Termination.
However, if the amounts of the payments cannot be finally determined on or
before that day, the Corporation shall pay to you on that day an estimate, as
determined in good faith by the Corporation, of the minimum amount of such
payments and shall pay the remainder of those payments (together with interest
<PAGE>
at the rate provided in Section 12747(b)(2)(B) of the Code) as soon as the
amount can be determined but in no event later than the thirtieth [30th] day
after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, the
excess shall constitute a loan by the Corporation to you payable on the fifth
[5thl day after demand by the Corporation (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
(iv) In the event that you are a "disqualified individual" within the
meaning of Section 28OG of the Code, the parties expressly agree that the
payments described in this Section 4 and all other payments to you under any
other agreements or arrangements with any persons that constitute "parachute
payments" within the meaning of Section 28OG of the Code are collectively
subject to an overall maximum limit. The maximum limit shall be [One] Dollar
($1 .00) less than the aggregate amount that would otherwise cause any such
payments to be considered a "parachute payment" within the meaning of Section
28OG of the Code, as determined by the Corporation. Accordingly, to the extent
that the payments would be considered a "parachute payment" with respect to
you, then the portions of such payments shall be reduced or eliminated in the
following order until the remaining change of control termination payments
with respect to you is within the maximum described in this Subsection (iv):
(A) First, any cash payment to you;
(B) Second, any change of control termination payments not described in this
Agreement; and
(C) Third, any forgiveness of indebtedness of yours to the Corporation.
You expressly and irrevocably waive any and all rights to receive any change
of control termination payments that exceed the maximum limit described in
this Subsection (iv).
(v) You shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Corporation, or otherwise except as specifically provided
in this Section 4.
(vi) In addition to all other amounts payable to you under this Section 4,
you shall be entitled to receive all benefits payable to you under the
Corporation's 401 (K) Pre-Tax Retirement Savings Plan and any other plan or
agreement relating to retirement benefits.
5. Successors; Binding Agreement. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or.
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
the assumption and agreement prior to the effectiveness of any succession shall
be a breach of this Agreement and shall entitle you to compensation from the
<PAGE>
Corporation in the same amount and on the same terms as you would have been
entitled to under this Agreement if you had terminated your employment for Good
Reason following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Corporation" shall mean the Corporation as defined above and any
successor to its business and/or assets that assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If you should die while any amount would still be
payable to you if you had continued to live, all such amounts, unless
otherwise provided in this Agreement, shall be paid in accordance with the
terms of this Agreement to your legatee or other designee or, if there is no
such designee, to your estate.
6. Notice. For the purpose of this Agreement, all notices and other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance this Agreement, except that notice of a change of address shall be
effective only on receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless the waiver, modification, or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party to this Agreement at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement have been made by
either party that are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of Utah. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
<PAGE>
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Salt Lake
City, Utah in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection this Agreement.
11. Entire Agreement. This Agreement sets forth the entire understanding of
the parties with respect to its subject matter and supersedes all prior written
or oral agreements or understandings with respect to the subject matter.
In witness whereof, the parties have executed this agreement at Salt Lake City,
Utah the day and year first above written.
EMPLOYEE:
Robert W. Millar
_____________________
Robert W. Millar
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC.
Delaware corporation
Thomas F. Motter
_______________________
by: Thomas F. Motter
Title: Chief Executive Officer & President
Exhibit 10.33
Change of Control Termination Agreement
This Change of Control Termination Agreement (the "Agreement") is entered into
on September 14, 1998, between PARADIGM MEDICAL INDUSTRIES, INC. a Delaware
corporation, with its principal place of business located at 1127 West 2320
South, Salt Lake City, Utah referred to as the Corporation, and John W. Hemmer.
Recitals
A. The Corporation considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel. In
this connection, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to the assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
C. To induce you to remain in the employ of the Corporation, a member of the
Executive Committee, and in consideration of your agreement set forth below, the
Corporation agrees that you shall receive the severance benefits set forth in
this Agreement in the event your employment with the Corporation is terminated
subsequent to a '.change in control of the Corporation" (as defined in Section 2
below) under the circumstances described below. This Agreement is meant to
supersede any other specific written agreements that may have been entered into
between yourself and the Corporation concerning termination of employment.
