Exhibit 10.5
SEPARATION AGREEMENT
This Separation Agreement ("Agreement") is made and entered into as of
this 19th day of December 2001 (the "Execution Date") by and among USA
Broadband, Inc., a Delaware corporation (the "Company") and Xxxxx X. Xxxxxx
("Executive"). (The Company and Executive are hereinafter sometimes referred to
individually as a "Party" and collectively as the "Parties").
WHEREAS, pursuant to the oral Employment Agreement by and between the
Company and Executive (the "Employment Agreement"), Executive has served as
President and Chief Executive Officer of the Company;
WHEREAS, Executive has also been elected to serve as a member of the
Company's Board of Directors; and
WHEREAS, Executive desires to resign from his position as an officer
and a director of the Company, and the Company desires to accept Executive's
resignation, on the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the promises and covenants
made between the Parties and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. TERMINATION OF EMPLOYMENT. Effective on December 19, 2001 (the
"Effective Date"), Executive resigns from all of his offices and positions with
the Company including his position as a member of the Company's Board of
Directors and, except as otherwise provided herein, the Parties' rights and
obligations under the Employment Agreement shall terminate.
2. SEPARATION CONSIDERATION. As complete satisfaction of the Company's
obligations under the Employment Agreement and except as otherwise may be
provided herein:
a. STOCK FORFEITURE. Pursuant to the Employment Agreement, Executive
was entitled to receive one hundred eighty thousand (180,000) shares of common
stock of the Company (the "Shares"), which Shares were subject to forfeiture if
certain performance criteria were not met. Of the Shares, Executive was issued
seventy-five thousand (75,000) Shares in exchange for consulting services
provided by Executive (the "Issued Shares"), and with regard to the remaining
Shares, Executive and the Company hereby agree that the performance criteria
have not been satisfied and that on the Execution Date, Executive shall forfeit
the remaining Shares to the Company. Within five (5) days following the
Execution Date, Executive hereby agrees to sell, transfer and convey the Issued
Shares to ____________ for an amount equal to FIFTY-TWO THOUSAND DOLLARS
($52,000). If the Issued Shares are not sold as provided above, the Issued
Shares shall remain subject to forfeiture.
b. [Intentionally Left Blank]
c. STOCK OPTION. The Company shall grant Executive an option to
purchase up to TWO HUNDRED THIRTY-FIVE THOUSAND (235,000) shares of common stock
of the Company (the "Option"). Executive shall be entitled to purchase the
shares under the Option, in whole or in part, according to the following
schedule and for the following prices:
i. EIGHTY-FIVE THOUSAND (85,000) SHARES on or after the
Execution Date for $1.50 per share;
ii. SEVENTY-FIVE THOUSAND (75,000) SHARES on or after April 1,
2002 for $2.50 per share; and
iii. SEVENTY-FIVE THOUSAND (75,000) SHARES on or after April 1,
2003 for $3.50 per share.
The Option shall expire five (5) years from the date of issuance.
Executive may not transfer, pledge, sell or assign the Option or any shares
issued or issuable in connection with the exercise of the Option except in
compliance with applicable federal and state securities laws. Upon any breach by
Executive of SECTIONS 6, 7 OR 8 of this Agreement, the Option shall terminate
immediately and any shares acquired on exercise of the Option shall immediately
be forfeited to the Company. The Option shall be evidenced by the Stock Option
Agreement attached hereto as EXHIBIT A (the "Stock Option Agreement") and shall
be executed on the same date as this Agreement. Except as otherwise provided
herein, all agreements between the Parties providing Executive with the right,
option or opportunity to purchase any securities of the Company shall terminate
on the Effective Date.
d. PROMISSORY NOTE. Executive hereby acknowledges that he owes the
Company TWO HUNDRED FIFTY-TWO THOUSAND FIVE HUNDRED DOLLARS ($252,500) plus any
accrued and unpaid interest on such amount with respect to a loan Executive
received from the Company in connection with Executive's purchase of one hundred
sixty-six thousand six hundred sixty-seven (166,667) shares of Series A
Convertible Preferred Stock of the Company (the "Series A Shares"). The amount
of the principal represents the purchase price of the Series A Shares; provided
that the principal sum of the note evidencing the obligation will be reduced on
January 2, 2002 to ONE HUNDRED TWENTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS
($127,500). On the Execution Date, Executive agrees to execute (i) the
promissory note attached hereto as EXHIBIT B to evidence the loan (the "Note");
(ii) the Stock Pledge and Security Agreement attached hereto as EXHIBIT C to
secure payment of the loan (the "Pledge Agreement"); and (iii) the Subscription
Agreement for the Series A Shares dated as of October 25, 2001 (the
"Subscription Agreement").
