EXHIBIT 10.2
EMPLOYMENT CONTRACT
THIS EMPLOYMENT CONTRACT (hereinafter "Contract") is made in Indianapolis,
Indiana, dated and effective January 1, 2005, by and between STANDARD MANAGEMENT
CORPORATION, an Indiana Corporation (hereinafter the "Company"), and XXXXXXX X.
XXXXX (hereinafter "Executive").
Recitals
A. Executive has participated in the organization of the Company and its
business.
B. Executive has and is expected to continue to make a major contribution
to the profitability, growth and financial strength of the Company.
C. The Company considers the continued services of the Executive to be in
the best interest of the Company and its shareholders and desires to assure the
continued services of the Executive on behalf of the Company on an objective and
impartial basis and without distraction or conflict of interest in the event of
an attempt to obtain control of the Company.
D. Executive is willing to remain in the employ of the Company under the
terms and conditions hereof and upon the understanding that the Company will
provide him with the income security herein if his employment is terminated by
the Company or if he voluntarily terminates his employment for good reason.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties to this Contract hereby agree as follows:
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Agreement
1. Employment. The Company hereby agrees to employ Executive as Executive
Vice President, Secretary and General Counsel of the Company. Executive accepts
such employment and agrees to be subject to the general supervision, orders,
advice and direction of the President and Chief Executive Officer and the Board
of Directors of the Company in a manner consistent with the Articles of
Incorporation and By-Laws of the Company. The Executive shall be permitted to
maintain his personal representation of selected corporate clients not adverse
to the interests of the Company.
2. Terms of Employment and Compensation. Executive's term of employment
(the "Employment Term") hereunder shall start on January 1, 2005 and continue
until such employment terminates pursuant to Section 7 hereof.
3. Salary and Bonus. Executive's salary for the first year hereunder shall
be $285,000.00 per year. Thereafter during the Employment Term, Executive's
salary shall be increased each year by an amount equal to Executive's salary for
the previous year multiplied by the percent change of the Consumer Price Index
for all Urban Consumers (the "CPI") (published by the Bureau of Labor
Statistics, United States Department of Labor) during the immediately preceding
calendar year. For example, if the percent change in the CPI from January 1,
2005 to December 31, 2005 were 5%, Executive's salary for the second year
hereunder would be $299,250.00. Executive's salary shall be payable on the
Company's regular salary payment dates. In addition to base salary, within
ninety (90) days after the end of each fiscal year of the Company, Executive
shall be entitled to receive a bonus equal to one and one-half percent (1-1/2%)
of the Company's earnings, on a consolidated basis, before interest and taxes
for such fiscal year of the Company. The bonus shall be calculated from the
books and records of the Company and its affiliates, which shall be kept in
accordance with generally accepted accounting principles applied by the Company
in the preparation of its financial statements.
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The salary and bonus payments hereunder shall be subject to withholding
and any other applicable tax law.
4. Salary Guarantee. All salaries payable to the Executive under the
Agreement will be guaranteed (the "Guaranteed Payments") as of the effective
date of the Agreement for the full Employment Term of the Agreement except for
terminations for violations found in Section 7(b) (c) (d) or (e) hereof.
(a) After the initial three year Employment Term of Guaranteed
Payments, any additional one year extensions made pursuant to the terms of
Section 7(a) will be guaranteed once the notice period for the extension
or termination period found in Section 7(a) has passed.
(b) None of the Guaranteed Payments described in this Section shall
prevent the Executive from receiving the Termination Benefits described in
Section 13 of the Agreement.
(c) All Guaranteed Payments described in this Section and payable to
the Executive shall be payable to the Estate of Xxxxxxx X. Xxxxx in the
event of death of the Executive.
(d) In the event of any mental disability that renders the Executive
unable to fulfill his duties pursuant to Section 1 of this Agreement, all
Guaranteed Payments shall be made to Xxxxxxx X. Xxxxx'x attorney in fact,
his personal representative, his guardian, or any other such person
legally specifically listed, to whomever is legally authorized to receive
monetary payments due and owing to Xxxxxxx X. Xxxxx.
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(e) In the event of any physical disability that renders the
Executive unable or unwilling to fulfill his duties pursuant to Section 1
of this Agreement, all Guaranteed Payments shall be made directly to the
Executive.