Therefore, in consideration of your continued employment and the parties'
agreement to be bound by the terms contained in this Agreement, the parties
agree as follows:
1. Term of Agreement. This Agreement shall commence on January 1, 1998 and shall
continue in effect through December 31, 2002. However, commencing on December
31, 2002 , and each December 31 afterwards, the term of this Agreement shall
automatically be extended for 1 additional year unless, no later than the
preceding November 1, the Corporation shall have given notice that it does not
wish to extend this Agreement. If a change in control of the Corporation shall
have occurred during the original or any extended term of this Agreement, this
Agreement shall continue in effect for a period of 12 months beyond the month in
which the change in control occurred. Notwithstanding the foregoing, and
provided no change of control shall have occurred, this Agreement shall
automatically terminate on the earlier to occur of (i) your termination of
employment with the Corporation, or (ii) the Corporation's furnishing you with
notice of termination, irrespective of the effective date of the termination.
2. Change in Control. No benefits shall be payable under this Agreement unless
there shall have been a change in control of the Corporation, as set forth
<PAGE>
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply with that regulation, provided
that, without limitation, such a change in control shall be deemed to have
occurred if (A) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
thirty percent (30%) or more of the combined voting power of the Corporation's
then out-standing securities; or (B) during any period of 2 consecutive years
(not including any period prior to the execution of this Agreement), individuals
who at the beginning of the period constitute the Board and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in clauses (A) or (D) of
this Section) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority; (C) the Corporation enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Corporation; (D) the Board eliminates or otherwise
reduces the authority, duties and/or responsibilities of the Executive Committee
which is ultimately responsible for operation of the company on a day to day
basis; or (E) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least thirty percent (30%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after the merger or consolidation, or the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. Termination Following Change in Control. If any of the events described in
Section 2 above constituting a change in control of the Corporation shall have
occurred, you shall be entitled to the benefits provided in Subsection 4(iii)
below on the subsequent termination of your employment during the term of this
Agreement, unless the termination is (A) because of your death, Disability or
Retirement, (B) by the Corporation for Cause, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If, as a result of your incapacity due physical or
mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for 6 consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability"' Termination by the Corporation or you of your
employment based on "Retirement" shall mean termination in accordance with the
Corporation's retirement policy, including early retirement, generally
<PAGE>
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Corporation of your employment for "Cause" shall
mean termination on (A) the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance by you of a Notice of
Termination for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties; or (B) the
willful engaging by you in conduct that is demonstrably and materially injurious
to the Corporation, monetarily or otherwise. For purposes of this Subsection, no
act, or failure to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without a reasonable belief
that your action or omission was in the best interest of the Corporation.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and hold
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a change in control of the
Corporation of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G), or (H), the circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination, as
defined in Subsections 3(v) and 3(iv), respectively, given in respect of them:
(A),the assignment to you of any duties inconsistent with your status and
position as it exists immediately prior to the change in control of the
Corporation or a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change in control
of the Corporation;
(B)a reduction by the Corporation in your annual base salary as in effect on
this date or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all key employees of the
Corporation and all key employees of any person in control of the Corporation;
(C) your relocation to a location not within twenty-five [25] miles of your
present office or job location, except for required travel on the Corporation's
business to an extent substantially consistent with your present business travel
obligations;
(D) the failure by the Corporation, without your consent, to pay to you any part
of your current compensation, or to pay to you any part of an installment of
<PAGE>
deferred compensation under any deferred compensation program of the
Corporation, within seven [7] days of the date the compensation is due;
(E) the failure by the Corporation to continue in effect any bonus to which you
were entitled, or any compensation plan in which you participate immediately
prior to the change in control of the Corporation that is material to your total
compensation, including but not limited to the Corporation's 1995 Stock Option
Plans, 401 (K) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or
any substitute plans adopted prior to the change of control in the Corporation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to the plan, or the failure by the
Corporation to continue your participation in it (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the ' level of your participation relative to
other participants, as existed at the time of the change in control;
(F) the failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation's
life insurance, medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the Corporation, the
failure to continue to provide you with a Corporation automobile or allowance in
lieu of it, if you were provided with such an automobile or an allowance in lieu
of it at the time of the change of control of the Corporation, the taking of any
action by the Corporation that would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Corporation, or the failure by
the Corporation to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at the time
of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 of this Agreement; or
(H) any purported termination of your employment that is not effected pursuant
to a Notice of Termination satisfying the requirements of Subsection (iv) below
(and, if applicable, the requirements of Subsection (II) above); for purposes of
this Agreement, no such purported termination shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with, respect
to, any circumstance constituting Good Reason under this Agreement. In the event
you deliver Notice of Termination based on circumstances set forth in Paragraphs
(A), (E), (F), (G), or (H) above, which are fully corrected prior to the Date of
Termination set forth in your Notice of Termination, the Notice of Termination
shall be deemed withdrawn and of no further force or effect. (iv) Notice of
Termination. Any purported termination of your employment by the Corporation or
by you shall be communicated by written Notice of Termination to the other party
to this Agreement in accordance with Section 6 of this Agreement. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice that shall
<PAGE>
indicate the specific termination provision in this Agreement relied on, and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty [30] days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty [30]-day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty [30] days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen [15] nor more
than sixty [60] days, respectively, from the date the Notice of Termination is
given). However, if within fifteen [I 5] days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this provision), the party receiving the Notice of Termination
notifies the other party that a dispute exists concerning the termination, then
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order, or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal has expired and no appeal has been perfected). The Date of
Termination shall be extended by a notice of dispute only if the notice is given
in good faith and the party giving the notice pursues the resolution of the
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit, and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement except to the
extent otherwise provided in subsection 4(iv).