3. INSURANCE AND RETIREMENT BENEFITS. Executive hereby acknowledges
that during his employment with the Company he has not participated in, or been
entitled to participate in, or received any benefits from, any health, life or
other insurance policy or any retirement, pension or benefit plans.
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4. BANK ACCOUNTS. Executive agrees to take all actions necessary to
remove himself as a signatory on the Company's bank accounts.
5. COMPANY RECORDS AND EQUIPMENT. Executive shall provide a schedule
of, and return to the Company any and all Company equipment, property, products,
services, processes, technology, inventions, patents, business strategies,
pricing information, current and prospective customer lists, marketing plans and
any and all other materials relating to the Company or its business in
Executive's possession in whatever form or medium whether written, electronic,
recorded or otherwise.
6. NON-SOLICITATION AND NON-COMPETITION.
a. Except as provided below, for a period of two (2) year following
the Effective Date (the "Restrictive Period"), Executive shall not anywhere in
the United States, without the prior written consent of the Company, directly or
indirectly:
i. engage in or perform any services, whether full or
part-time, or on a consulting or advisory basis, or become
financially interested in any business or undertaking which
is competitive with any business which at the time of the
Effective Date is carried on by the Company. The foregoing
provisions shall not restrict Executive's ownership of up to
5% of a class of publicly traded securities of companies
that compete with the Company;
ii. solicit or accept business from any client of the Company
with which Executive had dealings on behalf of the Company
during the last year of his employment by the Company;
iii. take any action which might divert from the Company any
opportunity within the scope of its then business; or
iv. solicit, hire or otherwise engage any person employed by
the Company within twelve (12) months prior to the
Effective Date, to perform services for Executive or any
other person.
b. It is the intention of the Parties that in the event any of the
covenants contained in this SECTION 6 shall be construed by any court as being
in any respect illegal or against public policy, any such covenant or portion
thereof shall not fail in its entirety, but shall continue in force and effect
for the term hereof to whatever extent may be necessary to protect the interests
of the Company and its perspective successors and assigns within the permissible
limits of legality and public policy.
c. It is mutually agreed that the time period and geographical area
of the covenants set forth in this SECTION 6 are reasonable and acceptable to
both Parties. It is expressly
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recognized and agreed that the covenants set forth in this SECTION 6 are for the
purpose of restricting the activities of Executive only to the extent necessary
for the protection of the legitimate business interests of the Company, and
Executive agrees that such covenants are reasonable for that purpose and do not
and will not preclude Executive from engaging in activities sufficient for the
purpose of earning a living or impose an undue hardship on Executive.
d. Executive shall refer exclusively to the Company, all
opportunities falling within the scope of the Company's business of which
Executive becomes aware while serving as an agent, employee, consultant advisor
or otherwise to a third party; provided, however, that the Company shall be
under no obligation to pursue any such opportunity referred by Executive. If the
Company does not pursue any opportunity referred by Executive, then Executive
may refer the opportunity to another party.
e. On or before each January 15, April 15, July 15 and October 15
occurring during the Restrictive Period, Executive shall deliver to the Company
written certification that he is in full compliance with, and not in breach of,
the provisions of this SECTION 6.
7. NON-DISPARAGEMENT. Each Party agrees not to, directly or indirectly,
slander, libel or otherwise disparage or make any false statements or take any
action which is, or is intended to, or could reasonably be expected to, be
detrimental to the other Party, its business or reputation.
