Document:

exhibit10_1.htm

  Exhibit 10.1

Executive Employment Agreement

 

  

This Executive Employment Agreement (this “Agreement”), is executed and delivered effective as of April 21, 2011 (the “Effective Date”), by and between Obagi Medical Products, Inc., a Delaware corporation (the “Company”), and Albert F. Hummel, an individual resident of the State of California (“Executive”).

 

1.     Position And Responsibilities

 

 (a)   Position.  Executive shall be employed by the Company to render services to the Company in the position of President and Chief Executive Officer. Executive shall report directly to the Company’s Board of Directors. Executive shall perform such duties and responsibilities as are normally related to such position, in accordance with industry standards, and any additional duties now or hereafter assigned to Executive by the Board of Directors of the Company.  Executive shall abide by the Company’s rules, regulations and practices, as adopted or modified from time to time in the Company’s sole discretion.  Without limiting the generality of the foregoing, for so long as Executive holds the position of Chief Executive Officer, at the Company’s request, Executive shall execute all certifications required to be executed by the Company’s principal executive officer (or person performing similar functions) pursuant to the regulations adopted by the Securities and Exchange Commission under Section 302 of the Sarbanes-Oxley Act of 2002 (“SOX”), all certifications or similar items required to be executed by the Company’s principal executive officer (or equivalent thereof) pursuant to Section 404 of SOX or the Company’s independent auditors, and all certifications required to be executed by the Company’s principal executive officer (or equivalent thereof) pursuant to Section 906 of SOX.

 

(b)   Other Activities. Except with the prior written consent of the Company, Executive shall not, during the term of this Agreement: (i) accept any other employment; provided, however, that Executive may retain his position as Chief Executive Officer of Cobrek Pharmaceuticals, Inc. as long as Executive remains substantially devoted to his duties and responsibilities to the Company; or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary gain) that might interfere with Executive’s duties and responsibilities hereunder or create a conflict of interest with the Company.  Executive may serve as a member of the board of directors of any company that does not compete directly with the Company.  Notwithstanding the foregoing, Executive may also devote reasonable time and attention to civic, charitable or social organizations so long as such activities do not interfere with the performance of his duties to the Company.

  

(c)  No Conflict. Executive represents and warrants that Executive’s execution of this Agreement, Executive’s employment with the Company and the performance of Executive’s proposed duties under this Agreement shall not violate any obligations Executive may have to any prior or other employer, or any other person or entity, including, without limitation, any obligations with respect to proprietary or confidential information of any prior employer, or any other person or entity.

 

2.       Compensation And Benefits

 

(a)   Base Salary. In consideration of the services to be rendered under this Agreement, the Company shall pay to Executive a salary at the current rate of Five Hundred Thousand Dollars ($500,000) per year, as adjusted from time to time as described below (the “Base Salary”). The Base Salary shall be paid in accordance with the Company’s standard bi-weekly payroll practices. The Base Salary will be reviewed and adjusted from time to time in accordance with the Company’s procedures for adjusting salaries for senior executives and as approved by the Compensation Committee of the Board of Directors.

  

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(b)   Bonus. Executive shall be eligible to receive an annual bonus based on a percentage of Executive’s Base Salary (currently 75%), or other increased percentage as may be determined by the Company’s Board of Director’s (or a committee thereof) from time to time (the “Bonus”).  Any such Bonus shall be subject to Executive’s achievement of corporate financial metrics or other goals and objectives to be established from time to time by the Company’s Board of Directors (or a committee thereof).

 

(c)   Stock Option/Restricted Stock Awards. On the Effective Date, the Company shall grant to Executive non-qualified stock options under the Company’s 2005 Stock Incentive Plan, as amended (the “Plan”) to purchase one hundred thousand (100,000) shares of the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), at an exercise price equal to the closing selling price per share of the Common Stock as reported on the Nasdaq Global Market on the Effective Date, pursuant to the form of stock option agreement adopted for use under the Plan (the “Options”).  Other than as set forth in Section 3(c), 3(d) or 3(e) below, the Options shall vest in three equal annual installments from the date of grant.  The Options shall expire on the tenth (10th) anniversary of the date of grant. Unless otherwise agreed to by the Compensation Committee of the Board of Directors, future option grants shall be subject to these same general terms and conditions (“Subsequent Options”).  Other than as set forth in this Agreement, all options granted to Executive, including the Options, shall be subject to the terms and conditions of the respective stock option agreement and related plan documents, and any additional terms approved by the Compensation Committee of the Board of Directors at the time of grant.

 

           In addition, on the Effective Date, the Company shall grant to Executive restricted stock units under the Plan to receive fifty thousand (50,000) shares of Common Stock pursuant to the form of restricted stock award agreement adopted for use under the Plan (the “RSUs”). Other than as set forth in Section 3(c), 3(d) or 3(e) below, the RSUs shall vest in full on the second anniversary of the Effective Date, provided that Executive is still employed by the Company at that time. From time to time, the Compensation Committee of the Board of Directors may grant future restricted stock units to Executive pursuant to the Plan (“Subsequent RSUs”). Any such Subsequent RSUs will be subject to vesting terms to be approved at that time.