(f) Upon the termination of Executive's employment for any reason
other than pursuant to Section 7(b), (d) or (e) hereof, the Company shall
pay to Executive in a lump-sum payment, within thirty (30) calendar days
after such termination, the salary received by him on the date of such
termination in an amount equal to three (3) years of annual salary.
5. Reimbursement for Expenses. The Company shall, during the Employment
Term, reimburse Executive for all reasonable travel, business entertainment and
other business expenses incurred by Executive in rendering services under this
Contract. Such reimbursement shall be subject to compliance with the applicable
policies and procedures established by the Company.
6. Fringe Benefits. During the Employment Term, Executive shall be
entitled to participate in the Company's corporate, medical and disability
insurance plans. The Company shall also provide Executive with term life
insurance in the amount of $750,000. Executive shall be entitled to all other
fringe benefits generally provided for salaried employees of the Company upon
attaining eligibility as provided under such fringe benefit programs. Executive
shall be entitled to four (4) weeks vacation per year.
7. Termination. The Employment Term shall terminate on the first to occur
of the following events:
(a) the third anniversary of the date on which the Employment Term
become effective; provided, however, that after such third anniversary,
the Employment Term shall be extended each year thereafter for an
additional one year
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period unless either party gives the other written notice at least 90 days
before such extension of its intention not to renew the Contract;
(b) termination by the Company for cause, upon written notice
(specifying the particulars) to Executive from the Company's Board of
Directors, which cause shall be limited to:
(i) the persistent failure of or refusal by Executive to
comply with the material orders, advice, directions, policies,
standard and regulations of the Company and its President or Board
of Directors, as promulgated from time to time, or with the
provisions of this Contract, which failure or refusal is detrimental
to the Company;
(ii) an act or acts of fraud or dishonesty by Executive
resulting in or tending to result in gain to or personal enrichment
of Executive at the Company's expense;
(iii) any felony conviction of Executive or material tort
which is detrimental to the Company; or
(iv) the persistent absence of Executive from his employment
without cause or explanation;
(c) the death of Executive;
(d) the 90th day after notice from the Company to Executive that
Executive is considered to be permanently disabled due to his inability to
perform his duties or fulfill his responsibilities hereunder, which
inability existed for a period of 90 days or more before such notice; or
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(e) termination by Executive, at his option, after 90 days prior
written notice to the Company.
Upon termination of Executive's employment pursuant to Section 7(b) (c) (d) or
(e), Executive (or his estate) shall receive (i) any unpaid salary payments with
respect to periods prior to the date of termination, and (ii) any termination,
disability or death benefits to which he is entitled under any employee benefit
plan of the Company which is in effect at the time of the termination of his
employment. In all other events of termination, Executive shall continue to
receive the Guaranteed Payments.
8. Agreement Not To Compete. Executive agrees that if his employment is
terminated by the Company pursuant to Subsection 7(b) hereof he shall not, for a
period of two years from the date his employment hereunder terminates, (x)
directly or indirectly sell or attempt to sell, within Indiana, on behalf of
himself or any other person, corporation or entity, any type of product marketed
by the Company at the time his employment is terminated, (y) directly or
indirectly sell or attempt to sell any type of product marketed by the Company
at the time his employment is terminated to any person, corporation or other
entity that is a customer of the Company at the time his employment is
terminated, and (z) within Indiana, directly or indirectly, own, manage,
operate, control, be employed by, participate in, or be connected in any manner
with the ownership, management, operation, or control of any business similar to
the type of business conducted by the Company at the time of termination of
Executive's employment hereunder; provided, however, that Executive may be a
shareholder of less than 5% of the outstanding shares of voting stock of any
company listed on a recognized stock exchange or traded in the NASD
over-the-counter market.
9. Technical Information. Executive covenants and agrees that during the
Employment Term and for a period of six months after termination of the
Employment Term
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(regardless of whether Executive is terminated or defaults under any other
provision of this Contract) he will assign to the Company or its nominees all of
his right, title and interest in and to all "Technical Information" (as
hereinafter defined) which he makes, develops or conceives, either alone or in
conjunction with others; he will disclose promptly to the Company all such
Technical Information; and he will cooperate with the Company in its efforts to
protect its rights of ownership in such Technical Information. For purposes of
this Contract, "Technical Information" shall mean and include, but not be
limited to, all software, processes, devices, trademarks, trade names,
copyrights, marketing plans, improvements, and ideas relating to the business of
the Company, and all goodwill associated with any such item.
