Employment Agreement

 

This Personal Employment Agreement (the “Agreement”) is entered as of this 8th
day of July, 2012 (the “Effective Date”), by and between MEDGENICS, INC., a
company organized under the laws of the State of Delaware (the “Company”) with
principal U.S. offices located at 555 California Avenue, Suite 365, San
Francisco, California 94104; and DR. MARVIN R. GAROVOY, whose address is 9 Dutch
Valley Lane, San Anselmo, California 94960-1015 (the “Executive”).

 

WITNESSETH

 

 

 

WHEREAS,the Company was established for the purpose of engaging in the research
and development, production and sale of products and/or services in the areas of
life sciences, biotechnology and/or medical devices; and

 

WHEREAS,the Company desires to engage the Executive as Chief Medical Officer;
and

 

WHEREAS,the Executive represents that he has the requisite skill and knowledge
to serve as such; and

 

WHEREAS,the parties desire to state the terms and conditions of the Executive’s
engagement by the Company, effective as of the Effective Date, as set forth
below.

 

NOW THEREFORE, in consideration of the mutual promises, covenants, conditions,
representations and warranties set forth herein, and intending to be legally
bound hereby, the parties agree as follows:

 

 

1.             Appointment; Term

1.1The Company hereby appoints the Executive as Chief Medical Officer of the
Company and, in such capacity, the Executive shall be subject to the direction
of the Company’s Chief Operating Officer (the “COO”).

 

 

 

 

1.2The Executive’s employment hereunder shall be for a term of one (1) year
commencing the Effective Date (the “Term”). The Term shall automatically extend
for one (1) additional year on each subsequent anniversary of the Effective Date
(the “Automatic Extension”), unless either party provides sixty (60) days
advance written notice to the other of such party’s desire not to renew. If the
Automatic Extension is terminated, then Executive’s employment hereunder shall
terminate as of the last day of the then current Term, subject to earlier
termination pursuant to Section 7 below.

 

 

2.            Position

During the term of this Agreement:

2.1The Executive shall be expected to work on average approximately 80% of an
average work week of an executive in a similar position with a public company of
similar size and nature as the Company. The Executive understands and agrees
that his duties may require that he work more than 80% of an average work week,
but that he shall not be entitled to any over-time pay as a result of any
additional hours worked. During the period that the Executive is working on a
part-time basis for the Company, the Executive may be employed by or provide
services to other entities upon written approval of the COO, provided that such
entities are not competitive with the Company.

 

2.2The Executive shall be responsible for coordinating the execution of the
medical/ clinical aspects of the Company’s business plan, as adopted by the
Company’s Board of Directors (the “Board”), and providing scientific assistance
as required, in cooperation and coordination with the COO and other members of
management.

 

2.3The duties, responsibilities, authority and position of the Executive and the
organizational structures implicit in them may be changed by the Company from
time to time, as the COO or the Board deems necessary, and reasonable efforts to
work with and accommodate the Executive with such changes will be made; however,
the Company retains the right of sole discretion to make such changes.

 

2.4The Executive undertakes to notify the Company, immediately and without
delay, of any interest or matter in respect of which he ‎may have a personal
interest or is likely to create a conflict of interest with his role in the
Company.

 

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2.5In the performance of the Executive’s duties under this Agreement, the
Executive shall adhere to such employment standards, ethical practices and
standards of care and competence as are customary for employees holding similar
positions with employers similar to the Company.

 

 

3.             Place of Work

In connection with the Executive’s employment by the Company, the Executive
shall be based at the current principal U.S. offices of the Company in San
Francisco, California, or at such other place as is otherwise appropriate to the
functions being performed by the Company. Because the majority of the Company’s
business is currently located in Israel, the Executive acknowledges that the
performance of his duties hereunder may require domestic or international
travel.

 

4.            Salary; Bonus

4.1The Company shall pay the Executive as compensation for the employment
services hereunder an annual gross salary of $280,000 (payable in bi-weekly
installments on the 15th and last day of each calendar month), during the term
of the Executive’s engagement hereunder (the “Salary”). Salary and all other
compensation payable to the Executive shall be paid minus required payroll
withholdings and deductions for federal, state and local income, FICA,
unemployment compensation, disability and other similar taxes or assessments.
   

4.2The Salary and additional benefits to which the Executive shall be entitled
hereunder (including bonuses) shall be reviewed by the Compensation Committee of
the Board on an annual basis; and, in the discretion of the Compensation
Committee, the Executive’s Salary may be adjusted and/or additional benefits
shall be granted to the Executive hereunder.    