 

(d)   Benefits.  Executive shall be eligible to participate in any and all medical, dental, vision, retirement, life insurance, AD&D and other benefits (the “Benefits”) established by the Company that are made generally available by the Company to executive officers of the Company, as such plans may be amended from time to time in the Company’s sole discretion. Without limiting the generality of the foregoing, Executive, and to the extent applicable, Executive’s covered dependents, shall be eligible to participate in the Company’s 401(k) program and shall receive immediate enrollment for health benefits to the maximum extent possible under the Company’s benefit plans.

 

(e)   Vacation. Executive shall receive three (3) weeks of paid vacation time per calendar year, which amount shall increase in accordance with the Company’s vacation policy for employees of the Company generally.  Executive may take such accrued vacation at such times as are mutually convenient to Executive and the Company.  In addition, Executive shall be entitled to all holidays provided under the Company’s regular holiday schedule.

  

(f)   Business Expenses. The Company will reimburse Executive for reasonable and necessary expenses appropriately incurred by Executive in performing his duties and obligations to the Company in accordance with, and subject to, such policies and procedures regarding executive officer expenses generally as the Company may from time to time have in effect.

 

  

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3.     At-Will Employment

 

(a)   At-Will Termination by Company. The employment of Executive shall be “at-will” at all times. The Company may terminate Executive’s employment with the Company at any time, without any advance notice, for any reason or no reason at all, notwithstanding anything to the contrary contained in or arising from any statements, policies or practices of the Company relating to the employment, discipline or termination of its employees. Upon and after the date of such termination, all obligations of the Company shall cease, except as set forth below in Section 3(b), 3(c), 3(d) or 3(e).

 

(b)   At-Will Termination by Executive. Executive may terminate employment with the Company at any time for any reason or no reason at all, upon two weeks’ advance written notice.  During such notice period, Executive shall continue to diligently perform all of Executive’s duties hereunder. The Company shall have the option, in its sole discretion, to make Executive’s termination effective at any time prior to the end of such notice period as long as the Company pays Executive all compensation (including all accrued Base Salary (at the annual rate then in effect), vacation and any other amounts owed to Executive at the time of termination) accrued to which Executive is entitled up through the last day of the two-week notice period. Any such amounts shall be paid on the effective date of termination. All reimbursable expenses incurred up to and including the date of termination shall be submitted for payment within thirty (30) days of termination and contain all documentation required pursuant to Company policy.  Any and all options to acquire shares of Common Stock that have vested under the Options or any Subsequent Options, and any and all shares of Common Stock that have issued or are issuable pursuant to vested RSUs or vested Subsequent RSUs, shall continue to belong to Executive.  Executive shall have ninety (90) days in which to exercise any vested portion of any Options and Subsequent Options.  All shares that remain unvested under such Options, any Subsequent Options, the RSUs or any Subsequent RSUs shall cease to vest on the date of termination.  Thereafter all obligations of the Company shall cease.

 

(c)   Involuntary Termination by Company without Cause Other Than for Good Reason.

 

                 (i)  If the Company terminates Executive’s employment for reasons other than for Cause (as defined below), Good Reason (as defined below) or death or disability (which is governed by subparagraph (e) below), which will be dealt with on a case-by-case basis at the time either such event occurs, then, during the Severance Period (as defined below), the Company shall: (A) pay to Executive a sum equal to twelve  (12) months of Base Salary (as then in effect); and (B) continue to make available to Executive, at the Company’s expense, the Benefits (including the full premium for COBRA continuation coverage if applicable for Executive and his eligible dependents) made generally available by the Company to its executives for the Severance Period, to the extent permitted under applicable law and the terms of such benefit plans. The cash consideration payable pursuant to subsection (A) above shall be paid in equal monthly installments as salary continuation pay, subject to deduction of ordinary payroll taxes, commencing on the date that is no later than the earlier of thirty (30) days following termination or the execution of the General Release (as defined below).    In addition, if the Company terminates Executive’s employment for reasons other than for Cause, or death or disability (as provided in subparagraph (e) below)(which will be dealt with on a case-by-case basis at the time either such event occurs) then the Options, any Subsequent Options, RSUs, and any Subsequent RSUs automatically shall cease to vest pursuant to the terms of the applicable stock option agreements and restricted stock unit agreements, and in the case of Options or Subsequent Options, Executive (or his estate, in the event of death) shall have one (1) year in which to exercise any vested portion of such Options and any Subsequent Options in accordance with the relevant plan documents.  Executive will own any shares of Common Stock issued or issuable under vested RSUs or vested Subsequent RSUs without any further action on Executive’s part. For purposes of this Agreement, the term “Severance Period” shall mean the

  

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twelve (12)-month period immediately following the date of Executive’s termination.  Any accrued vacation pay and any other amounts owed to Executive at the time of termination shall be paid on the effective date of Executive’s termination.  All reimbursable expenses incurred up to and including the date of termination shall be submitted for payment within thirty (30) days of termination and contain all documentation required pursuant to Company policy.

 

                  (ii)  The Company’s termination of Executive’s employment shall be for “Cause” if Executive: (A) exhibits willful misconduct or dishonesty which materially and adversely effects the business reputation of Executive or the Company; (B) is convicted of a felony; (C) acts (or fails to act) in the performance of his duties to the Company in bad (good) faith and to the Company’s detriment; (D) materially breaches this Agreement or any other agreement with the Company, which if curable, is not cured to the Company’s reasonable satisfaction within thirty (30) days of written notice thereof; or (E) engages in misconduct that is demonstrably and materially injurious to the Company, including, without limitation, willful and material failure to perform his duties as an officer or executive of the Company or excessive absenteeism unrelated to illness or vacation.