10. Covenant Against Disclosure of Technical and Confidential Information.
Executive agrees that while he is employed by the Company and thereafter he
shall not, directly or indirectly, disclose or use to the detriment of the
Company or for the benefit of any other person, corporation or other entity, any
confidential information or trade secret (including, but not limited to, the
identity and needs of any customer of the Company, the method and techniques of
any of the business of the Company, the marketing, sales, costs and pricing
plans and objectives of the Company, the problems, developments, research
records, and Technical Information) of the Company, or any of the affiliates of
the Company. Furthermore, Executive shall deliver promptly to the Company upon
termination of his employment, or at any time the Company may so request, all
memoranda, notes, records, reports, manuals, software, models, designs, and
other documents and computer records (and all copies thereof) relating to the
business of the Company, and all property associated therewith, which he may
then possess or have under his control. This Contract supplements and does not
supersede Executive's obligations under statute or the common law to protect the
Company's trade secrets and confidential information.
11. Remedy. Executive acknowledges that the restrictions contained in
Sections 8 through 10 of this Contract are reasonable and that the legal
remedies for breach of the
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covenants which are contained in Sections 8 through 10 of this Contract may be
inadequate and, therefore, agrees that, in the event of any actual or threatened
breach of any such covenant, in addition to any other right or remedy that the
Company may have, the Company may: (a) seek specific enforcement of any such
covenant through injunction or other equitable relief, and (b) recover from
Executive an amount equal to (i) all sums paid by the Company to him after
commencement of the breach, plus (ii) all costs and expenses (including
attorneys' fees) incurred by the Company in enforcement of the covenant, plus
(iii) all other damages to which the Company may be legally entitled.
12. Undertaking To Pay Termination Benefits. In addition to the payments
Executive shall receive under Section 4 hereof in the event of the termination
of his employment, the Company agrees to pay to the Executive the Termination
Benefits specified in Section 13 hereof if (a) control of the Company is
acquired (as defined in paragraph 14(a) hereof) and (b) within three years after
the acquisition of control occurs (i) the Company terminates the employment of
Executive for any reason other than pursuant to Section 7(b), 7(c) or 7(d)
hereof, or (ii) Executive voluntarily terminates his employment for good reason
(as defined in Section 14(b) hereof).
13. Termination Benefits. If Executive is entitled to termination benefits
pursuant to paragraph 12 hereof, the Company agrees to pay to Executive as
termination compensation in a lump-sum payment within five calendar days of the
termination of Executive's employment an amount to be computed by multiplying
(a) Executive's average annual compensation payable by the Company which is
includable in the gross income of Executive for the most recent five calendar
years ending coincident with or immediately before the date on which control of
the Company is acquired (or such portion of such period during which Executive
was an employee of the Company, by (b) 299%. For purposes of this Contract,
employment and compensation paid by a direct or indirect subsidiary of the
Company, if any will be deemed to be employment and compensation paid by the
Company.
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(a) The Termination Benefits described in this section are payable
to the Executive regardless of any determination by the Company's
independent public accountants that payments made pursuant to this section
are or would be non-deductible by the Company for federal income tax
purposes because of Section 280G of the Internal Revenue Code of 1986 or
any subsequent revisions in the Internal Revenue Code.
14. Definitions.
(a) As used in this Contract, the "acquisition of control": means
(i) attaining ownership of 15% or more of the shares of voting stock of
the Company by any person or group (other than a person or group including
Executive or with whom or which Executive is affiliated), or (ii) the
occurrence of a "change of control" required to be described under the
proxy disclosure rules of the Securities and Exchange Commission.