4. Compensation on Termination or During Disability. Following a change in
control of the Corporation, as defined by Section 2, on termination of your
employment or during a period of disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with the
Corporation as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all amounts payable to you under
any compensation plan of the Corporation during the period, until this Agreement
is terminated pursuant to Section 3(i) above. Thereafter, or in the event your
employment shall be terminated by the Corporation or by you for Retirement, or
by reason of your death, your benefits shall be determined under the
Corporation's retirement, insurance, and other compensation programs then in
effect in accordance with the terms of those programs.
(ii) If your employment shall be terminated by the Corporation for Cause or by
you other than for Good Reason, Disability, death, or Retirement, the
Corporation shall pay you your full base salary through the Date of Termination
<PAGE>
at the rate in effect at the time Notice of Termination is given, plus all other
amounts and benefits to which you are entitled under any compensation plan of
the Corporation at the time the payments are due. The Corporation shall have no
obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Disability, or (b) by you for
Good Reason, then you shall be entitled to the benefits provided below:
(A) The Corporation shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts and benefits to which you are entitled under any
compensation plan of the Corporation, at the time the payments are due, except
as otherwise provided below.
(B) In lieu of any further salary payments to you for periods subsequent to
the Date of Termination, the Corporation shall pay as severance pay to you a
lump sum severance payment together with the payments provided in paragraphs C
and D, below, the "Severance Payments") equal to 2.99 times the sum of your
annual base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect of them.
(C) The Corporation shall pay to you any deferred compensation, including, but
not limited to deferred bonuses, allocated or credited to you or your account as
of the Date of Termination.
(D) In lieu of shares of common stock of the Corporation (the "Corporation's
Shares") issuable on the exercise of outstanding options ("Options"), if any,
granted to you under the Corporation's Stock Option Plans (which Options shall
be canceled on the making of the payment referred to below), you shall receive
an amount in cash equal to the product of (i) the excess of the closing price of
the Corporation's Shares as reported on the NASDAQ-NMS Automatic Quotation
System on or nearest the Date of Termination (or, if not so reported, on the
basis of the average of the lowest asked and highest bid prices on or nearest
the Date of Termination), over the per share exercise price of each Option held
by you (whether or not then fully exercisable) plus the amount of any applicable
cash appreciation rights, times (ii) the number of the Corporation's Shares
covered by each such Option.
(E) The Corporation shall also pay to you all legal fees and expenses incurred
by you as a result of the termination (including all such fees and expenses
incurred by you as a result of the termination (including all such fees and
expenses, if any, incurred in contesting or disputing any termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment or benefit provided under this Agreement)).
