Exhibit 10.12
-------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
September 7, 1998 (the "Effective Date"), by and between Evercom, Inc., a
Delaware corporation, formerly known as Xxxxxx Holdings, Inc. (the "Company"),
and Xxxxxx X. Xxxxxxx (the "Executive").
RECITALS
WHEREAS, the Company is the owner of the outstanding shares of capital
stock of (i) Xxxxxx Telecommunications Corporation, an Alabama corporation
("TTC"), (ii) AmeriTel Pay Phones, Inc., a Missouri corporation ("AmeriTel"),
(iii) Xxxxxx STC, Inc., a Delaware corporation ("Xxxxxx STC"), (iv) Xxxxxx
Invision, Inc., a Delaware corporation ("Xxxxxx Invision"), (v) Saratoga
Telephone Company, Inc., a Delaware corporation ("Saratoga") and (vi) MOG
Communications, Inc., an Alabama corporation ("MOG") (the Company, TTC,
AmeriTel, Xxxxxx STC, Xxxxxx Invision, Saratoga, MOG and their respective
affiliates and subsidiaries are sometimes referred to herein individually as a
"Xxxxxx Entity" and collectively as the "Xxxxxx Entities");
WHEREAS, the Company desires to employ the Executive and the Executive
desires to furnish services to the Company and/or the other Xxxxxx Entities on
the terms and conditions hereinafter set forth;
WHEREAS, the parties desire to enter into this Agreement in order to set
forth the terms and conditions of the employment relationship of the Executive
with the Xxxxxx Entities;
WHEREAS, the Executive and the Company each acknowledge and agree that the
terms and conditions of employment set forth below are reasonable and necessary
in order to protect the legitimate business interests of the Xxxxxx Entities and
to compensate the Executive for information, knowledge and experience brought to
or gained from the Xxxxxx Entities;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth below, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and the
Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD. The period of employment of the Executive by the
Company hereunder (the "Employment Period") shall commence on the Effective Date
and shall end on December 31, 2001, (unless Executive's employment hereunder is
earlier terminated in accordance with Section 5 of the Agreement). Commencing
on January 1, 2002, the Employment Period shall be extended for successive one-
year periods (individually, a "Renewal Period"), unless a notice not to extend
this Agreement shall have been given by either party hereto to the other not
later than 90 days immediately preceding the commencement of the Renewal Period
(or unless Executive's employment hereunder is earlier terminated in accordance
with Section 5 of this Agreement). Unless the context otherwise requires, the
Employment Period shall for purposes of this Agreement be deemed to include the
current Renewal Period (if any), and shall automatically end upon Executive's
termination of employment with the Company.
3. POSITION AND DUTIES. The Executive shall devote his full time,
attention, skills and energies during the Employment Period to the business of
the Xxxxxx Entities, performing such specific functions on behalf of the Xxxxxx
Entities that are generally incident to and consistent with the Executive's
position as the Board of Directors of the Company may direct. The Executive
shall hold the position of Chief Executive Officer of the Company and shall
report directly to the Board of Directors and have all powers and duties which
are associated with such position in the industries in which the Company is
engaged. The Executive shall also be elected as a
1
member and Chairman of the Board of Directors of the Company as soon as
practicable. Notwithstanding the foregoing, the Executive shall not be
prohibited from serving on the boards of directors of other companies,
performing charity work or managing his own personal investments and affairs so
long as such activities do not interfere with the performance of the Executive's
duties hereunder.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Employment Period, the Company shall pay the
Executive a base salary at the rate specified in Exhibit A (the "Base Salary"),
which Base Salary shall be paid in equal installments in accordance with the
Company's payroll policy, subject to Section 5 below.
(b) BONUS. During the Employment Period, the Executive shall receive the
bonuses as specified in Exhibit A.
(c) OPTIONS. The Executive shall be awarded options to purchase the
Company's common stock, as specified in Exhibit A.
(d) OTHER BENEFITS. During the Employment Period, the Executive shall be
entitled to and eligible for group health insurance coverage and any other
fringe benefits in accordance with policies applicable generally to salaried
employees of the Company. The Executive shall also be entitled to four (4)
weeks paid vacation and other paid absences during the Employment Period in
accordance with policies applicable generally to salaried employees of the
Company and shall be reimbursed for reasonable expenses incurred in connection
with the business of the Company and the performance of his duties hereunder in
accordance with the policies established by the Company for reimbursement of
such expenses.