(b) As used in this Contract, the term "good reason" means, without
Executive's written consent, (i) a change in Executive's status, position
or responsibilities which, in his reasonable judgment, does not represent
a promotion from his status, position or responsibilities as in effect
immediately prior to the change in control; the assignment to Executive of
any duties or responsibilities which, in his reasonable judgment, are
inconsistent with such status, position or responsibilities; or any
removal of Executive from or failure to reappoint or reelect him to any of
such positions, except in connection with the termination of his
employment for total and permanent disability, death or pursuant to
Subsection 7(ii) or 7(iii) herein or by him other than for good reason;
(ii) a breach by the Company of its covenants under this Contract after a
change in control; (iii) the relocation of the Company's principal
executive offices to a location outside the Indianapolis, Indiana
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metropolitan area or the Company's requiring him to be based at any place
other than the location at which he performed his duties prior to a change
in control except for required travel on the Company's business to an
extent substantially consistent with his business travel obligations at
the time of a change in control; (iv) the failure by the Company to
continue to provide Executive with benefits substantially similar to those
enjoyed by him or to which he was entitled under any of the Company's
pension, profit sharing, life insurance, medical, dental, health and
accident, or disability plans in which he was participating at the time of
a change in control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive
him of any material fringe benefit enjoyed by him or to which he was
entitled at the time of the change in control, or the failure by the
Company to provide him with the number of paid vacation and sick leave
days to which he is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation and sick leave
policies and consistent with Section 6 of this Contract; (v) the failure
of the Company to obtain a satisfactory agreement from any successor or
assign of the Company to assume and agree to perform this Contract; (vi)
any purported termination of Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Subsection 15(c) hereof (and, if applicable, Subsection 7(b) hereof); and
for purposes of this Contract, no such purported termination shall be
effective; or (vii) any request by the Company that Executive participate
in an unlawful act or take any action constituting a breach of Executive's
professional standard of conduct.
Notwithstanding anything in this paragraph 14(b) to the contrary, Executive's
right to terminate his employment pursuant to paragraph 12 herein shall not be
affected by his incapacity due to physical or mental illness.
15. Additional Provisions Relating To Termination.
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(a) The Company is aware that the Board of Directors or shareholders
of the Company may then cause or attempt to cause the Company to refuse to
comply with its obligations under this Contract, or may cause or attempt
to cause the Company to institute, or may institute litigation seeking to
have this Contract declared unenforceable, or may take or attempt to take
action to deny Executive the benefits intended under this Contract. In
these circumstances, the purpose of this Contract could be frustrated. It
is the intent of the Company that Executive not be required to incur the
expenses associated with the enforcement of his rights under this Contract
by litigation or other legal action, nor be bound to negotiate any
settlement of his rights hereunder, because the cost and expense of such
legal action or settlement would substantially detract from the benefits
intended to be extended to Executive hereunder. Accordingly, if following
a change in control, if it should appear to Executive that the Company has
failed to comply with any of its obligations under this Contract or in the
event that the Company or any other person takes any action to declare
this Contract void or unenforceable, or institutes any litigation or other
legal action designed to deny, diminish or to recover from Executive the
benefits entitled to be provided to Executive hereunder, and that
Executive has complied with all of his obligations under this Contract,
the Company irrevocably authorizes Executive from time to time to retain
counsel of his choice, at the expense of the Company as provided in this
Subsection 15(a), to represent Executive in connection with the initiation
or defense of any litigation or other legal action, whether such action is
by or against the Company or any director, officer, shareholder, or other
person affiliated with the Company, in any jurisdiction. Notwithstanding
any existing or prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to Executive entering into
an attorney-client relationship with such counsel, and in that connection
the Company and Executive agree that a confidential relationship shall
exist between Executive and such counsel. The reasonable fees and expenses
of
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counsel selected from time to time by Executive as hereinabove provided
shall be paid or reimbursed to Executive by the Company on a regular,
periodic basis upon presentation by Executive of a statement or statements
prepared by such counsel in accordance with its customary practices, up to
a maximum aggregate amount of $250,000.00. Any legal expenses incurred by
the Company by reason of any dispute between the parties as to
enforceability of or the terms contained in this Contract, notwithstanding
the outcome of any such dispute, shall be the sole responsibility of the
Company, and the Company shall not take any action to seek reimbursement
from Executive for such expenses.
(b) The amounts payable to Executive under this Contract shall not
be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Contract. The Company shall not be entitled to set
off against the amounts payable to Executive of any amounts earned by
Executive in other employment after termination of his employment with the
Company, or any amounts which might have been earned by Executive in other
employment had he sought such other employment.
(c) Any purported termination by the Company or by Executive shall
be communicated by written Notice of Termination to the other party hereto
in accordance with Section 22 hereof. For purposes of this Contract, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Contract relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of his employment under the provision so
indicated. For purposes of this Contract, no such purported termination
shall be effective without such Notice of Termination.