8. CONFIDENTIALITY. Executive hereby acknowledges that the Company
possesses certain Confidential Information that is a valuable, special and
unique asset of the Company's business which has been made available to him
solely by virtue of his employment with the Company and solely to assist him in
performing his duties for the Company. As used herein, the term "Confidential
Information" includes all information and materials of, belonging to, used by,
or in the possession of the Company including, without limitation, information
relating to the Company's products, services, processes, technology, inventions,
patents, developments, business strategies, pricing, current and prospective
customers, marketing plans and trade secrets of every kind and character,
financial statements and records, financial condition, accounts receivable and
payable ledgers, business operations, and business opportunities, but does not
include (i) information that is in the public domain at the time the information
is acquired by Executive, (ii) information that later becomes public through no
act or omission of Executive or (iii) information generally known in the
industry in which the Company operates. Executive hereby acknowledges that all
Confidential Information is the exclusive property of the Company, whether or
not prepared in whole or in part by Executive and whether or not disclosed to or
entrusted to the custody of Executive. Executive hereby agrees that he will not
disclose any Confidential Information, in whole or in part, to any person or
entity, unless authorized to do so by the Company. Executive further agrees that
he shall not use any Confidential Information for his own purposes or for the
benefit of any other person or entity except the Company, whether such use
consists of duplication, removal, oral use or disclosure, or any other use,
without the Company's prior written consent.
9. RELEASE.
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a. Except for the rights and obligations arising under this
Agreement and claims related thereto, Executive, for himself and his successors,
administrators, executors, trusts, trustees, beneficiaries, heirs and assigns,
hereby fully and generally releases, waives and forever discharges the Company
and their respective shareholders, directors, officers, employees, agents and
attorneys whether past or present (the "Released Parties"), from any and all
actions, suits, debts, demands, damages, claims, judgments, liabilities,
benefits or other remedial relief of any nature, including costs and attorneys'
fees, whether known or unknown, including, but not limited to, all claims
arising out of Executive's employment with or separation from the Company, its
predecessors, successors and assigns, such as (by way of example only) any claim
for compensation, expense reimbursement, severance or other benefits apart from
the benefits stated herein; breach of contract; wrongful or tortious discharges;
impairment of economic opportunity; any claim under common law or equity; any
tort; claims for reimbursements; claims for commissions; implied or express
employment contracts or estoppel; or claims for employment discrimination under
Title VII of the Civil Rights Act of 1964, as amended, the Rehabilitation Act of
1973, as amended, the Americans with Disabilities Act of 1990, as amended, the
Civil Rights Act of 1866 and 1991, as amended, or any other state, federal or
local law, statute or regulation. Executive acknowledges and agrees that this
release, the release contained in SECTION 10 and the covenant not to xxx set
forth in SECTION 11 are essential and material terms of this Agreement and that,
without such release and covenant not to xxx, no agreement would have been
reached by the parties and no separation payment would have been paid.
b. Except for the rights and obligations arising under this
Agreement and claims relating thereto, the Company for themselves and the other
Released Parties, hereby fully and generally releases, waives and forever
discharges the Executive, for himself and his successors, administrators,
executors, trusts, trustees, beneficiaries, heirs and assignees from any and all
actions, suits, debts, demands, damages, claims, judgments, liabilities,
benefits or other remedial relief of any nature, including costs and attorneys'
fees, whether known or unknown, including, but not limited to, all claims
arising out of Executive's employment with or separation from the Company, its
predecessors, successors, assigns, such as (by way of example only) any claim
for compensation, severance or other benefits apart from the benefits stated
herein; breach of contract; impairment of economic opportunity; any claim under
common law or equity; and any tort.
