Exhibit 10.4
------------
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
THIS EMPLOYMENT AGREEMENT(the "Agreement"), made this 15th day of May, 2002
(the "Effective Date") is entered into by Stronghold Technologies, Inc., a New
Jersey corporation with its principal place of business at 000 Xxxxxxxxx Xxxx,
Xxxxxxxxxxxxx, Xxx Xxxxxx 00000 (the "Company"), and Xxxxxxxxxxx Xxxxx (the
"Executive").
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company.
WHEREAS, the Company is entering into a Merger Agreement with TDT
Development, Inc., its principle stockholders, TDT Acquisition Corp., Terre Di
Toscana, Inc., Terres Toscanas, Inc., on or about the Effective Date and this
Agreement is intended to survive such merger.
WHEREAS, the Company desires to provide the Executive with proper
incentives for him to continue performing as the Company's Chairman, President
and Chief Executive Officer.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Agreement. The Company hereby agrees to continue to employ the
-----------------
Executive, and the Executive hereby accepts continued employment with the
Company, upon the terms set forth in this Agreement, for the period commencing
on the Effective Date and ending on December 31, 2004 (such period, as it may be
extended, the "Term"), unless sooner terminated in accordance with the
provisions of Section 6. The Term shall be automatically renewed for successive
one year terms (each such renewal, a "Renewal Term"), unless either party
provides the other party with written notice no less than ninety (90) days prior
to the end of the then current Term or Renewal Term, of his or its intent not to
renew this Agreement.
2. Title; Capacity. The Executive shall serve as Chairman, President and
----------------
Chief Executive Officer or in a position at least commensurate therewith in all
material respects. The Executive shall be the highest ranking officer within the
Company. In addition, the Executive shall, as long as he remains employed with
the Company, be elected to a director position on the Board of Directors of the
Company (the "Board of Directors"). The Executive shall further be elected as
the Chairman of the Board of Directors and shall remain as Chairman of the Board
of Directors as long as he remains employed with the Company (and thereafter, if
properly elected to such position). The Executive's duties hereunder shall be
those which shall be prescribed from time to time by the Board of Directors in
accordance with the bylaws of the Company and shall include such executive
duties, powers and responsibilities as customarily attend the offices of
Chairman, President and Chief Executive Officer of a company of the size, type
and nature of the Company. The Executive will hold, in addition to the offices
of President and Chief Executive Officer of the Company, such other executive
offices in the Company and its subsidiaries to which he may be elected,
appointed or assigned by the Board of Directors from time to time and will
discharge such executive duties in connection therewith.
3. Services and Best Efforts. The Executive shall devote his full working
-------------------------
time, energy and skill (reasonable absences for vacations and illness excepted),
to the business of the Company in order to perform such duties faithfully and
diligently; provided, however, that notwithstanding any provision in this
-------- -------
Agreement to the contrary, the Executive shall be permitted to serve as a member
of the boards of directors of non-profit organizations, so long as such
memberships or activities do not unreasonably interfere with the performance of
his duties hereunder. The Executive shall also be permitted to serve as a member
of the boards of directors of other for-profit organizations, so long as such
memberships or activities do not unreasonably
-2-
interfere with the performance of the Executive's duties hereunder, and so long
as the Board of Directors approves of such memberships, such approval not to be
unreasonably withheld.
4. Compensation and Benefits.
-------------------------
(a) Salary. The Company shall pay the Executive a minimum annual base
------
salary at the annualized rate of $260,000.00 (the "Base Salary"), payable in
installments in accordance with the Company's normal payroll schedule but no
less often than monthly. The Base Salary shall be raised, effective January 1,
2003 to the annualized rate of $300,000.00 and raised, effective January 1, 2004
to the annualized rate of $350,000.00. Such salary shall be reviewed annually
and subject to increase as determined by the Board or a Compensation Committee
thereof its sole discretion.