  

(d)   Termination by Executive for Good Reason.

 

	
 (i)  If Executive terminates his employment for Good Reason then, during the Severance Period, the Company shall: (A) pay to Executive a sum equal to twelve (12) months of the Base Salary (as then in effect); and (B) continue to make available to, and pay on Executive’s behalf, the Benefits (including the full premium for COBRA continuation coverage if applicable for Executive and his eligible dependents) made generally available by the Company to its executives for that twelve (12)-month period, to the extent permitted under applicable law and the terms of the benefit plans. The cash consideration payable pursuant to subsection (A) above shall be paid as salary continuation pay in equal monthly installments, subject to normal payroll deductions, commencing on the date that is no later than the earlier of thirty (30) days following termination or the execution of the General Release.  Any Benefits shall also be paid in equal monthly installments during the Severance Period.  All reimbursable expenses incurred up to and including the date of termination shall be submitted for payment within thirty (30) days of termination and contain all documentation required pursuant to Company policy.  All accrued vacation and any other amounts owed to Executive as of the termination date shall be paid on the effective date of termination.

 

	
(ii)  In addition, notwithstanding anything to the contrary contained in the stock option agreements evidencing the Options, Subsequent Options or the Plan or in any restricted stock unit agreement evidencing the RSUs or Subsequent RSUs, in the case of a Change of Control (as defined below), all Options, Subsequent Options, RSUs and Subsequent RSUs shall fully vest and, in the case of Options and Subsequent Options, shall be exercisable immediately prior to such Change of Control regardless of Executive’s continued employment status. In the event Executive terminates his employment for Good Reason other than as a result of a Change of Control, all Options, Subsequent Options, RSUs or Subsequent RSUs will be treated in accordance with subsection (c)(i) above.

	
(iii)  Executive’s termination of his employment shall be for “Good Reason” if following a Change of Control the Company (including any successor in interest): (A) terminates Executive’s employment at any time within the one year anniversary of such Change of Control, for reasons other than for Cause,  or death or disability (which will be dealt with on a case-by-case basis at the time either such event occurs); (B) Executive voluntarily terminates his employment within six (6) months of the Company’s (or any successor in interest)  material reduction of Executive’s level of responsibility; or (C) Executive terminates his employment within six (6) months of the Company’s (or any successor in interest) material reduction of the Base Salary, except for any salary reduction that is generally applicable to the Company’s executives; provided that in the case of (B) and (C) above, “Good Reason” shall only 

 

 

  

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be found to exist if prior to Executive’s resignation for Good Reason, the Executive has provided thirty (30) days written notice to the Company within ninety (90) days following the existence of such Good Reason event indicating and describing the event resulting in such Good Reason, and the Company does not cure such event within ninety (90) days following the receipt of such notice from Executive.  In the event the Company fails to timely cure, Executive may resign upon expiration of the cure period.

  

	
(iv)  For purposes of this Agreement, the term "Change of Control" shall mean any of the following transactions:

 

	
  

	
(A)  a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

	
  

	
 

	
  

	
(B)  the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the capital stock of the Company’s subsidiary corporations);

	
  

	
 

	
  

	
(C)  the complete liquidation or dissolution of the Company;

	
  

	
 

	
  

	
(D)  any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger but excluding any such transaction or series of related transactions that the Board of Directors determines shall not be a Change of Control; or

	
  

	
 

	
  

	
(E)  the acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Board of Directors determines shall not be a Change of Control.  

 

(e)  Death/Disability.  Upon termination for death or as a result of permanent disability (as defined in the Plan), the Company shall pay Executive all compensation (including all accrued Base Salary (as then in effect), or vacation, any other amounts owed to Executive upon such event, and subject to payment of all reimbursable expenses) accrued to which Executive is entitled up through the date of death or permanent disability.  Any and all options to acquire shares of Common Stock that have vested under the Options or Subsequent Options, and any and all shares of Common Stock that have issued or are issuable pursuant to vested RSUs or any Subsequent RSUs, shall continue to belong to Executive (or his estate, in the event of death) and in the case of any Options or any Subsequent Options, the period to exercise such options shall be extended for a period of one (1) year following death or permanent disability. All shares that remain unvested under the Options, any Subsequent Options, the RSUs or any Subsequent RSUs shall cease to vest on the date of termination.  

 

(f)   Release.  Executive’s right to receive any payments or other benefits under this Section 3 (other than if termination is due to death, disability or voluntary resignation or for Cause, in each case

  

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assuming no severance payment is made, and in which case no release would be required) is expressly conditioned upon: (A) Executive’s execution of a general release of all claims as of the date of Executive’s termination, in substantially the form then in existence for executive employees generally (the “General Release”); and (B) Executive’s compliance with his obligations under this Agreement, and all other agreements between Executive and the Company.  With respect to the General Release, Executive or Executive’s legal representative must, within twenty-one (21) days after presentation of such General Release, execute such release on behalf of Executive and Executive’s estate, heirs and representatives.

  

4.     Termination Obligations

 

(a)  Return of Property.  Executive agrees that all property (including, without limitation, all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive’s employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive’s employment.