(F) The payments provided for in Paragraphs (B), (C), and (D) above, shall be
made no later than the fifth day following the Date of Termination. However, if
the amounts of the payments cannot be finally determined on or before that day,
the Corporation shall pay to you on that day an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and shall pay
the remainder of those payments (together with interest at the rate provided in
<PAGE>
Section 12747(b)(2)(B) of the Code) as soon as the amount can be determined but
in no event later than the thirtieth [30th] day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, the excess shall constitute a loan by
the Corporation to you payable on the fifth [5thl day after demand by the
Corporation (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(iv) In the event that you are a "disqualified individual" within the meaning of
Section 28OG of the Code, the parties expressly agree that the payments
described in this Section 4 and all other payments to you under any other
agreements or arrangements with any persons that constitute "parachute payments"
within the meaning of Section 28OG of the Code are collectively subject to an
overall maximum limit. The maximum limit shall be [One] Dollar ($1 .00) less
than the aggregate amount that would otherwise cause any such payments to be
considered a "parachute payment" within the meaning of Section 28OG of the Code,
as determined by the Corporation. Accordingly, to the extent that the payments
would be considered a "parachute payment" with respect to you, then the portions
of such payments shall be reduced or eliminated in the following order until the
remaining change of control termination payments with respect to you is within
the maximum described in this Subsection (iv):
(A) First, any cash payment to you;
(B) Second, any change of control termination payments not described in this
Agreement; and
(C) Third, any forgiveness of indebtedness of yours to the Corporation.
You expressly and irrevocably waive any and all rights to receive any change
of control termination payments that exceed the maximum limit described in this
Subsection (iv).
(v) You shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed by you
to the Corporation, or otherwise except as specifically provided in this Section
4.
(vi) In addition to all other amounts payable to you under this Section 4, you
shall be entitled to receive all benefits payable to you under the Corporation's
401 (K) Pre-Tax Retirement Savings Plan and any other plan or agreement relating
to retirement benefits.
5. Successors; Binding Agreement. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or.
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
the assumption and agreement prior to the effectiveness of any succession shall
be a breach of this Agreement and shall entitle you to compensation from the
<PAGE>
Corporation in the same amount and on the same terms as you would have been
entitled to under this Agreement if you had terminated your employment for Good
Reason following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Corporation" shall mean the Corporation as defined above and any
successor to its business and/or assets that assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If you should die while any amount would still be
payable to you if you had continued to live, all such amounts, unless otherwise
provided in this Agreement, shall be paid in accordance with the terms of this
Agreement to your legatee or other designee or, if there is no such designee, to
your estate.
6. Notice. For the purpose of this Agreement, all notices and other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance this Agreement, except that notice of a change of address shall be
effective only on receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless the waiver, modification, or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party to this Agreement at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement have been made by
either party that are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of Utah. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
<PAGE>
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Salt Lake
City, Utah in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection this Agreement.
11. Entire Agreement. This Agreement sets forth the entire understanding of
the parties with respect to its subject matter and supersedes all prior written
or oral agreements or understandings with respect to the subject matter.
In witness whereof, the parties have executed this agreement at Salt Lake City,
Utah the day and year first above written.
EMPLOYEE:
John W. Hemmer
_______________________
John W. Hemmer
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC.
Delaware corporation
Thomas F. Motter
________________________
by: Thomas F. Motter
Title: Corporate Executive Officer, President
Exhibit 10.34
Change of Control Termination Agreement
This Change of Control Termination Agreement (the "Agreement") is entered into
on September 14, 1998, between PARADIGM MEDICAL INDUSTRIES, INC. a Delaware
corporation, with its principal place of business located at 1127 West 2320
South, Salt Lake City, Utah referred to as the Corporation, and Michael W.
Stelzer.
Recitals
A. The Corporation considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel. In
this connection, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist. This possibility, and the
uncertainty and questions that it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Corporation and its stockholders.
B. The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to the assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
C. To induce you to remain in the employ of the Corporation, a member of the
Executive Committee, and in consideration of your agreement set forth below, the
Corporation agrees that you shall receive the severance benefits set forth in
this Agreement in the event your employment with the Corporation is terminated
subsequent to a '.change in control of the Corporation" (as defined in Section 2
below) under the circumstances described below. This Agreement is meant to
supersede any other specific written agreements that may have been entered into
between yourself and the Corporation concerning termination of employment.
Therefore, in consideration of your continued employment and the parties'
agreement to be bound by the terms contained in this Agreement, the parties
agree as follows:
1. Term of Agreement. This Agreement shall commence on January 1, 1998 and
shall continue in effect through December 31, 2002. However, commencing on
December 31, 2002 , and each December 31 afterwards, the term of this Agreement
shall automatically be extended for 1 additional year unless, no later than the
preceding November 1, the Corporation shall have given notice that it does not
wish to extend this Agreement. If a change in control of the Corporation shall
have occurred during the original or any extended term of this Agreement, this
Agreement shall continue in effect for a period of 12 months beyond the month in
which the change in control occurred. Notwithstanding the foregoing, and
provided no change of control shall have occurred, this Agreement shall
automatically terminate on the earlier to occur of (i) your termination of
employment with the Corporation, or (ii) the Corporation's furnishing you with
notice of termination, irrespective of the effective date of the termination.