(b) Bonus. Each fiscal year after fiscal year 2002,the Executive will
-----
be eligible to receive an annual bonus based upon the Company's meeting and
exceeding its annual budget, as such has been reviewed and approved by the Board
no later than the end of its first fiscal quarter (the "Budget"), for the
Company's earnings before interest, taxes, depreciation and amortization
("EBITDA"). This bonus will be earned according to the following: (i) if the
Company achieves 90-100% of EBITDA, the Executive will receive a bonus of 10% of
his then current annual base salary; (ii) if the Company achieves 101-110% of
EBITDA, the Executive will receive a total bonus of 20% of his then current
annual base; and (iii) if the Company achieves 111-120% of EBITDA, the Executive
will receive a total bonus of 30% of his then current annual base salary; (iv)
if the Company achieves 121-130% of EBITDA, the Executive will receive a total
bonus of 40% of his then current annual base salary; (v) if the Company achieves
131-140% of EBITDA, the Executive will receive a total bonus of 50% of his then
current annual base salary; (vi) if the Company achieves 141-150% of EBITDA,
the Executive
-3-
will receive a total bonus of 55% of his then current annual base salary; and
(vii) if the Company achieves 151% or more of EBITDA, the Executive will receive
a total bonus of 60% of his then current annual base salary. The bonus, if any,
shall be paid in one lump sum within sixty (60) days after the close of the
fiscal year for which it was earned.
(c) Fringe Benefits. The Executive shall be entitled to participate
---------------
in all benefit programs that the Company establishes and makes available to its
employees, if any, to the extent that the Executive's position, tenure, salary,
age, health and other qualifications make him eligible to participate. The
Company may alter, modify, add to or delete its benefit plans at any time as the
Company or its Board may determine, in its sole judgment, to be appropriate.
(d) Paid Time Off. The Executive shall be eligible to accrue paid
-------------
time off pursuant to the Company's normal policies and procedures governing
vacation time or other paid time off.
(e) Reimbursement of Expenses. The Company shall reimburse the
--------------------------
Executive for all reasonable travel, entertainment and other business expenses
incurred or paid by the Executive in connection with, or related to, the
performance of his duties, responsibilities or services under this Agreement,
upon presentation by the Executive of reasonable documentation, expense
statements, vouchers and/or such other supporting information as the Company may
request.
(f) Car Allowance. The Company shall pay Executive eight hundred
-------------
dollars ($800.00) per month as an expense reimbursement car allowance for the
lease or purchase of a vehicle. Executive shall additionally be reimbursed for
reasonable automobile insurance, repairs, tolls, parking and all other
business-related vehicle expenses.
-4-
(g) Supplemental Life Insurance. The Company shall pay the premium on
---------------------------
a term life insurance policy which shall be maintained by the Executive and for
which the Executive will have the exclusive right to determine the policy's
beneficiary. The premium on such policy shall not exceed ten thousand dollars
($10,000.00). The Company will be responsible for all cost of living increases
in the costs of such premiums.
(h) Deductions. The Company shall deduct from any pay to the
----------
Executive all taxes or other withholdings required by law or otherwise properly
authorized by the Executive.
5. Stock Options.
-------------
(a) Current Grant. The Company will grant to the Executive a stock
-------------
option (the "Option") under the Stronghold Technologies, Inc. 2000 Stock Option
Plan, as Amended (the "Plan") for the purchase of an aggregate of 200,000 shares
of common stock of the Company at an option exercise price equal of $1.50 per
share, the fair market value of the underlying common stock on the date of the
grant. The maximum amount permitted by law shall be treated as an Incentive
Stock Option within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"). The Option shall be subject to all terms, limitations,
restrictions and termination provisions set forth in the Plan and in the
separate option agreement that shall be executed to evidence the grant of any
option. While the Executive is employed by the Company, the Option will become
exercisable ("vest") on the earlier of: (i) the seventh anniversary of the
Effective Date; or (ii) the achievement of the performance goals set forth
below, based upon the Company's achievement of EBITDA:
----------------------------------------------------------------------------------------------------------------------
Fiscal Options Vested for Cumulative Options Vested for Cumulative Options Vested
Year fiscal year for Achieving fiscal year for Achieving 100- for fiscal year for Achieving
Ending 80-100% EBITDA 120% EBITDA Over 120% EBITDA
----------------------------------------------------------------------------------------------------------------------
2002 12,500 24,000 40,000
----------------------------------------------------------------------------------------------------------------------
2003 23,000 45,750 80,000
----------------------------------------------------------------------------------------------------------------------
2004 23,000 45,750 80,000
----------------------------------------------------------------------------------------------------------------------
-5-
Options to be vested pursuant to subpart (ii) shall be considered vested on the
sixtieth (60th) day following the closing of the Company's fiscal year for which
such vesting is occurring.
