Exhibit 10.89

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is made by and between Synbiotics Corporation, a California
corporation (“EMPLOYER”) and Paul Richard Hays (“EMPLOYEE”) effective as of
December 30, 2002.

 

RECITALS:

 

WHEREAS, EMPLOYER and EMPLOYEE wish to set forth in this Agreement the terms and
conditions under which EMPLOYEE is to be employed by EMPLOYER.

 

NOW, THEREFORE, EMPLOYER and EMPLOYEE, in consideration of the mutual promises
set forth herein, agree as follows:

 

ARTICLE 1

 

TERM OF AGREEMENT

 

1.1    Term. The term of this Agreement shall commence on the date first written
above and shall continue until terminated pursuant to Article 6.

 

ARTICLE 2

 

EMPLOYMENT DUTIES

 

2.1    Title/Responsibilities. EMPLOYEE shall serve as an employee of EMPLOYER
and hold the position of President of EMPLOYER, having the powers and
responsibilities consistent with such position and reporting to EMPLOYER’s Board
of Directors, all subject to ultimate direction and management of EMPLOYER’s
Board of Directors. EMPLOYEE shall also perform all duties that from time to
time are assigned to him by EMPLOYER’s Board of Directors, and shall provide the
Board with periodic reports upon request. EMPLOYEE’s Job location shall be San
Diego, CA.

 

2.2    Full Time Attention. EMPLOYEE shall perform his duties hereunder in a
diligent and professional manner and devote substantially all of his business
time and attention, best efforts, energy and skills to EMPLOYER during the time
he is employed hereunder as President of EMPLOYER. During the term of this
Agreement EMPLOYEE shall not without the express consent of EMPLOYER’s Board of
Directors serve or act as a shareholder (except passive holdings of less than 1
% of the stock), employee, agent, consultant, officer, director, partner,
representative or owner of any other business entity, nor (if it would require
more than an insubstantial amount of business time or attention) of any
non-profit entity.

 

2.3    Compliance with Rules. EMPLOYEE shall comply with all applicable
governmental laws, rules and regulations and with all of EMPLOYER’s policies,
rules and/or regulations applicable to all employees of EMPLOYER.

 

ARTICLE 3

 

COMPENSATION

 

3.1    Base Salary. EMPLOYER shall pay semi-monthly to EMPLOYEE a salary of
$250,000 per annum until such time or times as it may discretionarily be raised
(but not lowered) upon annual performance/salary review by EMPLOYER’s Board
(upon recommendation of its Compensation Committee).

 

3.2    Additional Compensation (Stock Option). In addition to the salary
provided in Section 3.1, once Employee has relocated to the San Diego area,
EMPLOYER shall grant to EMPLOYEE as additional compensation for EMPLOYEE’s
services (but not for any capital-raising purposes or in connection with any
capital-raising activities), a non-qualified stock option to purchase

 

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1,600,000 shares of EMPLOYER Common Stock under EMPLOYER’s 1995 Stock
Option/Stock Issuance Plan, with an exercise price equal to $.08 such option to
vest in sixteen (16) equal quarterly installments or upon sale of Employer. In
addition on each of the first three anniversary dates of this Agreement Employer
shall grant to Employee options to purchase an additional 400,000 shares of
Common Stock with an exercise price equal to the fair market value on the date
of grant, to vest in sixteen (16) equal quarterly installments or upon sale of
Employer.

 

3.3    Performance Bonus. In addition to the salary provided in Section 3.1,
Employer shall pay Employee a Performance Bonus based on the audited financial
results of Employer for the calendar years 2003, 2004 and 2005. The amount of
the Performance shall be calculated as follows; four percent (4.0%) of the first
$1,000,000 of EBITDA in excess of $2,000,000 plus six percent (6.0%) of EBITDA
in excess of $3,000,000. The Performance Bonus shall be paid within ten days of
completion of Employers audited year-end report. EBITDA is defined as earnings
before; interest, income taxes, depreciation, amortization and any
settlements/awards resulting from existing litigation.