  

(b)   Cooperation.  Following any termination of his employment, Executive shall perform any and all acts requested by the Company to ensure the orderly and efficient transition of Executive’s duties. Such acts may include, but are not limited to: (i) participating in meetings or telephone conferences; (ii) reviewing, preparing or executing documents; and (iii) providing assistance in connection with any litigation, investigation or audit involving the Company, or any of its affiliates, directors, officers, employees, agents, attorneys, representatives, stockholders, insurers, divisions, successors and/or assigns and any related holding, parent or subsidiary corporations.     

 

 5.       Non-Disclosure Of Third-Party Information

 

Executive represents, warrants and covenants that Executive shall not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others at any time, including but not limited to, any proprietary information or trade secrets of any current or former employer, if any; and Executive acknowledges and agrees that any violation of this provision shall be grounds for Executive’s immediate termination and could subject Executive to substantial civil liabilities and criminal penalties.  Executive further specifically and expressly acknowledges that no officer or other employee or representative of the Company has requested or instructed Executive to disclose or use any such third-party proprietary information or trade secrets.

  

6.       Nonsolicitation; Non-Interference

 

Executive acknowledges and agrees that the Company’s relationships with its employees, consultants, and service providers are valuable business assets.  Accordingly, Executive agrees that, during his employment with the Company and during the Severance Period following the date of any termination of such employment, he will not (for himself or for any third party) divert or attempt to divert from the Company any employee, consultant, or service provider, through solicitation or otherwise, or otherwise interfere with the Company’s business or the Company’s relationships with its employees, consultants, and service providers.

  

7.       Amendments; Waivers; Remedies

 

This Agreement may not be amended or waived except by a writing signed by Executive and by a duly authorized officer of the Company.  Failure to exercise any right under this Agreement shall not constitute a waiver of such right.  Any waiver of any breach of this Agreement shall not operate as a

  

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waiver of any subsequent breaches.  All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law.

  

8.     Assignment; Binding Effect

 

(a)  Assignment. The performance of Executive is personal hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement. This Agreement may be assigned or transferred by the Company and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets.

 

(b)  Binding Effect.  Subject to the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be binding upon each of the parties; the affiliates, officers, directors, agents, legal representatives, successors and assigns of the Company; and the heirs, devisees, spouses, legal representatives and successors of Executive.

 

 9 .      Notices

 

All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by United States first class registered or certified mail, return receipt requested, to the principal address of the other party, as set forth below on the signature page of this Agreement. The date of notice shall be deemed to be the earlier of (i) actual receipt of notice by any permitted means, or (ii) five (5) business days following dispatch by overnight delivery service or the United States mail. Executive shall be obligated to notify the Company in writing of any change in Executive’s address. Notice of change of address shall be effective only when provided in accordance with this Section 9.

 

 10.     Severability

 

If any provision of this Agreement shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect. In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or arbitrator shall reduce the time period or scope to the maximum time period or scope permitted by law.

  

11.       Taxes

 

 (a)  Withholding.  All amounts paid under this Agreement (including, without limitation, the Base Salary) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction.

  

(b)  Section 409A Compliance.  To the extent the salary continuation pay paid pursuant to Section 3(c) or (d): (a) are paid from the date of Executive’s termination of employment through March 15 of the calendar year following such termination, such severance benefits are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and thus payable pursuant to the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations; (b) are paid following said March 15, such severance benefits are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations made upon an involuntary separation from service and payable pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations, to the

  

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maximum extent permitted by said provision; and (c) are in excess of the amounts specified in clauses (a) and (b) of this paragraph, shall (unless otherwise exempt under Treasury Regulations) be considered separate payments subject to the distribution requirements of Section 409A(a)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”), including, without limitation, the requirement of Section 409A(a)(2)(B)(i) of the Code that payments or benefits be delayed until six (6) months after Executive’s separation from service (or death, if earlier) if Executive is a “specified employee” within the meaning of the aforesaid section of the Code at the time of such separation from service.  In the event that a six (6) month delay of any such separation payments or benefits is required, on the first regularly scheduled pay date following the conclusion of the delay period, Executive shall receive a lump sum payment or benefit in an amount equal to the separation payments and benefits that were so delayed, and any remaining separation payments or benefits shall be paid on the same basis and at the same time as otherwise specified pursuant to this Agreement (subject to applicable tax withholdings and deductions).  If the continued Benefits under Section 3(c) or (d) (or reimbursements for the cost of such Benefits, as applicable) are taxable to Executive or otherwise result in income imputed to Executive, then if Executive is a “specified employee,” to the extent necessary to avoid a violation of Section 409A of the Code, Executive shall pay for such Benefits for the first six months following Executive’s separation from service and shall be reimbursed for such payments on the first day of the seventh month following such separation from service (or death, if earlier).

 

The term “termination of employment” as it appears in Section 3 shall be interpreted consistent with the term “separation from service” within the meaning of section Treasury Regulation §1.409A-1(h) to the extent strictly necessary to either qualify the arrangement as an involuntary separation arrangement that is exempt from section 409A of the Code, or establish a time of payment that complies with section 409A of the Code.