(b) Effect of Change in Control on Vesting. Upon a Change of Control,
--------------------------------------
the unvested portion of the Option shall immediately vest and become exercisable
by the Executive. For purposes of this Agreement, a "Change in Control" shall
mean the occurrence of any of the following:
(i) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) 50% or more of either (x) the
then-outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
-------- -------
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change in Control Event: (A) any acquisition directly from the
Company (excluding an acquisition pursuant to the exercise, conversion or
exchange of any security exercisable for, convertible into or exchangeable for
common stock or voting securities of the Company, unless the Person exercising,
converting or exchanging such security acquired such security directly from the
Company or an underwriter or agent of the Company), (B) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (C) any acquisition by any
corporation pursuant to a Business Combination (as defined below) which complies
with clauses (x) and (y) of subsection (iii) of this definition; or
-6-
(ii) such time as the Continuing Directors (as defined below) do
not constitute a majority of the Board (or, if applicable, the Board of
Directors of a successor corporation to the Company), where the term "Continuing
Director" means at any date a member of the Board (x) who was a member of the
Board on the date of the initial adoption of this Agreement by the Board or (y)
who was nominated or elected subsequent to such date by at least a majority of
the directors who were Continuing Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election; provided, however, that there shall be excluded from
-------- -------
this clause (y) any individual whose initial assumption of office occurred as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or share exchange involving the Company or a sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), unless, immediately following such Business
Combination, each of the following two conditions is satisfied: (x) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then-outstanding shares of common
stock and the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of the resulting
or acquiring corporation or other form of entity in such Business Combination
(which shall include, without limitation, a corporation which as a result of
such transaction owns the
-7-
Company or substantially all of the Company's assets either directly or through
one or more subsidiaries) (such resulting or acquiring corporation or entity is
referred to herein as the "Acquiring Corporation") in substantially the same
proportions as their ownership of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, respectively, immediately prior to such
Business Combination and (y) no Person (excluding the Acquiring Corporation or
any employee benefit plan (or related trust) maintained or sponsored by the
Company or by the Acquiring Corporation) beneficially owns, directly or
indirectly, 30% or more of the then-outstanding shares of common stock of the
Acquiring Corporation, or of the combined voting power of the then-outstanding
securities of such corporation entitled to vote generally in the election of
directors (except to the extent that such ownership existed prior to the
Business Combination).
(iv) Notwithstanding the foregoing, a Change of Control shall not
occur in the following situation: any equity financing transaction or series of
transactions, which are for the sole purpose of raising cash to finance the
continuing operations of the Company (an "Equity Financing"), if and only if,
the Executive has voted in favor or otherwise consented to such Equity Financing
in his role as a director of the Company.
6. Termination. The Term of this Agreement shall terminate upon the
-----------
occurrence of any of the following:
(a) Expiration of the Term in accordance with Section 1, after a
party has given notice of its intent not to renew the Agreement;
(b) At the election of the Company, for Cause, upon sixty (60) days
written notice by the Company to the Executive. For the purposes of this
Agreement, "Cause" for
-8-
termination shall be deemed to exist upon a determination by the Board of
Directors that the Executive has committed any of the following conduct:
(i) Fraud;
(ii) Gross misconduct or unreasonable and continued neglect as an
employee, only after the Executive has been given notice and a period of no less
than thirty (30) days within 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; or
(iv) Commission of an act of moral turpitude.
