**Exhibit 10**

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement, effectiveas of January 1, 2008 (this “Agreement”), is entered into by and betweenRETRACTABLE TECHNOLOGIES, INC., a Texas corporation (the “Company”), theprincipal office of which is located at 511 Lobo Lane, P.O. Box 9, LittleElm, Texas 75068, and THOMAS J. SHAW (“Shaw”). The Company and Shaw are collectivelyreferred to herein as the “Parties.” In consideration of the mutual covenantsand conditions contained in this Agreement, the Parties agree as follows:

 

ARTICLE I

 

DUTIES AND COMPENSATION

 

1.01 Term of Employment and Duties. The Company and Shaw agree that for the period commencing on January 1,2008, and terminating on December 31, 2010 (the “Termination Date”), theCompany shall employ Shaw and Shaw shall perform duties (“Duties”) for theCompany as Chief Executive Officer and President of the Company as set forth inthe Company’s Third Amended and Restated Bylaws and shall report to the Company’sBoard of Directors (the “Board”).

 

1.02 Commitment to the Company. During the term of this Agreement, Shaw shall devote such working time,attention and energies to the business of the Company, as is necessary orappropriate for the performance of his Duties as Chief Executive Officer andPresident of the Company.  However, thiscommitment shall not be construed as preventing Shaw from participating inother businesses or from investing Shaw’s personal assets in such form ormanner as may require occasional or incidental time on the part of Shaw in themanagement, conservation and protection of such investments and provided thatsuch investments or business cannot be construed as being competitive or inconflict with the business of the Company.

 

1.03 Renewal of Term.  Unless Shaw’semployment hereunder is otherwise terminated as provided herein,  this Agreement shall renew upon eachTermination Date and continue in effect for an additional two-year period, andeach successive Termination Date shall thereafter be designated as the “TerminationDate” for all purposes under this Agreement. The provisions regarding post-employment issues of this Agreementsurvive termination of employment hereunder.

 

1.04 (a)  Salary.  BeginningJanuary 1, 2008, Shaw shall receive a salary of $416,399.88 per year,payable in 26 bi-weekly installments.  Annually,the Compensation and Benefits Committee shall review Shaw’s salary and shallmake such increases in future salary as it considers appropriate.  Shaw’s salary during the term of thisAgreement shall never be less than $416,399.88 per year (the “Base MinimumSalary”).  Effective at the beginning ofeach calendar year beginning January 1, 2009, and each year thereafterShaw’s Base Minimum Salary shall be increased by the percentage increase in theConsumer Price Index during the previous calendar year. The Base MinimumSalary, as adjusted, shall be the Base Minimum Salary in the next year.

 

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(b)  Fringe Benefits.During the term of this Agreement, the Company shall provide to Shaw each ofthe following:

 

(i)   all reasonable and customary executive “fringebenefits,” including, but not limited to, participation in qualified pension andprofit-sharing plans, participation in the Company’s Cafeteria Plan, and such otherinsurance benefits that are granted to or provided for executives now in theemploy of the Company or that may be granted to or provided for them during theterm of Shaw’s employment under this Agreement. Such payments of any fringe benefits to Shaw hereunder, if any, must bemade by the 15th day of the third month of the year following thedate Shaw is entitled to such benefits; and

 

(ii)  paid vacation and sickleave, as determined by the Board under a bona fide plan.

 

(c)  Reimbursement ofExpenses.

 

(i)                 During the term of Shaw’s employment hereunder, theCompany shall pay directly or reimburse Shaw for all reasonable and necessary outof pocket travel and entertainment expenses incurred by him in carrying on his Dutiesand responsibilities under this Agreement on behalf of the Company. Inaddition, the Company shall furnish Shaw with a cellular telephone and suitableoffice space and facilities for the performance of his Duties during the termof Shaw’s employment hereunder.

 

(ii)                During the term of Shaw’s employment hereunder, theCompany shall also pay for Shaw’s membership dues in professional organizationsand for any seminars and conferences related to Company business.

 

(iii)               The amount of expenses eligible for reimbursement duringa particular year may not affect the expenses eligible for reimbursement in anyother taxable year.

 

(iv)               The right to reimbursement is not subject toliquidation or exchange for another benefit.

 

(v)                Reimbursement of expenses upon separation of serviceshall be payable on or before seven months after the expense is incurred but inno event earlier than 6 months and one day after the expense is incurred.

 

1.05 (a)  Indemnification.  Shaw shall be indemnified by the Company for alllegal expenses, court costs and all liabilities incurred in connection with anyproceeding involving him by reason of his being or having been an officer, employeeor agent of the Company to the fullest extent permitted by the laws of theState of Texas.