 

 (b)   Section 280G. Notwithstanding anything herein to the contrary, to the extent that the severance benefits to be paid to Executive hereunder exceed an amount equal to 2.99 times the Executive’s “base amount” as determined pursuant to Section 280G of the Code, the amount of the severance benefits shall be reduced to the minimum extent necessary to ensure that the severance benefits do not exceed the amount determined pursuant to Section 280G of the Code.  Any such reductions shall be made first from compensation which is not deferred compensation subject to regulation under Section 409A of the Code; thereafter the Board of Directors (or Compensation Committee thereof) may determine the order of compensation to be paid out. This Section 11(b) shall apply only with respect to a severance benefit which is a “parachute payment” within the meaning of Section 280G of the Code.

 

12.     Governing Law

 

This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to conflicts of law principles.

 

 13.      Equitable Relief

 

 Executive agrees that any breach of Section 5 or 6 of this Agreement would cause substantial and irreparable harm to the Company for which money damages would be an inadequate remedy.  Accordingly, the Company shall in any such event be entitled to obtain injunctive and other forms of equitable relief to prevent such breach and to recover from Executive the Company’s costs (including without limitation reasonable attorneys’ fees) incurred in connection with enforcing the relevant provisions referenced above of this Agreement, in addition to any other rights or remedies available at law, in equity or by statute.

 

  

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14 .     Interpretation

 

This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party.  Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement.  Whenever the context requires, references to the singular shall include the plural and the plural the singular.

 

 15 .     Attorney's Fees

 

If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements, in addition to any other relief to which the party may be entitled.

  

16.     Obligations Survive Termination Of Employment

 

The parties agree that any and all of the Company’s or Executive’s obligations under this Agreement shall survive the termination of this Agreement.

 

 17.     Counterparts

 

 This Agreement may be executed in counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.

  

18.     Authority

 

Each party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in accordance with its terms.

 

 19.     Entire Agreement

 

This Agreement is intended to be the final, complete and exclusive statement of the terms of Executive’s employment by the Company supersedes and may not be contradicted by evidence of any prior or contemporaneous statements or agreements. Notwithstanding the foregoing, this Agreement shall not supersede or otherwise affect any agreements previously executed by Executive relating to the Company’s proprietary information or intellectual property rights.  To the extent that the plans, practices, policies or procedures of the Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.  Any subsequent change in Executive’s duties, position or compensation shall not affect the validity or scope of this Agreement other than as set forth in Section 3(d)(iii) above.

 

 20.       Indemnification

 

The Company shall indemnify Executive to the fullest extent permitted by applicable law and the Company’s Bylaws with respect to Executive’s service to the Company and Executive shall at all times be covered under a director’s and officer’s liability policy(ies) paid for by the Company. If not yet executed, Executive shall become party to the form of Indemnification Agreement currently in existence with the Company.

  

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21 .     Executive Acknowledgement

  

Executive acknowledges that Executive has had the opportunity to consult legal counsel concerning this Agreement, that Executive has read and understands this Agreement, that Executive is fully aware of its legal effect and that Executive has entered into this Agreement freely based on Executive’s own judgment and not on any representations or promises other than those contained in this Agreement.

 

 In Witness Whereof , the parties hereby execute this Employment Agreement as of the Effective Date.

 

	 	 Obagi Medical Products, Inc.	 	 	 Executive :	 
	 	 	 	 	 	 
	 	
/s/Preston Romm      

	 	 	
/s/ Albert F. Hummel

	 
	
Name:

	

Preston Romm

	 	Name: 	

Albert F. Hummel

	 
	Title:	

CFO 

	 	 	 	 
	 	 	 	 	 	 
	 	 Address for notices:	 	 	 Address for notices:	 
	 	 3760 Kilroy Airport Way, Suite 500	 	 	 131 Ridgefield Road	 
	 	 Long Beach, CA  90806	 	 	 Newtown SQ, PA 19073	 
	 	 	 	 	 	 
	 	 Attention: Chairman, Compensation Committee	 	 	 	 

 

10Exhibit 10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") shall be effective as of September ___, 2010 (the "Commencement Date") by and between York Entertainment, Inc., a Florida corporation (the "Company"), and Alex Bafer ("Employee").

ARTICLE I.

EMPLOYMENT

1.1

Employment and Title. The Company employs Employee, and Employee accepts such employment, as Chief Executive Officer of the Company, upon the terms and conditions set forth herein.

1.2

Duties. Subject to the power of the Board of Directors of the Company, Employee will serve as Chief Executive Officer and will faithfully and diligently perform the services and functions relating to such office or otherwise reasonably incident to such office, provided that all such services and functions will be reasonable and within Employee's area of expertise. Employee will, during the term of this Agreement (or any extension thereof), devote essentially his full business time, attention and skills and reasonable best efforts to the promotion of the business of the Company. The foregoing will not be construed as preventing Employee from managing other businesses, making investments in other businesses or enterprises provided that (a) Employee agrees not to become engaged in any other business activity that interferes with his ability to discharge his duties and responsibilities to the Company and (b) Employee does not violate any other provision of this Agreement.

1.3

Location. The principal place of employment and the location of Employee's principal office shall be in Boca Raton, Florida; provided, however, Employee shall, when requested by the Board of Directors, or may, if he determines it to be reasonably necessary, temporarily perform outside of Boca Raton, Florida, such services as are reasonably required for the proper execution of his duties under this Agreement.

1.4

Representations. Each party represents and warrants to the other that he/it has full power and authority to enter into and perform this Agreement and that his/its execution and performance of this Agreement shall not constitute a default under or breach of any of the terms of any agreement to which he/it is a party or under which he/it is bound. Each party represents that no consent or approval of any third party is required for his/its execution, delivery and performance of this Agreement or that all consents or approvals of any third party required for his/its execution, delivery and performance of this Agreement have been obtained.