(e) RELOCATION. The Executive shall be reimbursed for reasonable
out-of-pocket expenses incurred in relocating to the Dallas/Ft. Worth area,
which expenses shall include, without limitation, closing costs and commissions
on disposition of present residence, moving costs, up to one year of temporary
lodging, air fare and other travel, and closing costs and points on replacement
residence. The aggregate amount reimbursable under this Section 4(e) shall not
exceed $100,000.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. Prior to the end of the Employment Period, the
Company may terminate the Executive's employment under this Agreement for
"Cause". For purposes of this Agreement, the Company shall have Cause to
terminate the Executive's employment hereunder in the event the Executive: (i)
has committed any act of willful misconduct, embezzlement or wrongful conversion
of money or property belonging to any Xxxxxx Entity, or any act of fraud that
adversely affects the business of or relates to any of the Xxxxxx Entities; (ii)
is convicted of a felony at any time hereafter, which is reasonably likely to
have an adverse effect on the Company or its business; (iii) has failed to
comply with any material directive of the Board of Directors of the Company
related to his employment duties promptly following notice to the Executive of
such failure; or (iv) has willfully and continually failed to substantially
perform his duties hereunder (other than any such failure resulting from the
Executive's death or disability), and such failure continues for more than 10
days after written notice thereof to the Executive. The Executive will be
furnished an opportunity upon reasonable notice to state his case to the Board
of Directors with counsel prior to any termination for "Cause". If the
Executive's employment is terminated by the Company for Cause, the Company shall
pay the Executive any Base Salary accrued or owing to the Executive hereunder
through the date of termination, less any amounts owed by the Executive to any
Xxxxxx Entity, and the Company shall have no further liability or obligation to
the Executive hereunder.
(b) TERMINATION WITHOUT CAUSE AND TERMINATION FOR GOOD REASON. Prior to
the end of the Employment Period, the Company may terminate the Executive's
employment under this Agreement for a reason other than Cause or no reason
whatsoever (i.e., without Cause). If the Company terminates the Executive's
employment without Cause prior to the expiration of the Employment Period, or
the Executive terminates his employment with the Company prior to the expiration
of the Employment Period for "Good Reason"
2
(as defined below), or the Company elects not to extend the Employment Period as
provided in Section 2, the Company shall pay to the Executive an amount equal to
two times the Executive's annual cash compensation (Base Salary and Bonus) which
was paid to the Executive in the year prior to the year in which his employment
was terminated or not extended, provided that, for a termination in 1998 such
payment shall be $1,200,000 (the "Severance Payment"). The Company may, at its
option, pay the Severance Payment in a lump sum within 30 days after the date of
termination of employment, or pay the Severance Payment over a twelve month
period (commencing effective as of the date of termination of employment) in
equal installments in accordance with the Company's payroll policy. If the
Company terminates employment of the Executive because he has become disabled
such that he is unable to perform the essential functions of his job (with
reasonable accommodation) for a period of not less than 15 consecutive weeks,
any such termination shall be deemed to be a termination without Cause pursuant
to this Agreement. Similarly, the Executive's employment shall terminate upon
his death, and shall be deemed a termination by the Company without Cause, with
payments of the Severance Payment hereunder to be made to the Executive's
estate.
(c) GOOD REASON. A termination by the Executive of his employment with
the Company prior to the expiration of the Employment Period shall be deemed for
"Good Reason" if the Executive terminates his employment with the Company within
three (3) months following the occurrence of any of the following events: (i)
the Executive's duties are substantially diminished so as to be materially
inconsistent with the duties of a person of the Executive's position, (ii) the
Company materially breaches any of its obligations hereunder, (iii) the Company
determines to relocate its headquarters to an area which is outside of a 50 mile
radius from its present location, or (iv) a "Change in Control" of the Company
occurs. A "Change in Control" for purposes hereof shall mean (i) without prior
approval of the Board of Directors of the Company a single entity or group of
affiliated entities not currently owning an interest in the Company acquires
more than 50% of the voting stock of the Company issued and outstanding
immediately prior to such acquisition; (ii) shareholders of the Company approve
the consummation of any merger of the Company or any sale or other disposition
of all or substantially all of its assets, if the shareholders of the Company
immediately before such transaction own, immediately after consummation of such
transaction, equity securities (other than options and other rights to acquire
equity securities) possessing less than 50% of the voting power of the surviving
or acquiring corporation; or (iii) a change in the majority of the Board of
Directors of the Company during any 24-month period without the approval of a
majority of directors in office at the beginning of such period.
6. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS,
DEVELOPMENTS AND NON-COMPETITION, RELEASE.
(a) CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company and the other Xxxxxx Entities all trade
secrets, confidential information, proprietary information, knowledge and data
relating to the Xxxxxx Entities and/or the businesses or investments of the
Xxxxxx Entities which may have been obtained by the Executive during the
Executive's employment by the Company or any other Xxxxxx Entity including such
information with respect to any products, improvements, formulas, designs or
styles, processes, services, customers, suppliers, marketing techniques,
methods, know-how, data, future plans or operating practices ("Confidential
Information"), provided that "Confidential Information" shall not include
information that (i) is or becomes generally available to the public other than
as a result of a disclosure by the Executive or (ii) is or becomes available to
the Executive on a non-confidential basis from a source that is not known to the
Executive to be prohibited from disclosing such information to the Executive by
a legal, contractual or fiduciary obligation. Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such Confidential Information to anyone other than the Company and those
designated by the Company.
(b) REMOVAL OF DOCUMENTS. All records, files, drawings, letters,
memoranda, reports, computer data, computer disks, electronic storage media,
documents, models and the like relating to the business of the Company and/or
the business of any of the other Xxxxxx Entities, which the Executive prepares,
uses or comes into contact with and which contain Confidential Information shall
be the exclusive property of the Company to be used by the Executive only in the
performance of his duties for the Company and shall not be removed by the
3
Executive from the premises of any Xxxxxx Entity (without the written consent of
the Company) during or after the Employment Period unless such removal shall be
required or appropriate in connection with his carrying out his duties under
this Agreement, and, if so removed by the Executive, shall be returned to such
Xxxxxx Entities immediately upon termination of the Executive's employment
hereunder, or earlier request by the Company (with the Executive retaining no
copies thereof nor any notes or other records relating thereto).
(c) DEVELOPMENTS. The Executive will make full and prompt disclosure to
the Company of all inventions, improvements, discoveries, methods, developments,
software and/or works of authorship relating in any way to the business,
activities or affairs of any of the Xxxxxx Entities, whether patentable or not,
which are created, made, conceived or reduced to practice (in whole or in part)
by the Executive or under his direction or jointly with others prior to or
during the Employment Period, whether or not during normal working hours or on
the premises of the Company (collectively, "Developments"). The Executive
agrees to assign and does hereby assign to the Company all of his right, title
and interest in and to all Developments and related patents, copyrights and
applications therefor. The Executive shall do all permissible things, and take
all permissible action, necessary or advisable, in the Company's sole discretion
and at the Company's expense, to cause any other person related to the Executive
or an entity controlled by the Executive having an interest in a Development to
assign to the Company all of such person's or entity's right, title and interest
in and to such Development and related patents, copyrights and applications
therefor. The Executive agrees to cooperate fully with the Company, both during
and after the termination of the Employment Period, with respect to the
procurements, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments.
(d) NON-COMPETITION. During (i) the Executive's employment with the
Company and (ii) the one-year period immediately following the expiration or
earlier termination of the Employment Period, the Executive (A) shall not
engage, anywhere within the geographical areas in which any Xxxxxx Entity is
then conducting its business operations, directly or indirectly, alone, in
association with or as a shareholder, principal, agent, partner, officer,
director, Executive or consultant of any other organization, in any Competitive
Business; (B) shall not solicit or encourage any officer, Executive, independent
contractor, vendor or consultant of any of the Xxxxxx Entities to leave the
employ of, or otherwise cease his relationship with, any of the Xxxxxx Entities;
and (C) shall not solicit, divert or take away, or attempt to divert or to take
away, the business or patronage of any of the customers or accounts, of any
Xxxxxx Entity, which were served by any Xxxxxx Entity during the time the
Executive was employed by any Xxxxxx Entity. If the Executive violates any of
the provisions of this Section 6(d), following his termination of employment,
the computation of the time period provided herein shall be tolled from the
first date of the breach until the earlier of (i) the date judicial relief is
obtained by the Company, (ii) the Company states in writing that it will seek no
judicial relief for said violation, or (iii) the Executive provides satisfactory
evidence to the Company that such breach has been remedied. If, at any time,
the provisions of this Section 6(d) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 6(d) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Executive agrees that
this Section 6(d) as so amended shall be valid and binding as though any invalid
or unenforceable provision had not been included herein. For purposes of this
Section 6, Executive and the Company agree that Competitive Business shall mean
(i) the inmate telephone business, (ii) the business of selling, leasing or
otherwise providing law enforcement management systems, jail management systems,
victim notification systems and/or other tracking or record systems to inmate,
jail or correctional facilities, (iii) the billing, collection and/or validation
business within the inmate telephone industry, and/or (iv) any material line of
business that the Xxxxxx Entities are engaged in on the date of termination,
expiration or non-extension of the Employment Period.