10. EXECUTIVE'S RELEASE OF AGE CLAIMS. EXECUTIVE SPECIFICALLY WAIVES
AND RELEASES THE COMPANY AND ITS AGENTS FROM ALL CLAIMS EXECUTIVE MAY HAVE AS OF
THE DATE EXECUTIVE SIGNS THIS AGREEMENT REGARDING CLAIMS OR RIGHTS ARISING UNDER
THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED 29 U.S.C. ss. 621
("ADEA"). THIS SECTION 10 DOES NOT WAIVE RIGHTS OR CLAIMS THAT MAY ARISE UNDER
THE ADEA AFTER THE DATE EXECUTIVE SIGNS THIS AGREEMENT; EXECUTIVE FURTHER
AGREES: (a) THAT EXECUTIVE'S WAIVER OF RIGHTS UNDER THIS RELEASE IS KNOWING AND
VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKER'S BENEFIT PROTECTION ACT OF
1990; (b) THAT EXECUTIVE UNDERSTANDS THE TERMS OF THIS
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RELEASE; (c) THAT THE SEPARATION PAYMENT AND OTHER BENEFITS CALLED FOR IN THIS
AGREEMENT WOULD NOT BE PROVIDED TO ANY EXECUTIVE TERMINATING HIS EMPLOYMENT WITH
THE COMPANY WHO DID NOT SIGN A RELEASE SIMILAR TO THIS RELEASE, THAT SUCH
PAYMENT AND BENEFITS WOULD NOT HAVE BEEN PROVIDED HAD EXECUTIVE NOT SIGNED THIS
RELEASE, AND THAT THE PAYMENT AND BENEFITS ARE IN EXCHANGE FOR THE SIGNING OF
THIS RELEASE; (d) THAT EXECUTIVE HAS BEEN ADVISED IN WRITING BY THE COMPANY TO
CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (e) THAT THE COMPANY
HAS GIVEN EXECUTIVE A PERIOD OF AT LEAST TWENTY-ONE (21) DAYS WITHIN WHICH TO
CONSIDER THIS RELEASE WHICH EXECUTIVE MAY WAIVE BY SIGNING THIS AGREEMENT ON A
DATE PRIOR TO THE EXPIRATION OF THAT TWENTY-ONE (21) DAY PERIOD; (f) THAT
EXECUTIVE REALIZES THAT FOLLOWING EXECUTIVE'S EXECUTION OF THIS RELEASE,
EXECUTIVE HAS SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE
TO THE COMPANY; AND (g) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE
AND EFFECT IF EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO
REVOKE, THAT THIS AGREEMENT AND RELEASE SHALL THEN BECOME EFFECTIVE AND
ENFORCEABLE.
11. COVENANT NOT TO XXX. To the maximum extent permitted by law, and
except for any claims arising under this Agreement, each Party covenants not to
xxx or to institute or cause to be instituted any action in any federal, state
or local agency or court against the other Party. In addition, nothing herein
shall be construed to prevent Executive from enforcing any rights he may have
under the Employee Retirement Income Security Act of 1974 ("ERISA").
12. INDEMNIFICATION. The Company shall defend, indemnify and hold
harmless Executive in the manner, and to the extent, the Company is required to
defend, indemnify and hold harmless, its officers, directors and employees
pursuant to the Articles for any claim against Executive relating to acts
performed by Executive as an officer or director of the Company during the
course and scope of his employment or directorship by the Company.
13. ACKNOWLEDGMENT. Executive acknowledges by signing this Agreement
that Executive has read and understands the significance and consequences of
this Agreement, that Executive has had an opportunity to review whatever
documents he deemed relevant to his decision to execute this Agreement, that
Executive was advised by the Company to consult with his own legal counsel and
has either conferred with or had the opportunity to confer with his own attorney
regarding the terms and meaning of this Agreement, that no representations or
inducements have been made to Executive except as set forth in this Agreement,
and that Executive has signed this Agreement KNOWINGLY AND VOLUNTARILY.
14. NON-DISCLOSURE REPRESENTATION AND WARRANTY. Executive has not, and
will not, disclose to any third party any Confidential Information (as that term
is defined in SECTION 8 of this Agreement).
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15. PRESS RELEASE. After the Execution Date, the Company may make a
public announcement or disclosure regarding Executive's resignation and this
Agreement, PROVIDED, HOWEVER, that prior to making any such disclosure, the
Company shall consult with Executive regarding the specific items to be
disclosed and obtain Executive's consent to such disclosure, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, any Party to this
Agreement may make any public announcement or disclosure which is required by
law (in which case the disclosing Party shall to the extent practicable advise
the other Party to this Agreement and provide to the Party a copy of such
proposed disclosure prior to making the disclosure).
