Chief Operating Officer Employment Agreement

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THIS EXECUTIVE EMPLOYMENT AGREEMENT is made as of the March 22, 1999, by and between CHESAPEAKE BIOLOGICAL LABORATORIES, INC., a Maryland corporation (the "Corporation"), and JOHN T. BOTEK (the "Executive").


RECITALS


The Corporation has offered to employ Executive as its Vice President and Chief Operating Officer, and Executive has accepted such offer of employment. The Corporation and the Executive consider it in their mutual best interests that the Executive enter into this Employment Agreement to define the terms and conditions of the Executive's employment.


NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter contained, the Corporation and the Executive hereby agree as follows:


1. FULL-TIME EMPLOYMENT OF EXECUTIVE.


1.1. DUTIES AND STATUS.


(a) Effective April 13, 1999, the Corporation hereby engages the Executive as a full-time executive employee for the period specified in Section 4 hereof (the "Employment Period"), and the Executive accepts such employment, on the terms and conditions set forth in this Agreement. At all times during the Employment Period, the Executive shall hold the offices of Vice President and Chief Operating Officer. During the Employment Period: (i) the Executive shall exercise such authority and perform such executive duties as are commensurate with the duties of Vice President and Chief Operating Officer of the Corporation. During the Employment Period, there shall be no material decrease in the responsibilities and duties of the Executive, unless otherwise agreed to in writing by the Corporation and the Executive.


(b) During the Employment Period, the Executive shall (i) devote substantially all of his time and efforts to the business of the Corporation and its subsidiaries; (ii) not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation which competes or conflicts or interferes with the performance of his duties hereunder in any way; and (iii) accept such additional office or offices with the Corporation or its subsidiaries to which he may be elected by the Board of Directors of the Corporation, provided that the performance of the duties of such office or offices shall be consistent with the scope and nature of the duties provided for in paragraph (a) of this Section 1.1. The foregoing shall not preclude the Executive from devoting a reasonable amount of his time to (i) management of his personal business investments, (ii) civic and charitable affairs, (iii) supervision of his personal investments and (iv) serving on boards of directors of other corporations, provided, in each case, that such activities do not interfere with the performance of the Executive's duties under this Agreement.


(c) The Executive shall be required to perform the services and duties provided for in paragraph (a) of this Section 1.1 only at the location of the executive offices of the Corporation in the Baltimore metropolitan area.


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(d) The Executive shall be entitled to vacations, leaves of absence and leaves for illness or temporary disability in accordance with the policies of the Corporation as in effect from time to time, which policies shall not be less favorable than those in effect at the date of this Agreement. Any leave on account of illness or temporary disability which is less than total disability as defined in the Corporation's long-term disability insurance plan ("Total Disability") and which continues for a continuous period of less than 180 consecutive days shall not constitute a breach by the Executive of his obligations hereunder.


1.2. COMPENSATION AND GENERAL BENEFITS. As compensation for his services under this Agreement, the Executive shall be compensated as follows:


(a) The Corporation shall initially pay the Executive an annual base salary of $130,000, which shall be payable in periodic equal installments no less frequent than the periodic installments in effect for salaries of senior executives of the Corporation immediately prior to the effective date of this Agreement. Such base salary shall be subject to normal periodic review by the Compensation Committee of the Board of Directors of the Corporation (the "Compensation Committee"), at least annually, for increases based on the policies established by the Compensation Committee and based on the Executive's contributions to the enterprise. Notwithstanding the foregoing, until the earlier to occur of (i) such time as the Corporation receives at any time or from time to time hereafter net proceeds from one or more equity investments, whether through the sale of common or preferred stock of the Corporation or otherwise, in an amount equal to or exceeding, in the aggregate, $3,000,000, or (ii) January 3, 2000, the Executive agrees that one-half of his base salary shall not be paid but shall accrue, with all such accrued amounts to be paid immediately following the earlier to occur of the Corporation's receipt of such net proceeds or January 3, 2000.


(b) The Executive also shall be eligible for periodic incentive compensation payments, commencing after the Corporation has reported net earnings for two consecutive calendar quarters, in amounts the Compensation Committee considers appropriate in its sole and absolute discretion. Any such compensation, in the form of cash paid to the Executive as a bonus or as part of a profit or incentive cash compensation program established from time to time, shall be hereinafter referred to as "Incentive Compensation." Promptly after the Corporation reports net earnings for two consecutive calendar quarters, the Compensation Committee shall meet to determine whether to pay Executive an incentive bonus. Thereafter, so long as the Corporation remains profitable, the Compensation Committee shall consider, at least annually, whether to cause the Corporation to pay incentive bonuses to Executive; provided, however, that the Corporation shall have no obligation hereunder to pay such incentive bonus to Executive.