2.Change in Control. No benefits shall be payable under this Agreement unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the Corporation"
shall mean a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
the Corporation is in fact required to comply with that regulation, provided
that, without limitation, such a change in control shall be deemed to have
occurred if (A) any "person" (as that term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or a corporation owned,
directly or indirectly, by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing
thirty percent (30%) or more of the combined voting power of the Corporation's
then out-standing securities; or (B) during any period of 2 consecutive years
(not including any period prior to the execution of this Agreement), individuals
who at the beginning of the period constitute the Board and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in clauses (A) or (D) of
this Section) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority; (C) the Corporation enters into
an agreement, the consummation of which would result in the occurrence of a
change in control of the Corporation; (D) the Board eliminates or otherwise
reduces the authority, duties and/or responsibilities of the Executive Committee
which is ultimately responsible for operation of the company on a day to day
basis; or (E) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Corporation
outstanding immediately prior to it continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least thirty percent (30%) of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after the merger or consolidation, or the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets.
3. Termination Following Change in Control. If any of the events described in
Section 2 above constituting a change in control of the Corporation shall have
occurred, you shall be entitled to the benefits provided in Subsection 4(iii)
below on the subsequent termination of your employment during the term of this
Agreement, unless the termination is (A) because of your death, Disability or
Retirement, (B) by the Corporation for Cause, or (C) by you other than for Good
Reason.
(i) Disability; Retirement. If, as a result of your incapacity due physical or
mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for 6 consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability"' Termination by the Corporation or you of your
employment based on "Retirement" shall mean termination in accordance with the
Corporation's retirement policy, including early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you.
(ii) Cause. Termination by the Corporation of your employment for "Cause"
shall mean termination on (A) the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance by you of a Notice of
Termination for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which the
Board believes that you have not substantially performed your duties; or (B) the
willful engaging by you in conduct that is demonstrably and materially injurious
to the Corporation, monetarily or otherwise. For purposes of this Subsection, no
act, or failure to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without a reasonable belief
that your action or omission was in the best interest of the Corporation.
Notwithstanding the foregoing, you shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
of the entire membership of the Board at a meeting of the Board called and hold
for such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for Good
Reason. For purposes of this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a change in control of the
Corporation of any of the following circumstances unless, in the case of
paragraphs (A), (E), (F), (G), or (H), the circumstances are fully corrected
prior to the Date of Termination specified in the Notice of Termination, as
defined in Subsections 3(v) and 3(iv), respectively, given in respect of them:
(A),the assignment to you of any duties inconsistent with your status and
position as it exists immediately prior to the change in control of the
Corporation or a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the change in control
of the Corporation;
(B) a reduction by the Corporation in your annual base salary as in effect on
this date or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all key employees of the
Corporation and all key employees of any person in control of the Corporation;
(C) your relocation to a location not within twenty-five [25] miles of your
present office or job location, except for required travel on the Corporation's
business to an extent substantially consistent with your present business travel
obligations;
(D) the failure by the Corporation, without your consent, to pay to you any
part of your current compensation, or to pay to you any part of an installment
of deferred compensation under any deferred compensation program of the
Corporation, within seven [7] days of the date the compensation is due;
(E) the failure by the Corporation to continue in effect any bonus to which
you were entitled, or any compensation plan in which you participate immediately
prior to the change in control of the Corporation that is material to your total
compensation, including but not limited to the Corporation's 1995 Stock Option
Plans, 401 (K) Pre-Tax Retirement Savings Plan, and Flexible Benefit Plan, or
any substitute plans adopted prior to the change of control in the Corporation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to the plan, or the failure by the
Corporation to continue your participation in it (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the ' level of your participation relative to
other participants, as existed at the time of the change in control;
(F) the failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation's
life insurance, medical, health and accident, or disability plans in which you
were participating at the time of the change in control of the Corporation, the
failure to continue to provide you with a Corporation automobile or allowance in
lieu of it, if you were provided with such an automobile or an allowance in lieu
of it at the time of the change of control of the Corporation, the taking of any
action by the Corporation that would directly or indirectly materially reduce
any of such benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the change in control of the Corporation, or the failure by
the Corporation to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at the time
of the change in control of the Corporation;
(G) the failure of the Corporation to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as contemplated in
Section 5 of this Agreement; or
(H) any purported termination of your employment that is not effected pursuant
to a Notice of Termination satisfying the requirements of Subsection (iv) below
(and, if applicable, the requirements of Subsection (II) above); for purposes of
this Agreement, no such purported termination shall be effective.