4.3The Executive shall be eligible to receive an annual cash bonus with respect
to each fiscal year of the Company during the Term of up to an amount equal to
five percent (5%) of Salary on an annualized basis, as determined by the
Compensation Committee of the Board, in its sole discretion, which shall be
based upon objective and subjective corporate and personal performance criteria
as established by the Chairman and the Compensation Committee of the Board (the
“Goal Bonus”). If awarded, the Goal Bonus shall be payable at such time as
bonuses similar to Goal Bonus are paid to other members of management.

 

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5.            Benefits

5.1The Executive shall be entitled to be reimbursed for all normal, usual and
necessary actual business expenses arising out of travel, lodging, meals and
entertainment whether in the U.S. or abroad, provided Executive provides proper
documentation and provided further that such business expenses are within an
expense policy approved by the Board.

 

5.2The Executive shall be entitled, in addition to U.S. public holidays, to
twenty (20) days of paid time off (“PTO Days”) per calendar year, prorated for
any partial year and ratably accrued with each pay period. A maximum of one
year’s entitlement to PTO Days may be accumulated if unused, beyond which any
PTO Days will be forfeited by the Executive if not utilized during the year in
which they are allocated.

 

5.3The Executive shall be entitled to participate in all senior manager employee
benefit plans or programs of the Company for employees located in the United
States, whether now offered or offered at any time during the term of this
Agreement, including any medical, dental, dependent coverage, disability,
retirement, pension or 401(k) plans and sick leave, to the extent Executive is
eligible therefor. The Company, in its sole and absolute discretion, may
discontinue, reduce or otherwise change any benefit now or hereafter offered to
its work force or senior managers.

 

5.4The Executive shall be granted options to purchase up to 20,000 shares of the
Company’s common stock pursuant to the Company’s Stock Incentive Plan, as the
same may be amended. Such options shall vest in four (4) equal annual
installments, with options to purchase the first 5,000 shares vesting upon the
first anniversary of the Effective Date. Such options shall have a ten-year term
and an exercise price of $14.50 per share and shall be subject to the terms and
conditions of the Company’s Stock Incentive Plan, as the same may be amended,
and pursuant to the standard form of option agreement which the Company may use.

 

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5.5Any tax liability in connection with any of the benefits provided to the
Executive, including the options (including with respect to the grant, exercise,
sale of the options or the shares receivable upon their exercise) shall be borne
solely by the Executive.

 

 

6.            Termination

6.1Voluntary Termination – The Company and the Executive shall each have the
right to terminate this Agreement for any reason by giving the other party at
least thirty (30) days advance written notice of the effective date of
termination.

 

6.2Termination With Cause – The Company may terminate the Executive’s employment
immediately upon written notice for cause. For purposes of this Agreement,
termination for “cause” shall mean and include: (a) conviction of a felony
involving moral turpitude or affecting the Company or its subsidiaries; (b) any
refusal to carry out a reasonable directive of the COO or the Board which
involves the business of the Company or its subsidiaries and was capable of
being lawfully performed; (c) embezzlement of funds of the Company or its
subsidiaries; (d) any breach of the Executive’s fiduciary duties or duties of
care to the Company (except for conduct taken in good faith); (e) any breach of
this Agreement by the Executive and the failure to cure the same to the
satisfaction of the Company within fifteen days of written notice from the
Company specifying in reasonable detail such breach; or (f) any conduct (other
than in good faith) materially detrimental to the Company or its subsidiaries,
including, but not limited to, sexual harassment and violence.

 

6.3Termination Upon Death or Disability - The Company may terminate the
Executive’s employment immediately upon the death of the Executive or after
having established the Executive’s disability. For purposes of this Agreement,
“disability” means a physical or mental infirmity that impairs the Executive’s
ability to substantially perform his duties under the Agreement that continues
for a period of at least ninety (90) consecutive days.

 

6.4Except as otherwise provided in Section 6.5 below, on the effective date of
termination, the Executive, or his estate in the case of death, shall be paid
all wages and benefits through the effective date of termination and thereafter
all obligations of the Company under this Agreement shall cease. Upon
termination, the Executive shall remain bound by specific obligations set forth
in this Agreement, as indicated in the applicable Sections of this Agreement.
From and after the delivery of a notice of termination by either the Executive
or the Company, the Executive shall, at the Company’s request, cooperate with
the Company and use his best efforts to assist in the integration into the
Company’s organization the person or persons who will assume the Executive’s
responsibilities.