ARTICLE II.

TERM

2.1

Term. The term of Employee's employment hereunder (the "Term") shall commence as of the Commencement Date and shall continue for a period of three years (the "Scheduled Termination Date") unless renewed or earlier terminated pursuant to the provisions of this Agreement. Assuming all conditions of this Agreement have been satisfied and there has been no breach of the Agreement during its initial Term, Employee may extend the Term for an additional three years at Employee's sole election ("Extended Term").

ARTICLE III.

COMPENSATION

3.1

Salary. As compensation for the services to be rendered by Employee, the Company shall pay Employee, during the Term of this Agreement, an annual base salary of not less than Two Hundred Seventy Five Thousand Dollars ($150,000), which base salary shall accrue monthly (prorated for periods less than a month) and shall be paid in equal monthly installments, in arrears. The base salary will be reviewed annually, or as appropriate, by the Board of Directors and may be increased at any time.

3.2

Bonuses. The Employee shall be eligible for a discretionary bonus, payable within thirty (30) days of the end of each calendar quarter during the Term, in an amount up to 150% of the base salary paid to the Employee in the prior quarter (the "Bonus”).  Each quarter the Board of Directors shall determine the amount of the Bonus, if any, that will be paid to the Employee.

3.3

Stock Options.  Any options issued to the Employee prior to or during the Term shall vest in full in the event of the termination of employment of Employee and shall remain outstanding for the full term set forth in the option agreements.

3.4

Benefits. Employee shall be entitled and the Company shall pay for the same medical, hospital, pension, profit sharing, dental and life insurance coverage and benefits as are available to the Company's most senior executive officers on the Commencement Date together with the following additional benefits:

(a)

The Company's normal vacation allowance for all employees who are executive officers of the Company, but not less than four (4) weeks annually, with the option to carry over unused vacation days.

(b)

The Employee will be entitled to participate in any benefit plan or program of the Company which may currently be in place or implemented in the future.

ARTICLE IV.

WORKING FACILITIES, EXPENSES AND INSURANCE

4.1

Working Facilities and Expenses. Employee shall be furnished with an office at the principal executive offices of the Company, or at such other location as agreed to by Employee and the Company, and other working facilities and secretarial and other assistance suitable to his position and reasonably required for the performance of his duties hereunder. The Company shall reimburse Employee for all of Employee's reasonable expenses incurred while employed and performing his duties under and in accordance with the terms and conditions of this Agreement, subject to Employee's full and appropriate documentation, including, without limitation, receipts for all such expenses in the manner required pursuant to Company's policies and procedures and the Internal Revenue Code of 1986, as amended and applicable regulations as are in effect from time to time.

4.2

Insurance. The Company may secure in its own name or otherwise, and at its own expense, life, disability and other insurance covering Employee or Employee and others, and Employee shall not have any right, title or interest in or to such insurance other than as expressly provided herein. Employee agrees to assist the Company in procuring such insurance by submitting to the usual and customary medical and other examinations to be conducted by such physicians(s) as the Company or such insurance company may designate and by signing such applications and other written instruments as may be required by any insurance company to which application is made for such insurance.

ARTICLE V.

DEATH, ILLNESS OR INCAPACITY

5.1

Death. In the event of the death of the Employee, the Company shall pay to the estate or other legal representative of the Employee the base salary (at the annual rate then in effect) accrued to the date of the Employee's death and not theretofore paid to the Employee, and an additional twenty-four (24) months of base salary and quarterly bonus payments, as a death benefit. At the election of the estate of other legal representative, such payments may be made in a lump sum within ninety (90) days of election, or as continued salary and bonus payments. The additional bonus payments shall be calculated by reference to the average quarterly bonuses received by Employee during the two (2) years immediately prior to such termination, or such shorter period of time if the Commencement Date is less than two (2) years prior to the date of death. Rights and benefits of the estate or other legal representative of the Employee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

5.2

Disability. During any time Employee suffers from a Disability (as defined below), the employment of the Employee may be terminated by the Company or the Employee. In the event of such termination, the Company shall pay to the Employee on a monthly basis, for a period of twenty-four (24) months following termination, the difference between Employee's monthly base salary at the time of termination and any monthly disability pay benefits received by Employee. Employee shall also be entitled to annual bonus payments for a period of twenty-four (24) months following termination, calculated by reference to the average quarterly bonuses received by Employee during the two (2) years immediately prior to such termination, or such shorter period of time if the Commencement Date is less than two (2) years prior to the date of such termination. At the election of Employee or his legal representative, such payments may be made in a lump sum within ninety (90) days of election, or as continued salary and bonus payments. Rights and benefits of the Employee under the other benefit plans and programs of the Company shall be determined in accordance with the terms and provisions of such plans and programs.

For purposes hereof, the terms “disabled” or “disability” shall mean the inability of Executive to perform all or substantially all of the duties and obligations contemplated by or required under this Agreement as a result of an accident, illness, disease, or injury, for a period of ninety (90) consecutive days, or any one hundred eighty (180) days in any twelve (12) consecutive months.

ARTICLE VI.