 

ARTICLE 4

 

4.1    Fringe Benefits. EMPLOYEE shall be entitled during the term of his
employment under this Agreement to all other fringe benefits made available from
time to time by EMPLOYER to its executives generally and/or its employees
generally, including without limitation participation in EMPLOYER’s 401 (k) plan
and group health insurance plan.

 

4.2    Expenses. EMPLOYER shall reimburse EMPLOYEE, not less often than monthly,
for reasonable out-of-pocket business expenses incurred by EMPLOYEE in the
course of his duties hereunder upon submission by EMPLOYEE of appropriate
expense account reports and substantiating receipts.

 

4.3    Vacation. EMPLOYEE shall be entitled to four (4) weeks paid vacation per
full year of service, in accordance with and subject to EMPLOYER’s vacation
accrual plan and policies. EMPLOYEE acknowledges the “cap” on vacation accruals
set forth in such plan and policies.

 

4.4    Relocation. EMPLOYER shall reimburse EMPLOYEE a maximum total of $85,000
for the following expenses associated with the relocation of Employee; moving
service, packing/unpacking, real estate closing costs/real estate commissions
including any income tax liability associated therewith, and commutes to and
from Missouri.

 

In addition, Employer shall provide Employee a two-bedroom condo in San Diego
for up to six months from the date of this Agreement.

 

ARTICLE 5

 

FORMER EMPLOYMENT

 

5.1    No Conflict. EMPLOYEE represents and warrants that the execution and
delivery by him of this Agreement, his employment by EMPLOYER and his
performance of duties under this Agreement will not conflict with and will not
be constrained by any prior employment or consulting agreement or relationship,
or any other contractual obligation.

 

5.2    No Use of Prior Confidential Information. EMPLOYEE will not intentionally
disclose to EMPLOYER or use on its behalf any confidential information belonging
to any of his former employers, but during his employment by EMPLOYER he will
use in the performance of his duties all information (but only such information)
which is generally known and used by persons with training and experience
comparable to his own or is common knowledge in the industry or otherwise
legally in the public domain.

 

TERMINATION

 

6.1    Term. This Agreement (including EMPLOYEE’S employment) shall continue
until terminated by either EMPLOYER or EMPLOYEE. Such termination (including
termination of EMPLOYEE’s employment) shall be effected by written notification
and may be effected at any time, with or without Cause, for any reason or no
reason. Notwithstanding, this Agreement shall terminate on December 30, 2005 if
not terminated earlier as provided above.

 

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6.2    Severance. If this Agreement and/or EMPLOYEE’s employment is terminated
as a result of Cause, EMPLOYEE shall be entitled to no severance pay. If this
Agreement and/or EMPLOYEE’s employment is terminated other than for Cause,
EMPLOYEE shall be entitled to twelve (12) months’ severance pay if terminated
during the first eighteen months of this Agreement and six (6) months’ severance
pay if terminated during the second eighteen months of this Agreement. However,
if this Agreement and/or EMPLOYEE’S employment is terminated other than for
Cause and as a result of a change of control of Employer, then the Employee
shall be entitled to twelve months severance pay.

 

“Cause” shall be defined to mean:

 

(a)    Death;

 

(b)    Voluntary resignation (other than because of a material breach by
EMPLOYER of its obligations under this Agreement, or reassignment of EMPLOYEE to
a location outside of San Diego County);

 

(c)    EMPLOYEE’s repudiation of this Agreement;

 

(d)    Permanent disability (defined as EMPLOYEE’s inability to perform, with or
without reasonable accommodation, the essential functions of his position for
any 50 business days—exclusive of vacation days taken—within any continuous
period of 200 days by reason of physical or mental illness or incapacity);

 

(e)    EMPLOYEE being formally charged with the commission of a felony, or being
convicted of a misdemeanor involving moral turpitude;

 

(f)    EMPLOYEE’s demonstrable fraud or dishonesty;

 