 

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6.5Severance – In the event that the Company terminates the Executive without
cause (as defined in Section 6.2), the Company shall continue to pay Salary (as
and when provided in Section 4.1) to the Executive for the period ending six (6)
months after the effective date of such termination (the “Severance Period”) as
severance. The Executive shall not be entitled to any other benefits set forth
in Articles 4 or 5 during the Severance Period.

 

 

7.             Proprietary Information

7.1The Executive acknowledges and agrees that he may have access to confidential
and/or proprietary information concerning the business and financial activities
of the Company and information and technology regarding the Company’s product
research and development, including, without limitation, the Company’s banking,
investments, investors, properties, employees, marketing plans, customers, trade
secrets, and test results, processes, data and know-how, improvements,
inventions, techniques and products (actual or planned). Such information,
whether documentary, written, oral or computer generated, even if not
patentable, or not protectable or protected by copyright laws, shall be deemed
to be and is referred to as “Proprietary Information”.    

7.2Proprietary Information shall be deemed to include any and all proprietary
information disclosed by or on behalf of the Company and irrespective of form,
but excluding information that (a) was known to the Executive prior to his
association with the Company and can be so proven; (b) shall have become a part
of the public domain except as a result of a breach of this Agreement by the
Executive; or (c) shall have been received by the Executive from a third party
having no obligation to the Company.

 

7.3The Executive agrees and declares that all Proprietary Information, patents
and other rights in connection therewith shall be the sole property of the
Company and its assigns. At all times, both during and after the termination of
his employment with the Company for any reason, the Executive will keep in
strict confidence and trust all Proprietary Information, and the Executive will
not use, disclose or provide access to any Proprietary Information or anything
relating to it without the written consent of the Board.

 

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7.4Upon termination of his employment with the Company, the Executive will
promptly deliver to the Company all documents and materials of any nature
pertaining to his work with the Company, and he will not take with him any
documents or materials or copies thereof containing any Proprietary Information.

 

7.5The Executive recognizes that the Company has received and may receive
confidential or proprietary information from third parties subject to a duty on
the Company’s part to maintain the confidentiality of such information and to
use it only for certain limited purposes. At all times, both during his
employment with the Company and for a period of three (3) years after the
effective date of termination of his employment with the Company for any reason,
the Executive undertakes to keep and hold all such information in strict
confidence and trust, and he will not use, disclose or provide access to any of
such information without the prior written consent of the Board, except as may
be necessary to perform his duties as an employee of the Company and consistent
with the Company’s agreement with such third party. Upon termination of his
employment with the Company, the Executive shall act with respect to such
information as set forth in Section 7.4, mutatis mutandis.

 

7.6The Executive acknowledges that (i) in his relationship with the Company he
may have access to material, non-public inside information about the Company,
and (ii) the Company is a public company with securities listed and traded on
the NYSE MKT and on the AIM Market operated by the London Stock Exchange. The
Executive agrees that he is subject to and shall comply with all laws, rules and
regulations, applicable to trading in Company stock, including those prohibiting
trading on material, non-public inside information. In addition, the Executive
agrees to comply with the Company’s Code of Business Conduct and Ethics and such
other codes or policies of conduct as may be adopted or amended by the Board.

 

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7.7The Executive’s undertakings in this Section 7 shall remain in full force and
effect after termination of this Agreement or any extension hereof.

 

 

8.            Disclosure and Assignment of Inventions

8.1The Executive understands that the Company is engaged in a continuous program
of research, development, production and marketing in connection with its
business and that, as an essential part of his employment with the Company, he
is expected to make new contributions to and create inventions of value for the
Company. Executive agrees to share with the Company all his knowledge and
experience, provided however that Executive shall not disclose to the Company
any information which Executive has undertaken to third parties to keep
confidential or in which third parties have any rights.

 

8.2As of the Effective Date of this Agreement, the Executive undertakes and
covenants that he will promptly disclose in confidence to the Company all
inventions, improvements, designs, original works of authorship, formulas,
concepts, techniques, methods, systems, processes, compositions of matter,
computer software programs, databases, mask works, and trade secrets, related to
the Company’s business or current or anticipated research and development,
whether or not patentable, copyrightable or protectible as trade secrets, that
are made or conceived or first reduced to practice or created by him, either
alone or jointly with others, during the period of his employment, whether or
not in the course of his employment (“Inventions”).

 

8.3The Executive agrees that all Inventions that (a) are developed using
equipment, supplies, facilities or Proprietary Information of the Company, (b)
result from work performed by him for the Company, or (c) relate to the
Company’s business or current or anticipated research and development, will be
the sole and exclusive property of the Company (“Company Inventions”).