 

(b)  Payment ofExpenses. In the event of any action, proceeding or claim against Shawarising out of his serving or having served in a capacity specified in Section 1.01above, which in Shaw’s sole judgment requires him to retain counsel (suchchoice of counsel to be made by Shaw with the prior consent of the Company,which may not unreasonably withhold its consent) or 

 

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otherwise expend his personalfunds for his defense in connection therewith, the Company shall pay for orreimburse Shaw for all reasonable attorney’s fees and expenses and court and othercosts associated with Shaw’s defense of such action as such fees and costs areincurred.

 

ARTICLE II

 

TERMINATION OF EMPLOYMENT

 

2.01 Termination Procedure.  Either party to this Agreement may terminate Shaw’semployment under this Agreement by giving the other party written notice of theintent to terminate at least thirty days prior to the proposed termination dateexcept as set out in section 2.02.  Adecision by the Company to terminate Shaw’s employment under this Agreementshall require an affirmative vote of more than 66-2/3% of the Board except asset out in Section 2.02.

 

2.02  Death. This Agreement shall terminate on the date of Shaw’s death. If thisAgreement is terminated as a result of Shaw’s death, the Company shall pay toShaw’s estate, upon appointment of the Independent Executor or other personalrepresentative but in no event any later than the 90th day followinghis death, a lump sum severance payment consisting of Shaw’s salary through thedate of his death and reimbursement of expenses.   Shaw shall also be entitled to such rights asare provided under the Company’s qualified employment benefit plans as suchterm is defined in final 409A Treasury Regulations.

 

2.03  Disability.  The Company shall have the right to terminatethis Agreement if Shaw incurs a permanent disability during the term of his employmentunder this Agreement.  For purposes ofthis Agreement, “Permanent Disability” shall mean Shaw is unable to engage in anysubstantial gainful activity by reason of any medically determinable physicalor mental impairment which can be expected to result in death or can beexpected to last for a continuous period of not less than 12 months or is, byreason of any medically determinable physical or mental impairment which can beexpected to result in death or can be expected to last for a continuous periodof not less than 12 months, receiving income replacement benefits for a periodof not less than 3 months under an accident and health plan covering employeesof the Company.  Shaw shall also bedeemed to be disabled for purposes of this section if he is determined to betotally disabled by the Social Security Administration.

 

In the event that eitherparty disputes whether Shaw has a permanent disability, such dispute shall besubmitted to a physician mutually agreed upon by Shaw or his legal guardian andthe Company.  If the parties are unableto agree on a mutually satisfactory physician, each shall select a reputablephysician, who, together, shall in turn select a third physician whose determinationof Shaw’s ability to perform his job duties shall be conclusive and binding tothe parties.  Evidence of such disabilityshall be conclusive notwithstanding that a disability policy or clause in aninsurance policy covering Shaw shall contain a different definition of “permanentdisability.”

 

If Shaw’s employment underthis Agreement is terminated by the Company because he has a permanentdisability, the Company shall pay Shaw, not sooner than six months and one dayafter 

 

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the date of termination andnot later than seven months after the date of termination, a lump sum severancepayment consisting of: (1) Shaw’s salary through the date of histermination, (2) reimbursement of expenses, and (3) Shaw’s then undiscountedsalary for a period of 24 months.  Shawshall also be entitled to such rights as are provided under the Company’squalified employment benefit plans as such term is defined in final 409ATreasury Regulations.

 

2.04  Termination With Cause.  The Company shall have the right to terminatethis Agreement for cause.  For purposesof this Agreement, the Parties agree that “for cause” shall exclusively bedefined to mean: (a) conviction of a felony which is materiallydetrimental to the Company, (b) proof, as determined finally by a court ofcompetent jurisdiction, of the gross negligence or willful misconduct which ismaterially detrimental to the Company, or (c) proof, as determined finallyby a court of competent jurisdiction, of a breach of a fiduciary duty which ismaterially detrimental to the Company.

 

If the Company terminatesShaw’s employment hereunder “for cause” the Company shall pay Shaw, not laterthan the 30th day following the date of termination, a lump sum severancepayment consisting of Shaw’s salary through the date of his termination and reimbursementof expenses.****In the event that such lump sumseverance payment exceeds an amount equal to the lesser of two times Shaw’sannual compensation or two times the limit on compensation under Section 401(a)(17)of  the Internal Revenue Code of 1986, asamended (the “409A Limit Amount”), notwithstanding the above, the lump sumseverance payment to be made not later than the 30th day followingthe date of termination shall be capped at the 409A Limit Amount.  The remainder shall be paid no earlier than sixmonths and one day after the date of termination and no later than seven monthsafter the date of termination.  Shawshall also be entitled to such rights as are provided under the Company’squalified employment plans as such term is defined in final 409A TreasuryRegulations.