(g)    EMPLOYEE’s use of alcohol, drugs or any illegal substance in such a
manner as to interfere with the performance of his duties under this Agreement;

 

(h)    EMPLOYEE’s intentional, reckless or grossly negligent action materially
detrimental to the best interest of the EMPLOYER, including any misappropriation
or unauthorized use of EMPLOYER’s property or improper use or disclosure of
confidential information (but excluding any good faith exercise of business
judgment);

 

(i)    EMPLOYEE’s intentional failure to perform material duties under this
Agreement if such failure has continued for 15 days after EMPLOYEE has been
notified in writing by EMPLOYER of the nature of EMPLOYEE’s failure to perform;

 

(j)    EMPLOYEE’s chronic absence from work for reasons other than illness or
permitted vacation;

 

or

 

(k)    EMPLOYEE’s violation of policies in EMPLOYER’s official Employee
Handbook, as it may be amended from time to time.

 

Termination for Cause shall be without prejudice to any other right or remedy to
which EMPLOYER may be entitled at law, in equity, or under this Agreement.

 

ARTICLE 7

 

ARBITRATION

 

7.1    Final and Binding Arbitration. Any controversy, claim or dispute between
(a) a party to this Agreement, on the one hand, and (b) the other party to this
Agreement and/or such second party’s parents, subsidiaries or affiliates and/or
any of their directors, officers, employees, agents, successors, assigns, heirs,
executors, administrators, or legal representatives, on the other hand, arising
out of, in connection with, or in relation to (t) the interpretation, validity,
performance or breach of this Agreement, (u) EMPLOYEE’s stock options and the
underlying shares, (v) EMPLOYEE’s employment by EMPLOYER, (w) any termination of
such employment, (x) any actions during or with respect to EMPLOYEE’s work for
EMPLOYER, (y) any claims for breach of contract, tort,

 

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or breach of the covenant of good faith and fair dealing, or (z) any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of EMPLOYEE’s employment with EMPLOYER or
its termination, shall, at the request of either party, be resolved to the
exclusion of a court of law by binding arbitration in San Diego, California, in
accordance with Exhibit A hereto. Each of EMPLOYEE and EMPLOYER understands and
agrees that the arbitration shall be instead of any civil litigation and that
the arbitrator’s decision shall be final and binding to the fullest extent
permitted by law and enforceable by any court having jurisdiction thereof. The
only claims not covered by this Section 7.1 are claims for benefits under the
workers’ compensation laws, claims for unemployment insurance benefits, and
matters within the jurisdiction of the California Labor Commissioner, which will
be resolved pursuant to those laws.

 

ARTICLE 8

 

GENERAL PROVISIONS

 

8.1    Governing Law. This Agreement and the rights of the parties thereunder
shall be governed by and interpreted under California law.

 

8.2    Assignment. EMPLOYEE may not delegate, assign, pledge or encumber his
rights or obligations under this Agreement or any part thereof.

 

8.3    Notice. Any notice required or permitted to be given under this Agreement
shall be sufficient if it is in writing and is sent by registered or certified
mail, postage prepaid, or personally delivered, to the following addresses, or
to such other addresses as either party shall specify by giving notice under
this section:

 

TO EMPLOYER:

  

Synbiotics Corporation

    

Attn: Board of Directors

    

11011 Via Frontera

    

San Diego, CA 92127

Copy to:

  

Hayden J. Trubitt

    

Brobeck, Phleger & Harrison LLP

    

12390 El Camino Real

    

San Diego, CA 92130

TO EMPLOYEE:

  

Paul Richard Hays

    

C/o Synbiotics Corporation

    

11011 Via Frontera

    

San Diego, CA 92127

 

8.4    Amendment. This Agreement may be waived, amended or supplemented only by
an express writing signed by both of the parties hereto. To be valid, EMPLOYER’S
signature must be by a person specially authorized by EMPLOYER’S Board of
Directors to sign such particular document.