Your rights to terminate your employment pursuant to this Subsection shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with, respect
to, any circumstance constituting Good Reason under this Agreement. In the event
you deliver Notice of Termination based on circumstances set forth in Paragraphs
(A), (E), (F), (G), or (H) above, which are fully corrected prior to the Date of
Termination set forth in your Notice of Termination, the Notice of Termination
shall be deemed withdrawn and of no further force or effect.
(iv) Notice of Termination. Any purported termination of your employment by
the Corporation or by you shall be communicated by written Notice of Termination
to the other party to this Agreement in accordance with Section 6 of this
Agreement. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice that shall indicate the specific termination provision in this
Agreement relied on, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, thirty [30] days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such thirty [30]-day period), and (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection (ii)
above shall not be less than thirty [30] days, and in the case of a termination
pursuant to Subsection (iii) above shall not be less than fifteen [15] nor more
than sixty [60] days, respectively, from the date the Notice of Termination is
given). However, if within fifteen [I 5] days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as determined without
regard to this provision), the party receiving the Notice of Termination
notifies the other party that a dispute exists concerning the termination, then
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties, by a binding
arbitration award, or by a final judgment, order, or decree of a court of
competent jurisdiction (which is not appealable or with respect to which the
time for appeal has expired and no appeal has been perfected). The Date of
Termination shall be extended by a notice of dispute only if the notice is given
in good faith and the party giving the notice pursues the resolution of the
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all compensation,
benefit, and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement except to the
extent otherwise provided in subsection 4(iv).
4. Compensation on Termination or During Disability. Following a change in
control of the Corporation, as defined by Section 2, on termination of your
employment or during a period of disability you shall be entitled to the
following benefits:
(i) During any period that you fail to perform your full-time duties with the
Corporation as a result of incapacity due to physical or mental illness, you
shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all amounts payable to you under
any compensation plan of the Corporation during the period, until this Agreement
is terminated pursuant to Section 3(i) above. Thereafter, or in the event your
employment shall be terminated by the Corporation or by you for Retirement, or
by reason of your death, your benefits shall be determined under the
Corporation's retirement, insurance, and other compensation programs then in
effect in accordance with the terms of those programs.
(ii) If your employment shall be terminated by the Corporation for Cause or by
you other than for Good Reason, Disability, death, or Retirement, the
Corporation shall pay you your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given, plus all other
amounts and benefits to which you are entitled under any compensation plan of
the Corporation at the time the payments are due. The Corporation shall have no
obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated (a) by the
Corporation other than for Cause, Retirement or Disability, or (b) by you for
Good Reason, then you shall be entitled to the benefits provided below:
(A) The Corporation shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given,
plus all other amounts and benefits to which you are entitled under any
compensation plan of the Corporation, at the time the payments are due, except
as otherwise provided below.
(B) In lieu of any further salary payments to you for periods subsequent to
the Date of Termination, the Corporation shall pay as severance pay to you a
lump sum severance payment together with the payments provided in paragraphs C
and D, below, the "Severance Payments") equal to 2.99 times the sum of your
annual base salary in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination given in respect of them.
(C) The Corporation shall pay to you any deferred compensation, including, but
not limited to deferred bonuses, allocated or credited to you or your account as
of the Date of Termination.
(D) In lieu of shares of common stock of the Corporation (the "Corporation's
Shares") issuable on the exercise of outstanding options ("Options"), if any,
granted to you under the Corporation's Stock Option Plans (which Options shall
be canceled on the making of the payment referred to below), you shall receive
an amount in cash equal to the product of (i) the excess of the closing price of
the Corporation's Shares as reported on the NASDAQ-NMS Automatic Quotation
System on or nearest the Date of Termination (or, if not so reported, on the
basis of the average of the lowest asked and highest bid prices on or nearest
the Date of Termination), over the per share exercise price of each Option held
by you (whether or not then fully exercisable) plus the amount of any applicable
cash appreciation rights, times (ii) the number of the Corporation's Shares
covered by each such Option.