(c) During the Employment Period, the Executive shall be entitled to such fringe benefits as are now or hereafter made available to the Corporation's executive officers generally and to participate in the Corporation's 401(k) plan as well as such plans of the Corporation relating to stock options, employee stock ownership, pension, thrift, profit-sharing, group life insurance, medical coverage, education, or other retirement or employee benefits as the Corporation has adopted or may hereafter adopt for the benefit of its executive officers.


(d) The Corporation shall reimburse the Executive for his reasonable out-of-pocket expenses incurred in connection with performing his duties hereunder on behalf of the Corporation, subject to the Executive's compliance with the Corporation's policies for expense reimbursement as in effect from time to time.


(e) As an inducement essential for Executive to accept the Corporation's offer of employment, the Corporation hereby grants the Executive: (i) a non-qualified option to purchase 125,000 shares of the Corporation's Class A Common Stock at an exercise price of $1.00 per share, in accordance with the Stock Option Agreement attached hereto as Exhibit A, and (ii) an incentive stock option under the Corporation's existing Incentive Stock Option Plan to purchase 25,000 shares of the Corporation's Class A Common Stock at an exercise price equal to the average of the closing "bid" and "asked" prices of the Corporation's Class A Common Stock as


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quoted on the Nasdaq National Market as of the date hereof, with such options to vest in two equal installments on December 2, 2000 and March 1, 2001.


(f) As promptly as possible following execution of this Agreement, and provided that the Executive is insurable at standard rates, the Corporation shall obtain a "split dollar" term insurance policy in the face amount of $200,000 on the life of Executive, with the beneficiary thereof to be such person, trust or entity as Executive shall designate from time to time. During the Employment Period, the Corporation shall pay all premiums as and when due on such policy, and upon termination or expiration of the Employment Period, the Corporation shall assign such policy to Executive.


2. COMPETITION; CONFIDENTIAL INFORMATION.


The Executive and the Corporation recognize that due to the nature of his position with the Corporation, the Executive has had access to and has acquired, will have access to and will acquire, and will assist in developing, confidential and proprietary information relating to the business and operations of the Corporation and its subsidiaries and affiliates, including, without limiting the generality of the foregoing, information with respect to their present and prospective products, systems, customers, agents, processes and sales and marketing methods. The Executive acknowledges that such information has been and will continue to be of central importance to the business of the Corporation and its affiliates and that disclosure of it to or its use by others could cause substantial loss to the Corporation. The Executive and the Corporation also recognize that an important part of the Executive's duties will be to develop good will for the Corporation and its affiliates through his personal contact with customers, agents and others having business relationships with the Corporation and its subsidiaries and affiliates, and that there is a danger that this good will, a proprietary asset of the Corporation and its subsidiaries and affiliates, may follow the Executive if and when his relationship with the Corporation is terminated. The Executive accordingly agrees as follows:


2.1. NON-COMPETITION.


At all times during the Employment Period and for a period of one (1) year after expiration or termination of the Employment Period, other than as a result of (i) a termination by the Corporation without cause (pursuant to Section 4.2) or (ii) by the Executive for Good Reason (as defined in Section 5.2(b) hereof):


(a) the Executive will not, directly or indirectly, either individually or as owner, partner, agent, employee, consultant or otherwise, except for the account of and on behalf of the Corporation or its subsidiaries or affiliates, engage in any activity competitive with the business of the Corporation or its subsidiaries or affiliates;


(b) the Executive will not, directly or indirectly, solicit or otherwise attempt to establish for himself or any person, firm or entity, other than the Corporation or its subsidiaries or affiliates, any business relationship with any person, firm or corporation which was, at the time of termination of the Employment Period, a customer of the Corporation or one of its subsidiaries or affiliates, but only to the extent such business relationship would be competitive with the business of the Corporation or its subsidiaries or affiliates; or


(c) the Executive will not, directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, except for the account of and on behalf of the Corporation or its subsidiaries or affiliates, solicit or otherwise attempt to establish for himself or any other person, firm or entity, any employment, agency, consulting or other relationship with any person (except any person with whom the Executive had a business relationship prior to his employment with the Corporation hereunder, other than solely through his previous affiliation with the Corporation as a director) who was an employee of the Corporation or its subsidiaries or affiliates at any time within one year before termination or expiration of the Employment Period.


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2.2. INVESTMENTS. Nothing in this Section 2 shall be construed to prevent the Executive from owning, as an investment, not more than 2% of a class of equity securities issued by any competitor of the Corporation or its affiliates and publicly-traded and registered under Section 12 of the Securities Exchange Act of 1934.


2.3. TRADE SECRETS. The Exec ...