 

2.05 Termination WithoutCause.  If the Company terminatesShaw’s employment hereunder for any reason other than for cause as that term isdefined in Section 2.04 and not at his implicit request, as shall bedetermined in a writing by the independent Board members to be kept with therecords of the Company, the Company shall pay Shaw, not later than the 30th dayfollowing the date of termination, a lump sum severance payment consisting of: (1) Shaw’ssalary through the date of his termination, (2) reimbursement of expenses,and (3) Shaw’s then undiscounted salary for a period of 24 months. In theevent that such lump sum severance payment exceeds the 409A Limit Amount,notwithstanding the above, the lump sum severance payment to be made not laterthan the 30th day following the date of termination shall be cappedat the 409A Limit Amount.  The remainder shallbe paid no earlier than six months and one day following the date oftermination and no later than seven months after the date of termination.  Shaw shall also be entitled to such rights asare provided under the Company’s qualified benefit plans as such term isdefined in final 409A Treasury Regulations.

 

2.06  Resignation.  If Shaw resigns from his employment underthis Agreement other than for a reason of change of control or ownership asdefined in Section 2.07, the Company shall pay Shaw, not sooner than sixmonths and one day after the date of termination and not later than sevenmonths after the date of termination a lump sum severance payment consisting of(1) Shaw’s salary through the date of his termination, (2) reimbursementof expenses, and (3) Shaw’s 

 

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then undiscounted salary fora period of 90 days. Shaw shall also be entitled to such rights as are providedunder the Company’s qualified employment benefit plans as such term is definedin final 409A Treasury Regulations.

 

2.07  Change of Control or Ownership.  Shaw shall have the right to resign from his employmentunder this Agreement if there is a Change of Control.  For purposes of this Agreement a Change ofControl shall be deemed to have occurred on either of the following dates: (i) thedate any one person (other than Shaw), or more than one person acting as agroup, acquires (or has acquired during the 12-month period ending on the dateof the most recent acquisition by such person or persons) ownership of stock ofthe Company possessing thirty percent (30%) or more of the total possible votingpower of the stock of the Company (assuming the immediate conversion of allthen outstanding convertible preferred stock) or (ii) the date a majorityof members of the Board of Directors is replaced during any 12-month period by Directorswhose appointment or election is not endorsed by a majority of the members ofthe Company’s Board of Directors before the date of the appointment or election.

 

Shaw shall further have theright to resign from his employment under this Agreement if there is a Changeof Ownership.  For purposes of thisAgreement a Change of Ownership shall be deemed to have occurred on the datethat any one person (other than Shaw), or more than one person acting as agroup, acquires ownership of the Company’s stock that, together with the stockpreviously held by such person or group constitutes more than fifty percent(50%) of the total fair market value or total voting power (assuming theimmediate conversion of all then outstanding convertible preferred stock) ofthe Company.

 

If Shaw exercises his rightto terminate his employment hereunder following a Change of Control orOwnership, he shall receive, no sooner than six months and one day after thedate of termination and not later than seven months after the date oftermination, a lump sum severance payment consisting of: (1) Shaw’s salarythrough the date of his termination, (2) Shaw’s then undiscounted salary fora period of 24 months, and (3) reimbursement of expenses. Shaw shall alsobe entitled to such rights as are provided under the Company’s qualified employmentbenefit plans described in Section 401 of the Code.

 

2.08  Mitigation.  Shaw shall have no obligation to mitigate anydamages or payments made to him under Article II of this Agreement.

 

2.09 Excess Parachute Payments. In the event that payment of the amounts this Agreement requires theCompany to pay Shaw would cause Shaw to be the recipient of an excess parachutepayment (within the meaning of Section 280G(b) of the Code), theamount of the payments to be made to Shaw pursuant to this Agreement shall bereduced to an amount equal to one dollar less than the amount that would causethe payments hereunder to be excess parachute payments.  The manner in which such reductionoccurs, including the items of payment and amounts thereof to be reduced, shallbe mutually agreed to by Shaw and the Company.