(c) Upon the death or disability of the Executive. As used in this
Agreement, the term "disability" shall mean the inability of the Executive with
reasonable accommodation as may be required by State or Federal law, due to a
physical or mental disability, for a period of one hundred eighty (180) days,
whether or not consecutive, during any 360-day period to perform the services
contemplated under this Agreement. A determination of disability shall be made
by a physician satisfactory to both the Executive and the Company, provided that
-------- ----
if the Executive and the Company do not agree on a physician, the Executive and
the Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties
(d) At the election of the Executive, upon not less than thirty (30)
days' prior written notice of termination; and
(e) At the election of the Company, without cause, immediately upon
written notice by the Company to the Executive.
-9-
7. Effect of Termination. Upon termination of the Agreement, the only
-----------------------
remuneration to which the Executive will be entitled shall be as follows:
(a) Termination after the Expiration of the Term, for Cause or at
-----------------------------------------------------------------
Election of the Executive. In the event the Executive's employment is terminated
-------------------------
after the expiration of the Term pursuant to Section 6(a), for cause pursuant to
Section 6(b), or at the election of the Executive pursuant to Section 6(d), the
Company shall pay to the Executive the compensation and benefits otherwise
payable to him/her under Section 3 through the last day of his actual employment
by the Company.
(b) Termination for Death or Disability. If the Executive's employment
-----------------------------------
employment is terminated by death or because of disability pursuant to Section
6(c), the Company shall pay to the estate of the Executive or to the Executive,
as the case may be, the compensation that would otherwise be payable to the
Executive up to the end of the month in which the termination of his employment
because of death or disability occurs.
(c) Termination Without Cause. If the Executive's employment is
---------------------------
terminated without cause pursuant to Section 6(e), the Company shall pay the
Executive a lump sum payment equal to his then current base salary for a period
of the greater of: (i) the balance of the Term or any Renewal Term; or (ii)
twelve months.
(d) Survival. The provisions of Sections 8, 9, 10 and 11 shall
--------
survive the termination of this Agreement.
8. Non-Compete.
-----------
(a) During the term of the Executive's employment with the Company
(whether or not such employment extends passed the expiration of the Term) and
for a period of twelve (12) months after the termination thereof, the Executive
will not directly or indirectly:
-10-
(i) as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of the
total outstanding stock of a publicly held company), engage in the business of
developing, producing, marketing or selling products and/or services of the kind
or type developed or being developed, produced, marketed, sold or provided by
the Company while the Executive was employed by the Company; or
(ii) hire, recruit, solicit or induce, or attempt to induce, any
employee or contractor of the Company to terminate their employment with, or
otherwise cease their business relationship with, the Company;
(iii) solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any of the clients, customers or
accounts, or prospective clients, customers or accounts, of the Company which
were actively contacted, solicited or served by the Company during the term of
the Executive's employment with the Company; or
(b) If any restriction set forth in this Section 8 is found by any
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 8 are necessary for
the protection of the business and goodwill of the Company and are considered by
the Executive to be reasonable for such purpose. The Executive agrees that any
breach of this Section 8 will cause the Company substantial and irrevocable
damage and therefore, in the event of any such breach,
-11-
in addition to such other remedies which may be available, the Company shall
have the right to seek specific performance and injunctive relief.
9. Proprietary Information.
-----------------------
(a) The Executive agrees that all information and know-how, whether
or not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. The Executive will not disclose any Proprietary Information to others
outside the Company or use the same for any unauthorized purposes without
written approval by an officer of the Company, either during or after his
employment, unless and until such Proprietary Information has become public
knowledge without fault by the Executive.
(b) The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Executive only in the performance of his duties for
the Company.
(c) The Executive agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or
-12-
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to the Executive in the course of the
Company's business.