CONFIDENTIALITY

6.1

Confidentiality.  During the Term of this Agreement and thereafter, Employee shall not divulge, communicate, use to the detriment of the Company, or for the benefit of any other business, firm, person, partnership or corporation, or otherwise misuse any information pertaining to the Company including, without limitation, all (i) data or trade secrets, including secret processes, formulas or other technical data (ii) production methods; (iii) customer lists; (iv) personnel lists; (v) proprietary information; (vi) financial or corporate records; (vii) operational, sales, promotional and marketing methods and techniques; (viii) development ideas, acquisition strategies and plans; (ix) financial information and records; (x) "know-how" and methods of doing business; and (xi) 

2

computer programs, including source codes and/or object codes and other proprietary, competition-sensitive or technical information or secrets developed with or without the help of Employee (collectively “Confidential Information”). Employee acknowledges that any such information or data he may have acquired was received in confidence and by reason of his relationship to the Company. Confidential Information, data or trade secrets shall not include any information which: (a) at the time of disclosure is within the public domain; (b) after disclosure becomes a part of the public domain or generally known within the industry through no fault, act or failure to act, error, effort or breach of this Agreement by Employee; (c) is known to the recipient at the time of disclosure; (d) is subsequently discovered by Employee independently of any disclosure by the Company; (e) is required by order, statute or regulation, of any governmental authority to be disclosed to any federal or state agency, court or other body; or (f) is obtained from a third party who has acquired a legal right to possess and disclose such information.

6.2

Records. All documents, papers, materials, notes, books, correspondence, drawings and other written and graphic records relating to the Company’s business which Employee shall prepare or use, or come into contact with, shall be and remain the sole property of the Company and, effective immediately upon the termination of the Employee's employment with the Company for any reason, shall not be removed from the Company's premises without the Company's prior written consent and any such documents, papers, materials, notes, books, correspondence, drawings and other written and graphic records upon request shall be returned to the Company.

ARTICLE VII.

TERMINATION

7.1

Termination For Cause. 

(a)

Termination For Cause.  This Agreement and the employment of Employee may be terminated by the Company "For Cause" under any one of the following circumstances:

A.

Employee has committed any material act of fraud, misappropriation or theft against the Company.

B.

Employee's default breach of any material provision of this Agreement; provided, that Employee shall not be in default hereunder unless (i) he shall have failed to cure such default or breach within thirty (30) days of written notice thereof by the Company to Employee or (ii) Employee shall have duly received notice of at least three (3) prior instances of such breach or default (whether or not cured by Employee).

C.

Employee engages in willful misconduct in the performance of his duties hereunder; provided, that Employee shall not be in default hereunder unless (i) he shall have failed to cure such default or breach within fifteen (15) days of written notice thereof by the Company to Employee, or (ii) Employee shall have duly received notice of at least three (3) prior instances of such breach or default (whether or not cured by Employee).

D.

At the election of the Employee.

A termination For Cause under this Section 7.1 shall be effective upon the date set forth in a written notice of termination delivered to Employee. Except as provided in Article XI, this Agreement shall thereupon terminate and cease to be of any further force or effect.

(b)

Effect of Termination For Cause. If Employee's employment is terminated "For Cause" pursuant to Section 7.1:

A.

Employee shall be entitled to accrued base salary and benefits under Sections 3.1 and 3.4, respectively, through the date of termination.

B.

Employee shall be entitled to accrued bonuses under Section 3.2 hereof through the date of termination.

C.

Employee shall be entitled to reimbursement for expenses accrued through the date of termination in accordance with the provisions of Section 4.1 hereof.

D.

All unvested stock options granted to Employee shall be forfeited.

7.2

No Termination Without Cause. This Agreement may only be terminated pursuant to Section 5.1, 5.2, 7.1, and 7.3.

7.3

Termination Upon Change In Control. 

(a)

Termination Upon Change of Control.  If within a two (2) year period following any Change in Control there occurs:

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A.

A material diminution of the Employee's responsibilities, as compared with the Employees responsibilities immediately prior to the Change in Control;

B.

Any reduction in the sum of Employee's base salary (as set forth in Section 3.1) or bonus (as set forth in Section 3.2) as of the date immediately prior to the Change in Control;

C.

Any failure to provide the Employee with benefits at least as favorable as those enjoyed by similarly situated senior corporate officers at the Company under the Company's pension, life insurance, medical, health and accident, disability or other written employee plans under which the form and/or amounts of benefits are prescribed in applicable documents;

D.

Any relocation of the Employee's principal site of employment to a location more than 25 miles from the Employee's principal site of employment as of the date immediately prior to the Change in Control; or

E.

Any material breach of this Agreement on the part of the Company; 

then, at the option of Employee, exercisable by the Employee within thirty (30) days after the occurrence of any of the foregoing events, the Employee may resign from employment with the Company (or, if involuntarily terminated, give notice of intention to collect benefits under this Agreement) by delivering a notice in writing (the "Notice of Termination") to the Company, and shall be entitled to the severance pay and benefit continuation provisions of Section 7.3(b).

(b)

Effect of Change of Control Termination.  

A.

Employee shall be paid a lump sum within ninety (90) days of such termination in an amount equal to 2.9 times the base salary as set forth in Section 3.1.

B.

Employee shall be entitled to reimbursement for expenses accrued through the date of termination in accordance with the provisions of Section 4.1 hereof.

C.