16. CLOSING DOCUMENTS. In addition to this Agreement, on the Execution
Date, the following documents shall be executed and delivered:
a. by Executive - (a) the Stock Option Agreement; (b) the Note;
(c) the Pledge Agreement; (d) the Subscription Agreement; and (e) any
instruments or documents necessary to remove Executive as a signatory on the
Company's bank accounts; and
b. by the Company - (a) the Stock Option Agreement; (b) the Pledge
Agreement; (c) the Subscription Agreement; and (d) any instruments or documents
necessary to remove Executive as a signatory on the Company's bank accounts.
17. TAXES. Executive shall be responsible for any and all federal,
state and other taxes arising out of, or related to, his employment with the
Company or the transactions contemplated by this Agreement.
18. ENTIRE AGREEMENT. This Agreement, the Stock Option Agreement, the
Note, the Pledge Agreement and the Subscription Agreement set forth the entire
agreement and understanding of the Parties relating to the subject matter
contained herein and merge all prior discussions, correspondence, agreements,
promises, commitments, contracts or other instruments or understandings between
them, and no Party shall be bound by any subsequent instrument, agreement or
representation pertaining to the subject matter contained herein unless
expressed in writing and signed by the Parties hereto.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each shall have the same force and effect as the other, as one and
the same instrument.
20. GOVERNING LAW. This Agreement shall be governed by laws of the
State of Illinois.
21. BINDING AGREEMENT. The Parties hereto warrant that each has been
represented by counsel in connection with this Agreement, that they have read
this Agreement, that they intend to be legally bound by the same, that they have
entered into this Agreement freely and voluntarily, and that they have the full
right, power, authority and capacity to enter into and execute the same. The
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Parties hereto further warrant that this Agreement is entered into with no Party
relying upon any statement or representation made by any other Party not
expressly embodied in this Agreement.
22. EQUITABLE RELIEF. Executive expressly acknowledges and agrees that
the violation of any of the provisions this Agreement would cause immediate and
irreparable harm, loss and damage to the Company not adequately compensable by a
monetary award. Without limiting any of the other remedies available to the
Company at law or in equity, or the Company's right or ability to collect money
damages, Executive agrees that any actual or threatened violation of any of the
provisions of this Agreement may be immediately restrained or enjoined by any
court of competent jurisdiction, and that a temporary restraining order or
injunction (preliminary or final) or any other equitable relief may be issued in
any court of competent jurisdiction, upon seventy-two (72) hours notice.
23. ATTORNEYS' FEES. In any claim arising out of or relating to this
Agreement, the prevailing party shall recover his or its reasonable costs and
attorneys' fees.
24. VENUE AND JURISDICTION. Venue and jurisdiction of any lawsuit
involving this Agreement shall exist in state and federal courts in Xxxx County,
Illinois; however, if the Company seeks injunctive relief, the company may file
such action wherever in its judgment relief might most effectively be obtained.
25. NOTICES. All notices, requests and other communications hereunder
shall be in writing and shall be deemed to be duly given if delivered or mailed
by prepaid mail addressed to:
a. If to Executive: Xxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxxx, Xxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
b. If to the Company: USA Broadband, Inc.
000 Xxxxxxxxx Xxx, #0
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Facsimile: 707-769-1622
with a copy to: Xxxxxxx & Xxxxxxxx Ltd.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: 000-000-0000
or such other address as the addressee may direct in writing.
26. CAPTIONS. The captions applied to the sections of this Agreement
are for convenience only and shall not affect their meaning or construction.
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27. WAIVER. The failure of either party to insist in any instance or
performance of any term of this Agreement shall not be construed as a waiver of
future performance of any such term.
28. SEVERABILITY. If any portion of this Agreement is held invalid or
unenforceable, the remainder thereof shall remain in full force and effect, and
if the invalidity or unenforceability is due to the unreasonableness of time or
geographical restrictions, such covenants and restrictions shall be effective
for such period of time and for such areas as may be determined to be reasonable
by a court of competent jurisdiction.
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IN WITNESS WHEREOF, the Parties have hereunto set their hands as of the
date first written above.
EXECUTIVE: THE COMPANY:
USA BROADBAND, INC.
By:_____________________ By:______________________________________
Xxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
Its: Executive Vice President
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