 

8.4The Executive  agrees with the Company that all Company Inventions and all
products developed or derived therefrom are and shall be owned exclusively by
the Company, and the Executive shall have no rights in or to such Company
Inventions.  The Executive hereby irrevocably transfers and assigns to the
Company: all right, title and interest in and to (a) the Company Inventions,
including all worldwide patent rights (including patent applications and
disclosures), copyright rights, mask work rights, trade secret rights, know-how,
and any and all other intellectual property or proprietary rights (collectively,
“Intellectual Property Rights”) therein, and (b) any and all “Moral Rights” (as
defined below) that he may have in or with respect to any Company Invention. To
the extent applicable, all copyrightable works shall be considered works made
for hire owned exclusively by the Company. The Executive also hereby forever
waives and agrees never to assert any and all Moral Rights he may have in or
with respect to any Company Invention, even after termination of his work on
behalf of the Company. “Moral Rights” mean any rights of paternity or integrity,
any right to claim authorship of an invention, to object to any distortion,
mutilation or other modification of, or other derogatory action in relation to,
any invention, whether or not such would be prejudicial to his honor or
reputation, and any similar right, existing under judicial or statutory law of
any country in the world, or under any treaty, regardless of whether or not such
right is denominated or generally referred to as a “moral right”, in all cases.
The Executive will not file any patent applications for Company Inventions other
than in the name of the Company (other than such patent applications which are
required by law to be filed by such Executive but which shall immediately
thereafter be assigned for no or nominal consideration to the Company).

 

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8.5To the extent that the Executive owns or controls (presently or in the
future) any patent rights, copyright rights, mask work rights, trade secret
rights, or any other intellectual property or proprietary rights that block or
interfere with the rights assigned to the Company under this Agreement
(collectively, “Related Rights”), the Executive hereby grants or will cause to
be granted to the Company a non-exclusive, royalty-free, irrevocable, perpetual,
transferable, worldwide license (with the right to sublicense) to make, have
made, use, offer to sell, sell, import, copy, modify, create derivative works
based upon, distribute, sublicense, display, perform and transmit any products,
software, hardware, methods or materials of any kind that are covered by such
Related Rights, to the extent necessary to enable the Company to exercise all of
the rights assigned to the Company under this Agreement.    

8.6The Executive agrees to assist the Company in every proper way to obtain for
the Company and enforce patents, copyrights, mask work rights, and other legal
protections for the Company’s Inventions in any and all countries. The Executive
agrees to execute any documents that the Company may reasonably request for use
in obtaining or enforcing such patents, copyrights, mask work rights, trade
secrets and other legal protections. The Executive’s obligations under this
Section 8.6 will continue beyond the termination of his employment with the
Company, provided that the Company will compensate him at a reasonable rate
after such termination for time or expenses actually spent by him at the
Company’s request on such assistance. The Executive hereby irrevocably appoints
the CEO of the Company, including future CEO’s or corresponding officers of the
Company or successor companies, as his attorney-in-fact to execute documents on
his behalf for this purpose.    

8.7The Executive’s undertakings in this Section 8 shall remain in full force and
effect after termination of this Agreement or any extension hereof.

 

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9.             Non-Solicitation

9.1The Executive agrees and undertakes that during the period of his employment
and for a period of twelve (12) months following termination of his employment
with the Company for any reason, he will not, directly or indirectly, including
personally or in any business in which he is an officer, director or
shareholder, for any purpose or in any place, solicit, assist in soliciting or
employ any person employed by the Company or retained by the Company as a
consultant, or any customer or supplier of the Company, on the date of such
termination or during the five months preceding such termination.

 

9.2If any one or more of the terms contained in this Section 9 shall for any
reason be held to be excessively broad with regard to time, geographic scope or
activity, the term shall be construed in a manner to enable it to be enforced to
the extent compatible with applicable law.    

9.3The Executive’s undertakings in this Section 9 shall remain in full force and
effect after termination of this Agreement or any extension hereof.

 

 

10.          Mutual Representations

10.1The Executive represents and warrants to the Company that the execution and
delivery of this Agreement and the fulfillment of the terms hereof (a) will not
constitute a default under or conflict with any agreement or other instrument to
which he is a party or by which he is bound, and (b) do not require the consent
of any person or entity.

 

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10.2The Company represents and warrants to the Executive that this Agreement has
been duly authorized, executed and delivered by the Company and that the
fulfillment of the terms hereof (a) will not constitute a default under or
conflict with any agreement or other instrument to which it is a party or by
which it is bound, and (b) do not require the consent of any person of entity.