Employee shall be entitled to receive a Bonus within ninety (90) days of such termination in an amount equal to 150% of the Bonus received by Employee, if any, during the year immediately prior to such termination.

D.

Employee shall be entitled to receive all benefits as would have been awarded under Section 3.4 hereof through the expiration of the Term hereof; which benefits shall be awarded as and when the same would have been awarded under the Agreement had it not been terminated.

In addition to the foregoing, the Company agrees to provide Employee with payment sufficient to provide for a gross-up of any excise, income, and other taxes resulting from imposition of the parachute penalties of the Internal Revenue Code or applicable state tax laws. Except as provided in Article XI, this Agreement shall thereupon terminate and cease to be of any further force or effect.

(c)

Change of Control Defined. For purposes of this Agreement, a Change of Control shall be deemed to have occurred in the event of:

A.

The acquisition by any person or entity, or group thereof acting in concert, of "beneficial" ownership (as such term is defined in Securities and Exchange Commission ("SEC") Rule 13d-3 under the Securities Exchange Act of 1934, as amended) (the "Exchange Act”), of securities of the Company which, together with securities previously owned, confer upon such person, entity or group the voting power, on any matters brought to a vote of shareholders, of fifty percent (50%) or more of the then outstanding shares of capital stock of the Company; or

B.

The sale, assignment or transfer of assets of the Company or any subsidiary or subsidiaries, in a transaction or series of transactions, if the aggregate consideration received or to be received by the Company or any such subsidiary in connection with such sale, assignment or transfer is greater than fifty percent (50%) of the book value of the Company's assets on a consolidated basis immediately before such transaction or the first of such transactions, as determined by the Company in accordance with generally accepted accounting principles; or

C.

The merger, consolidation, share exchange or reorganization of the Company (or one or more subsidiaries of the Company) as a result of which the holders of all of the shares of capital stock of the Company as a group would receive less than fifty percent (50%) of the voting power of the capital stock or other interests of the surviving or resulting corporation or entity; or

D.

The adoption of a plan of liquidation or the approval of the dissolution of the Company; or

4

E.

The commencement (within the meaning of SEC Rule 14d-2 under the Exchange Act) of a tender or exchange offer which, if successful, would result in a Change of Control of the Company.

ARTICLE VIII.

INDEMNIFICATION

8.1

Indemnification. The Company shall to the full extent permitted by law indemnify, defend and hold harmless Employee from and against any and all claims, demands, liabilities, damages, losses and expenses (including reasonable attorney's fees, court costs and disbursements) arising out of the performance by him of his duties hereunder except in the case of his willful misconduct and will carry directors and officers' insurance in amounts commensurate with industry standards.

ARTICLE IX.

BOARD OF DIRECTORS

9.1

Election to Board. As a condition to Employee's obligations hereunder, he will be elected to the Company's Board of Directors, and each year during the Term the Company will cause the Employee to be nominated to serve in such capacity.

ARTICLE X.

MISCELLANEOUS

10.1

No Waivers. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver of any such provision, nor prevent such party thereafter from enforcing such provision or any other provision of this Agreement.

10.2

Notices. Any notice to be given to the Company and Employee under the terms of this Agreement may be delivered personally, by telecopy, telex or other form of written electronic transmission, or by registered or certified mail, postage prepaid, and shall be addressed as follows:

				
	 
	If to the Company:

	 
	2200 NW Corporate Boulevard, Suite 303

Boca Raton, Florida 33431

	 
	 
	 
	 

	 
	If to Employee:

	 
	 

	 
	 
	 
	 

Either party may hereafter notify the other in writing of any change in address. Any notice shall be deemed duly given (i) when personally delivered, (ii) when telecopied, telexed or transmitted by other form of written electronic transmission (upon confirmation of receipt) or (iii) on the third day after it is mailed by registered or certified mail, postage prepaid, as provided herein.

10.3

Severability. The provisions of this Agreement are severable and if any provision of this Agreement shall be held to be invalid or otherwise unenforceable, in whole or in part, the remainder of the provisions, or enforceable parts thereof, shall not be affected thereby.

10.4

Successors and Assigns. The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, including the survivor upon any merger, consolidation, share exchange or combination of the Company with any other entity. Employee shall not have the right to assign, delegate or otherwise transfer any duty or obligation to be performed by him hereunder to any person or entity.

10.5

Entire Agreement. This Agreement supersedes all prior and contemporaneous agreements and understandings between the parties hereto, oral or written, and may not be modified or terminated orally. No modification, termination or attempted waiver shall be valid unless in writing and signed by the party against whom such modification, termination or waiver is sought to be enforced. This Agreement was the subject of negotiation by the parties hereto and their counsel.

10.6

Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida without reference to the conflict of law principles thereof.

10.7

Section Readings. The section headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said sections.

5

10.8

Further Assurances. Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by the other party in order to carry out the provisions and purposes of this Agreement.

10.9

Counterparts. This Agreement may be executed in counterparts, all of which taken together shall be deemed one original.

ARTICLE XI.

SURVIVAL

11.1

Survival. The provisions of Articles VI, VII, VIII, and IX, of this Agreement shall survive the termination of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

York Entertainment, Inc.

			
	 
	By:

	 

	 
	Name:

	 

	 
	Title:

	 

	 
	 
	 

	 
	 
	 

	 
	EMPLOYEE

	 
	 
	 

	 
	 
	 

	 
	 

	 
	Alexander Bafer

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