10. Developments.
------------
(a) The Executive will make full and prompt disclosure to the Company
of all inventions, improvements, discoveries, methods, developments, software,
and works of authorship, whether patentable or not, which are created, made,
conceived or reduced to practice by the Executive or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
(b) The Executive agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section 10(b)
shall not apply to Developments which meet each of the following criteria: (i)
they do not in any way relate to the present or planned business or research and
development of the Company; and (ii) they are made and conceived by the
Executive not during normal working hours, not on the Company's premises and not
using the Company's tools, devices, equipment or Proprietary Information.
(c) The Executive agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. The Executive
shall sign all papers, including, without limitation, copyright applications,
patent applications, declarations, oaths, formal assignments, assignment of
priority
-13-
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
11. Other Agreements. The Executive hereby represents that he/she is not
----------------
bound by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. The Executive further represents that his performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by him/her in confidence or in trust prior to his
employment with the Company.
12. Indemnification and Directors and Officers Insurance.
----------------------------------------------------
(a) The Company agrees to indemnify the Executive to the fullest
extent permitted by applicable law, including but not limited to, whenever
permitted by law, the advancement and reimbursement of expenses and costs
incurred by the Executive. This indemnification shall extend to all actions or
inactions by the Executive in his capacity as officer, director, employee,
agent, fiduciary or otherwise for the Company, its affiliates, subsidiaries,
benefit plans or otherwise.
(b) The Company shall maintain a policy of commercially reasonable
directors and officers liability insurance which shall cover the Executive's
actions and omissions as an officer and director of the Company.
13. Notices. All notices required or permitted under this Agreement shall
-------
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at
-14-
the address shown above, or at such other address or addresses as either party
shall designate to the other in accordance with this Section 13.
14. Pronouns. Whenever the context may require, any pronouns used in this
--------
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
15. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement. This
Agreement shall not alter any of the Executive's rights under any equity grant
which had been memorialized in an agreement with the Company and authorized by
the Board prior to the Effective Date.
16. Amendment. This Agreement may be amended or modified only by a written
---------
written instrument executed by both a properly authorized executive officer or
director of the Company and the Executive.
17. Governing Law and Jurisdiction. This Agreement shall be construed,
---------------------------------
interpreted and enforced in accordance with the laws of the State of New Jersey.
The parties agree that any disputes arising under this Agreement or otherwise
related to the employment of the Executive by the Company shall be brought
exclusively in the state and federal courts located in the State of New Jersey
and the parties hereby waive the defense of lack of personal jurisdiction in any
such action.
18. Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of both parties and their respective successors and assigns,
including any corporation with which or into which the Company may be merged or
which may succeed to its assets or
-15-
business, provided, however, that the obligations of the Executive are personal
and shall not be assigned by him.
19. Acknowledgment. The Executive states and represents that he has had an
--------------
opportunity to fully discuss and review the terms of this agreement with an
attorney. The Executive further states and represents that he has carefully read
this Agreement, fully understands the contents herein, freely and voluntarily
assents to all of the terms and conditions hereof, and signs his name of his own
free act.
20. No Wavier. No delay or omission by the Company in exercising any right
---------
under this Agreement shall operate as a waiver of that or any other right. A
waiver or consent given by the Company on any one occasion shall be effective
only in that instance and shall not be construed as a bar or waiver of any right
on any other occasion.
21. Captions. The captions of the sections of this Agreement are for
--------
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
22. Severability. In case any provision of this Agreement shall be invalid,
------------
illegal or otherwise unenforceable, the validity, legality and enforceability of
the remaining provisions shall in no way be affected or impaired thereby.
23. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which shall
constitute one in the same Agreement.
-16-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
STRONGHOLD TECHNOLOGIES, INC. EXECUTIVE
By:/s/ Xxxxxxxxxxx X. Xxxxx /s/ Xxxxxxxxxxx X. Xxxxx
------------------------------ ------------------------------
Name: Xxxxxxxxxxx X. Xxxxx Xxxxxxxxxxx Xxxxx
Title:President
Dated: May 15, 2002 Dated: May 15, 2002
--------------------------- -------------------------
-17-