 

8.5    Waiver. No waiver of any provision of this Agreement shall be binding
unless and until set forth expressly in writing and signed by the waiving party.
To be valid, EMPLOYER’S signature must be by a person specially authorized by
EMPLOYER’S Board of Directors to sign such particular document. The waiver by
either party of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach of the same or
any other term or provision, or a waiver of any contemporaneous breach of any
other term or provision, or a continuing waiver of the same or any other term or
provision. No failure or delay by a party in exercising any right, power, or
privilege hereunder or other conduct by a party shall operate as a waiver
thereof, in the particular case or in any past or future case, and no single or
partial exercise thereof shall preclude the full exercise or further exercise of
any right, power, or privilege. No action taken pursuant to this Agreement shall
be deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained herein.

 

8.6    Severability. All provisions contained herein are severable and in the
event that any of them shall be held to be to any extent invalid or otherwise
unenforceable by any court of competent jurisdiction, such provision shall be
construed as if It were

 

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written so as to effectuate to the greatest possible extent the parties’
expressed intent; and in every case the remainder of this Agreement shall not be
affected thereby and shall remain valid and enforceable, as if such affected
provision were not contained herein.

 

8.7  Headings. Article and section headings are inserted herein for convenience
of reference only and in no way are to be construed to define, limit or affect
the construction or interpretation of the terms of this Agreement.

 

8.8    Drafting Party. The provisions of this Agreement have been prepared,
examined, negotiated and revised by each party hereto, and no implication shall
be drawn and no provision shall be construed against either party by virtue of
the purported identity of the drafter of this Agreement, or any portion thereof.

 

8.9    No Outside Representations. No representation, warranty, condition,
promise, understanding or agreement of any kind with respect to the subject
matter hereof has been made by either party, nor shall any such be relied upon
by either party, except those contained herein. There were no inducements to
enter into this Agreement, except for what is expressly set forth in this
Agreement.

 

8.10    Entire Agreement. This Agreement, together with EMPLOYER’s standard
Proprietary Information and Inventions Agreement, constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
completely supersedes all prior or contemporaneous agreements, understandings,
arrangements, commitments, negotiations and discussions of the parties, whether
oral or written (all of which shall have no substantive significance or
evidentiary effect). Each party acknowledges, represents and warrants that he or
it has not relied on any representation, agreement, understanding, arrangement
or commitment which has not been expressly set forth in this Agreement. Each
party acknowledges, represents and warrants that this Agreement is fully
integrated and not in need of parol evidence in order to reflect the intentions
of the parties. The parties specifically intend that the literal words of this
Agreement shall, alone, conclusively determine all questions concerning the
parties’ intent.

 

IN WITNESS WHEREOF, the parties have executed and delivered this Employment
Agreement in San Diego, California as of the date first written above.

 

 

SYNBIOTICS CORPORATION

/s/    CHRISTOPHER P. HENDY

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Christopher P. Hendy, Director

 

 

/s/    PAUL RICHARD HAYS    

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Paul Richard Hays

 

Attachment: Exhibit A (Arbitration Procedures)

 

 

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EXHIBIT A

 

ARBITRATION PROCEDURES

 

1.    Agreement to Arbitrate

 

In the event that there is any dispute relating to, regarding or arising in
connection with EMPLOYEE’s employment with EMPLOYER which cannot be resolved
through direct discussion or mediation, regardless of the kind or type of
dispute (excluding claims for workers’ compensation, unemployment insurance or
any matters within the jurisdiction of the California Labor Commissioner), all
such disputes shall be submitted exclusively to final and binding arbitration
pursuant to the provisions of the Federal Arbitration Act or, if inapplicable,
the Uniform Arbitration Act (California Code of Civil Procedure § 1280 et seq.),
upon request submitted in writing to the President within one year from the date
the dispute first arose, or within one year of the date of termination of
employment, whichever occurs first. This procedure shall be the exclusive method
for resolving all claims relating to the termination of EMPLOYEE’s employment,
including but not limited to any alleged violations of federal, state and/or
local statutes; all claims based upon any purported breach of duty arising in
contract or tort, including but not limited to breach of contract, breach of the
covenant of good faith and fair dealing, or violation of public policy; and any
other alleged violation of an employee’s statutory, contractual or common law
rights.