(E) The Corporation shall also pay to you all legal fees and expenses incurred
by you as a result of the termination (including all such fees and expenses
incurred by you as a result of the termination (including all such fees and
expenses, if any, incurred in contesting or disputing any termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment or benefit provided under this Agreement)).
(F) The payments provided for in Paragraphs (B), (C), and (D) above, shall be
made no later than the fifth day following the Date of Termination. However, if
the amounts of the payments cannot be finally determined on or before that day,
the Corporation shall pay to you on that day an estimate, as determined in good
faith by the Corporation, of the minimum amount of such payments and shall pay
the remainder of those payments (together with interest at the rate provided in
Section 12747(b)(2)(B) of the Code) as soon as the amount can be determined but
in no event later than the thirtieth [30th] day after the Date of Termination.
In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, the excess shall constitute a loan by
the Corporation to you payable on the fifth [5thl day after demand by the
Corporation (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(iv) In the event that you are a "disqualified individual" within the meaning
of Section 28OG of the Code, the parties expressly agree that the payments
described in this Section 4 and all other payments to you under any other
agreements or arrangements with any persons that constitute "parachute payments"
within the meaning of Section 28OG of the Code are collectively subject to an
overall maximum limit. The maximum limit shall be [One] Dollar ($1 .00) less
than the aggregate amount that would otherwise cause any such payments to be
considered a "parachute payment" within the meaning of Section 28OG of the Code,
as determined by the Corporation. Accordingly, to the extent that the payments
would be considered a "parachute payment" with respect to you, then the portions
of such payments shall be reduced or eliminated in the following order until the
remaining change of control termination payments with respect to you is within
the maximum described in this Subsection (iv):
(A) First, any cash payment to you;
(B) Second, any change of control termination payments not described in this
Agreement; and
(C) Third, any forgiveness of indebtedness of yours to the Corporation.
You expressly and irrevocably waive any and all rights to receive any change
of control termination payments that exceed the maximum limit described in this
Subsection (iv).
(v) You shall not be required to mitigate the amount of any payment provided
for in this Section 4 by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed by you
to the Corporation, or otherwise except as specifically provided in this Section
4.
(vi) In addition to all other amounts payable to you under this Section 4, you
shall be entitled to receive all benefits payable to you under the Corporation's
401 (K) Pre-Tax Retirement Savings Plan and any other plan or agreement relating
to retirement benefits.
5. Successors; Binding Agreement. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or.
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
the assumption and agreement prior to the effectiveness of any succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Corporation in the same amount and on the same terms as you would have been
entitled to under this Agreement if you had terminated your employment for Good
Reason following a change in control of the Corporation, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Corporation" shall mean the Corporation as defined above and any
successor to its business and/or assets that assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If you should die while any amount would still be
payable to you if you had continued to live, all such amounts, unless otherwise
provided in this Agreement, shall be paid in accordance with the terms of this
Agreement to your legatee or other designee or, if there is no such designee, to
your estate.
6. Notice. For the purpose of this Agreement, all notices and other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance this Agreement, except that notice of a change of address shall be
effective only on receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived, or
discharged unless the waiver, modification, or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. No waiver by either party to this Agreement at any time of any breach by
the other party of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter of this Agreement have been made by
either party that are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of Utah. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for shall be paid net of any applicable
withholding or deduction required under federal, state, or local law. The
obligations of the Corporation under Section 4 shall survive the expiration of
the term of this Agreement.
8. Validity. The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or unenforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Salt Lake
City, Utah in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. However, you shall be entitled to seek specific performance
of your right to be paid until the Date of Termination during the pendency of
any dispute or controversy arising under or in connection this Agreement.
11. Entire Agreement. This Agreement sets forth the entire understanding of
the parties with respect to its subject matter and supersedes all prior written
or oral agreements or understandings with respect to the subject matter.
In witness whereof, the parties have executed this agreement at Salt Lake City,
Utah the day and year first above written.
EMPLOYEE:
Michael W. Stelzer
_______________________
Michael W. Stelzer
THE COMPANY:
PARADIGM MEDICAL INDUSTRIES, INC.
Delaware corporation
Thomas F. Motter
______________________
by: Thomas F. Motter
Title: Chief Executive Officer & President
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PARADIGM
MEDICAL INDUSTRIES, INC. SEPTEMBER 30, 1998 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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