 

10.3Each party hereto warrants and represents to the other that this Agreement
constitutes the valid and binding obligation of such party enforceable against
such party in accordance with its terms subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting creditors’ rights generally,
and subject, as to enforceability, to general principles of equity (regardless
if enforcement is sought in proceeding in equity or at law).

 

11.          Notice; Addresses

11.1The addresses of the parties for purposes of this Agreement shall be the
addresses set forth above, or any other address which shall be provided by due
notice.

 

11.2All notices in connection with this Agreement shall be sent by registered
mail or delivered by hand to the addresses set forth above, and shall be deemed
to have been delivered to the other party at the earlier of the following two
dates: if sent by registered mail, as aforesaid, three business days from the
date of mailing; if delivered by hand, upon actual delivery or proof of delivery
(in the event of a refusal to accept it) at the address of the addressee.
Delivery by facsimile or other electronic mail shall be sufficient and be deemed
to have occurred upon electronic confirmation of receipt.

 

12.          Miscellaneous

12.1The preamble to this Agreement constitutes an integral part hereof.

 

12.2Headings are included for reference purposes only and are not to be used in
interpreting this Agreement.

 

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12.3The provisions of this Agreement are in lieu of the provisions of any
collective bargaining agreement, and therefore, no collective bargaining
agreement shall apply with respect to the relationship between the parties
hereto (subject to the applicable provisions of law).

 

12.4No failure, delay or forbearance of either party in exercising any power or
right hereunder shall in any way restrict or diminish such party’s rights and
powers under this Agreement, or operate as a waiver of any breach or
nonperformance by either party of any terms or conditions hereof.

 

12.5Any determination of the invalidity or unenforceability of any provision of
the Agreement shall not affect the remaining provisions hereof unless the
business purpose of this Agreement is substantially frustrated thereby.

 

12.6This Agreement is personal and non-assignable by the Executive. It shall
inure to the benefit of any corporation or other entity with which the Company
shall merge or consolidate or to which the Company shall lease or sell all or
substantially all of its assets, and may be assigned by the Company to any
affiliate of the Company or to any corporation or entity with which such
affiliate shall merge or consolidate or which shall lease or acquire all or
substantially all of the assets of such affiliate. Any assignee must assume all
the obligations of the Company hereunder, but such assignment and assumption
shall not serve as a release of prior agreements, promises, covenants,
arrangements, communications, representations the Company.

 

12.7This Agreement sets forth the entire agreement of the parties hereto in
respect of the subject matter contained herein and supersedes all negotiations,
undertakings, agreements, representations or warranties, whether oral or
written, by any officer, employee or representative of the Company or any party
thereto; and any prior agreement of the parties hereto or of the Executive and
the Company in respect of the subject matter contained herein is hereby
terminated and cancelled. Any modification to the Agreement can only be made in
writing, signed by the Executive and the Chairman or other executive officer of
the Company as designated by the Board.

 

12.8The Company shall have all the rights and remedies at law or in equity. The
Executive recognizes and affirms that in the event of breach of any of the
provisions of Section 7 (Confidential Information), 8 (Intellectual Property) or
9 (Non-Solicitation), money damages would be inadequate and there may be no
adequate remedy at law. Accordingly, the Company shall have the right, in
addition to any other right or remedy existing in its favor, to enforce such
Sections not only by an action or actions for damages, but also by an action or
actions for specific performance, injunction and/or other equitable relief
without posting any bond or security in order to enforce or prevent any
violations (whether anticipatory, continuing or future) of any of the provision
of such Sections (provided that the Company can make a showing of harm or damage
in an appropriate court proceeding). All of the provisions of Sections 7, 8 and
9 and this Section 12 shall survive the termination or expiration of this
Agreement until the expiration of the applicable statute of limitations.

 

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12.9This Agreement will be governed by and construed in accordance with the laws
of the State of California, excluding that body of law pertaining to conflict of
laws. Any legal action or proceeding arising under this Agreement will be
brought exclusively in the federal or state courts located in the Northern
District of California and the parties hereby irrevocably consent to the
personal jurisdiction and venue therein.

 

12.10This Agreement may be executed in two or more identical counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. In the event that any signature is delivered by facsimile
transmission or by an e-mail which contains a portable document format (.pdf)
file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.

 

/s/ Eugene A. Bauer   /s/ Dr. Marvin R. Garovoy   MEDGENICS , INC.   Dr. Marvin
R. Garovoy   By: Eugene A. Bauer,         Executive Chairman of the Board of
Directors      

 

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