 

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ARTICLE III

 

RESTRICTIONS DURING AND AFTEREMPLOYMENT

 

3.01  Non-Compete.  During Shaw’s employment by the Company underthis Agreement and for a one-year period following the termination of Shaw’s employmentby the Company, except if such termination is pursuant to Section 2.05 or2.07 of this Agreement, Shaw shall not work for or provide any services in anycapacity to any individual or business entity that is in direct competitionwith the business of the Company as it exists during Shaw’s employment hereunderwith the Company.

 

3.02  Non-Hire.  During the one-year period immediatelyfollowing the termination of Shaw’s employment hereunder by the Company, exceptif such termination is pursuant to Section 2.05 or 2.07 of this Agreement,Shaw shall not, either directly or indirectly, recruit or hire or attempt torecruit or hire, any employee of the Company.

 

3.03  Soliciting Customers or Accounts AfterTermination of Employment. During the one-year period immediately followingthe termination of Shaw’s employment hereunder with the Company, except if suchtermination is pursuant to Section 2.05 or 2.07 of this Agreement, Shawshall not either directly or indirectly:

 

(a) Make known to anyperson, firm or corporation the names and addresses of any of the customers or accountsof the Company; or

 

(b) Call on, solicit ortake away, or attempt to call on, solicit or take away any of the customers oraccounts of the Company on whom Shaw called or with whom he became acquaintedduring his employment hereunder with the Company, either for himself or for anyother person, firm or corporation.

 

3.04  Company Records and Documents.  All Company-related records and documents areconsidered to be the exclusive property of the Company.  Upon the termination of Shaw’s employment hereunderby the Company for any reason, he shall promptly return to the Company all suchrecords and documents in his possession or under his control.  Shaw shall have the right to retain copies ofCompany records and documents relating to the Company’s predecessor, hispatents and those records and documents that are reasonably necessary for himto be able to exercise his rights under the Technology License Agreemententered into between Shaw and the Company on June 23, 1995, as amended(the “License Agreement”).

 

ARTICLE IV

 

MISCELLANEOUS

 

4.01  Relationship to License Agreement.  Nothing in this Agreement shall modify orlimit Shaw’s rights and privileges as established in the License Agreement. Inthe event of any conflict between this Agreement and the terms of the License Agreement,the Parties agree that the terms of the License Agreement shall prevail.

 

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4.02  Notice.  Any notice required or permitted to be givenunder this Agreement shall be sufficient if in writing and sent by certifiedmail by the Company to the residence of Shaw, or by Shaw to the Company’sprincipal office.

 

4.03  Further Assurances.  Each party agrees to perform any further actsand to execute and deliver any further documents that may be reasonably necessaryto carry out the provisions of this Agreement.

 

4.04  Severability.  In the event that any of the provisions, orportions thereof, of this Agreement are held to be unenforceable or invalid byany court of competent jurisdiction, the validity and enforceability of theremaining provisions or portions thereof shall not be affected thereby.

 

4.05  Construction.  Whenever used herein, the singular numbershall include the plural, and the plural number shall include the singular.

 

4.06  Headings.  The headings contained in this Agreement arefor purposes of reference only and shall not limit or otherwise affect themeaning of any of the provisions contained herein.

 

4.07  Multiple Counterparts.  This Agreement may be executed in multiple counterparts,each of which shall be deemed to be an original but all of which together shallconstitute one and the same instrument.

 

4.08  Governing Law.  This Agreement has been executed in and shallbe governed by the laws of the State of Texas.

 

4.09  Inurement.  Subject to the restrictions against transferor assignment as herein contained, the provisions of this Agreement shall inureto the benefit of, and shall be binding on, the assigns, successors ininterest, personal representatives, estates, heirs and legatees of each of the Partieshereto.

 

4.10  Waivers.  No waiver of any provision or condition ofthis Agreement shall be valid unless executed in writing and signed by the partyto be bound thereby, and then only to the extent specified in such waiver.  No waiver of any provision or condition ofthis Agreement shall be construed as a waiver of any other provision orcondition of this Agreement, and no present waiver of any provision orcondition of this Agreement shall be construed as a future waiver of suchprovision or condition.

 

4.11  Amendment.  This Agreement may be amended only by theunanimous written consent of both Shaw and the Company.

 

4.12  Execution.  Each party to this Agreement herebyrepresents and warrants to the other party that such party has full power andcapacity to execute, deliver and perform this Agreement.

 

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RETRACTABLETECHNOLOGIES, INC.
|        |   | THOMAS J. SHAW |
|-------------|--------|----------------|
| By:         |   |           | Individually |
| Print Name: |   |           |   |
| Its:        |   |           |   |
|        |   |           |
| Date:       |   |           | Date: |   |
|             |        |                |  |  |  |  |

 

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