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(d) In addition to any payments, termination benefits or any other
benefits Executive is entitled to receive hereunder, in the event of a
change or acquisition of control, the Company agrees to pay the Payment
Amount (as hereinafter defined) to the Executive in a lump-sum payment
within thirty (30) calendar days after the termination of Executive's
employment for any reason, including, without limitation, termination of
employment by the Company, termination of employment by the Executive and
termination of employment by reason of death. The Payment Amount" shall be
the product, determined as of the date of Executive's termination of
employment, determined by (i) multiplying the number of shares of common
stock of the Company then subject to unexercised options (Unexercised
Options) held by the Executive which were granted by the Company or an
affiliate of the Company by (ii) the highest per share fair market value
of the common stock on any day during the period beginning six (6) months
prior to the date of Executive's termination of employment. For purposes
of this provision, Unexercised Options shall include all outstanding
options whether or not they are exercisable at the time of the election by
Executive hereunder. There shall be no deduction of Executive's exercise
price per share for each Unexercised Option from the amount to be received
by him pursuant to this subsection (d). Upon payment by the Company of the
Payment Amount in accordance with this subsection (d), the Unexercised
Options shall be deemed to be surrendered by the Executive and cancelled
by the Company. Such cancellation shall be effective regardless of whether
the Executive surrenders an agreement relating to any Unexercised Option.
16. Entire Agreement. This Contract contains the entire agreement of the
parties relating to the employment of Executive by the Company, superseding any
and all prior such agreements, and cannot be amended, modified, or supplemented
in any respect except by subsequent written agreement entered into by the
parties. The Second Amended and Restated Employment Contract dated and effective
July 1, 1999 shall terminate in all respects upon execution of this Contract.
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17. Benefit. Executive acknowledges that the services to be rendered to
him are unique and personal; accordingly, Executive may not assign any of his
rights or delegate any of his duties or obligations under this Contract. The
rights and obligations of the Company under this Contract shall inure to the
benefit of, and be binding upon, the legal representatives, successors and
assigns of the Company.
18. No Waiver. No failure on the part of either party at any time to
require the performance by the other party of any term of this Contract shall be
taken or held to be a waiver of such term or in any way affect such party's
right to enforce such term, and no waiver on the part of either party of any
term in this Contract shall be taken or held to be a waiver of any other term
hereof or the breach thereof.
19. Severability. The provisions of Sections 8 through 11 hereof are
severable, and the invalidity or unenforceability of any particular provision of
Sections 8 through 11 shall not affect or limit the enforceability of the other
provisions. If any provision in Sections 8 through 11 hereof is held
unenforceable for any reason, including the time period, geographic area, or
scope of activity covered, then such provision shall be enforced to whatever
extent is reasonable and enforceable.
20. Governing Law. This Contract shall be governed and construed in
accordance with the law of the State of Indiana (other than the provisions
relating to choice of law). The Contract may be brought in any state or federal
court of record in Indianapolis, Indiana and the parties hereto waive any right
to question the jurisdiction of such court over their person or the property of
such venue.
21. Arbitration of Disputes; Injunctive Relief. Any controversy or claim
arising out of or relating to this Contract or the breach thereof, other than
injunctive relief under Section 11, shall be settled by binding arbitration in
the City of Indianapolis, Indiana, in
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accordance with the laws of the State of Indiana, by three arbitrators, one of
whom shall be appointed by the Company, one by Executive and the third of whom
shall be appointed by the first two arbitrators. If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then the third arbitrator
shall be appointed by the Chief Judge of the United States District Court for
the Southern District of Indiana. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators, which shall be as provided in this
Section. Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
22. Captions. The captions in this Contract are for convenience and
identification purposes only, and not an integral part of this Contract, and are
not to be considered in the interpretation of any part hereof.
23. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if in writing and personally
delivered to the party to whom notice should be given or if sent by registered
or certified mail, postage prepaid, addressed to the addresses set forth below,
or to such other addresses as shall be furnished in writing by either party to
the other:
Xxxxxxx X. Xxxxx
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
To the Company:
Standard Management Corporation
00000 Xxxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Chairman, President and Chief Executive Officer
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IN WITNESS WHEREOF, the Company has caused this Contract to be executed on
its behalf by its duly authorized officer, and Executive has hereunto set his
hand as of the 25 day of August, 2005.
STANDARD MANAGEMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
_______________________________________
Xxxxxx X. Xxxxxx,
Chairman, President and Chief Executive Officer
EXECUTIVE
/s/ Xxxxxxx X. Xxxxx
_______________________________________
Xxxxxxx X. Xxxxx
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