 

Any failure to request arbitration in accordance with the foregoing provisions
shall constitute a waiver of all rights to raise or present any claims in any
form, in any forum, arising out of any dispute that was subject to arbitration.

 

2.    Selection of Arbitrator

 

All disputes subject to arbitration will be resolved by a single arbitrator
selected from a list provided by the California Mediation and Conciliation
Service from its Employment Arbitration Panel. The parties shall select the
arbitrator by alternately striking names from the list, and the last name
remaining on the list shall be the arbitrator selected to resolve the dispute.
The arbitrator must be selected within thirty (30) days of receipt of the
written request for arbitration. The arbitration hearing shall be held in San
Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.

 

3.    Authority of Arbitrator

 

The arbitrator shall only be authorized to exercise the powers specifically
enumerated by this procedure and to decide the dispute in accordance with
governing principles of law and equity. The arbitrator shall have no authority
to modify the powers granted by the terms of this procedure or to modify the
terms of the employee handbook, except as required by law. The arbitrator shall
have the authority to rule on motions by the parties, to issue protective orders
upon motion of any party or third party, and to determine only the disputes
submitted by the parties based upon the grounds presented. Any dispute or
argument not presented by the parties is outside the scope of the arbitrator’s
jurisdiction and any award invoking such disputes or arguments is subject to a
motion to vacate; provided, however, the arbitrator shall have exclusive
authority to resolve any dispute relating to the validity, interpretation and
enforcement of these arbitration procedures.

 

4.    Discovery

 

The arbitrator shall have the power, in addition to determining the merits of
the dispute submitted, to permit discovery regarding the subject matter of
arbitration and to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, liabilities, sanctions and penalties as may be imposed in like
circumstances by a Superior Court under the California Code of Civil Procedure.
All discovery must be completed thirty (30) days prior to the date set for the
arbitration hearing.

 

5.    Hearing Procedure

 

The issue(s) submitted to the arbitrator must be set forth in the request for
arbitration. The arbitrator shall have no authority to frame the statement of
the issue(s). Unless otherwise agreed by the parties, the arbitration hearing
shall be governed by the formal rules of evidence contained in the California
Evidence Code. The parties shall mutually agree on the number of days required
for hearing. The hearing shall be recorded and transcribed verbatim by a
certified shorthand reporter. Each party shall bear

 

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its own costs with respect to a copy of the transcript of the hearing; however,
the parties shall each be responsible for one-half the cost of the court
reporters fee and the arbitrator’s copy of the hearing transcript.

 

6.    Post-Hearing Procedure

 

Each party shall have the right to present closing argument at the conclusion of
all sworn testimony and, in addition to or in lieu of closing argument, either
party shall have the right to submit post-hearing briefs. The due date and
procedure for exchanging post-hearing briefs shall be mutually agreed upon by
the parties or as directed by the arbitrator.

 

7.    Opinion and Award

 

The arbitrator shall issue a written opinion and award within sixty (60) days of
closing arguments or the receipt of post-hearing briefs, whichever is later. The
arbitration award and opinion shall be signed and dated by the arbitrator and
shall decide all issues submitted and set forth the legal principles supporting
each aspect of the opinion and award. The arbitrator shall only be permitted to
award those remedies in law or equity which are requested by the parties and
which are supported by the credible, relevant evidence. The arbitrator shall
have no authority to award punitive or exemplary damages under any circumstances
or for any reason.

 

8.    Fees and Costs

 

Each party shall be responsible for its own attorney’s fees, except as provided
by law, and for all costs associated with discovery unless otherwise ordered by
the arbitrator. Each party shall also be responsible for one-half of the
arbitrator’s fee and one half of any costs associated with the facilities for
the arbitration hearing.

 

9.    Severability

 

In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.

 

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