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Barnes v. Neuromark

November 25, 2008

GARRY R. BARNES AND GLB VENTURES, LLC., PLAINTIFFS,
v.
NEUROMARK, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER

Garry Barnes and GLB Ventures, LLC, sued Neuromark Inc. for breach of contract, seeking damages or rescission. On October 14 and 15, 2008, the case was tried before the Court. The Court's findings of fact and conclusions of law are set forth below.

Jurisdiction

Barnes is a resident and citizen of Illinois. GLB Ventures, LLC, which is wholly owned by Barnes and his spouse, is an Illinois corporation with its principal place of business in Illinois. Neuromark, Inc. is a Delaware corporation with its principal place of business in Boulder, Colorado that develops and licenses genetic tests relating to neuropsychiatric disorders. The amount in controversy in this suit exceeds $75,000.00. Thus, the Court has diversity jurisdiction. See 28 U.S.C. § 1332.

Background

In 1976, Barnes received a bachelor's degree in business administration from Pittsburg State University in Pittsburg, Kansas. (Joint Tr. Ex. ("JTE") 67.) Since then, he has served in various capacities, from sales representative to President and CEO, in companies both large and small. (Id.) Barnes was introduced to Neuromark by PBA Professional Business Advisers, a company that connects start-up companies with skilled executives who are willing both to work for and invest in those companies.

On April 2, 2007, Barnes and Neuromark signed a contract in which Barnes agreed to act as Neuromark's Chief Commercial Officer for two years and to invest $250,000.00 in the company in exchange for 625,000 shares of its common stock. (JTX 5 ¶¶ 1-2, 4.) The contract contains, among others, a provision governing its termination. That provision allows Neuromark to terminate the contract:

[F]or cause, upon thirty (30) days written notice by the Company to the Executive. For the purposes of this Agreement, "Cause" for termination shall be deemed to exist upon a determination by the Board of Directors, after an opportunity for the Executive to be heard, that the Executive has committed any of the following conduct:

i. Fraud in connection with his performance of duties hereunder;

ii. Gross misconduct or unreasonable or continued neglect as an Employee, only after the Executive has been given notice and a period of no less than thirty (30) days with which to cure such gross misconduct or unreasonable and continued neglect;

iii. Conviction of a felony, if such felony detrimentally affects Executive's abilities to conduct his duties hereunder. (Id. ¶ 6b.)

It permits Barnes to terminate the contract:

[F]or Good Reason, upon thirty (30) days written notice by the Executive to the Company. For the purposes of this Agreement, "Good Reason" shall be deemed to exist upon a determination by the Executive, if without the Executive's consent, the Company:

i. fails to maintain the Executive in his position;

ii. fails to pay the Base Salary or provide the benefits stated in section 5 of this Agreement as an when required to be aid hereunder;

iii. fails to have any successor in interest to the Company or any acquirer of any portion of the assets of the Company greater than 50%, assume ...


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