(e) NON-COMPETITION IN EXPANSION MARKETS. Executive acknowledges that a
valuable asset of the Xxxxxx Entities is the plan of the Company and the other
Xxxxxx Entities to extend and expand their business, by acquisition or
otherwise, to areas of the United States of America which the Xxxxxx Entities do
not yet serve as of the Effective Date. Accordingly, during (i) the Executive's
employment with the Company and (ii) the one-year period immediately following
the expiration or earlier termination of the Employment Period, the Executive
shall not engage, anywhere in the United States of America, directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, Executive or consultant of any other
4
organization, in any Competitive Business. If the Executive violates any of the
provisions of this Section 6(e), following his termination of employment, the
computation of the time period provided herein shall be tolled from the first
date of the breach until the earlier of (i) the date judicial relief is obtained
by the Company, (ii) the Company states in writing that it will seek no judicial
relief for said violation, or (iii) the Executive provides satisfactory evidence
to the Company that such breach has been remedied. If, at any time, the
provisions of this Section 6(e) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 6(e) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Executive agrees that
this Section 6(e) as so amended shall be valid and binding as though any invalid
or unenforceable provision had not been included herein.
(f) CONTINUING OPERATION. Any termination of the Executive's employment or
of this Agreement shall have no effect on the continuing operation of this
Section 6.
(g) LEGITIMATE BUSINESS INTERESTS. The Executive has carefully read and
considered the provisions of this Section 6 and, having done so, agrees that the
restrictions set forth herein, including, without limitation, the time and
geographic restrictions set forth above, are fair and reasonable and are
reasonably required for the protection of the legitimate business interests and
goodwill of the Company.
(h) REMEDIES. The Executive acknowledges that any violation of any of the
covenants and agreements contained in this Section 6 would result in irreparable
and continuing harm and damage to the Company and the other Xxxxxx Entities
which would be extremely difficult to quantify and for which money damages alone
would not be adequate compensation. Consequently, the Executive agrees that, in
the event he violates or threatens to violate any of these covenants and
agreements, the Company shall be entitled to: (1) entry of an injunction
enjoining such violation and/or requiring the Executive to return all materials
or other proprietary information of the Company and (2) money damages insofar as
they can be determined. Nothing in this Agreement shall be construed to
prohibit the Company and the other Xxxxxx Entities from also pursuing any other
legal or equitable remedy, the parties having agreed that all remedies are
cumulative.
7. SEVERABILITY. Whenever possible, each provision and term of this
Agreement will be interpreted in a manner to be effective and valid, but if any
provision or term of this Agreement is held to be prohibited or invalid, then
such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement.
8. WAIVER. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right arising out of this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the Company and its affiliates, successors and assigns, and
the Executive and his assigns, heirs and legal representatives. Each of the
Xxxxxx Entities (and their respective affiliates, successors and assigns) shall
be third party beneficiaries of this Agreement and may independently enforce and
benefit from the terms hereof.
10. OTHER AGREEMENTS; INDEMNIFICATION. The Executive hereby represents
that, except as he has disclosed in writing to the Company, the Executive is not
bound by the terms of any agreement
5
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 the
Executive's 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 of the terms of
this Agreement does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by the Executive in
confidence or in trust prior to the date of this Agreement, and the Executive
will not disclose to the Company or any other Xxxxxx Entity or induce the
Company or any other Xxxxxx Entities to use any confidential or proprietary
information or material belonging to any previous employer or others. The
Executive hereby indemnifies and agrees to defend and hold the Company and the
other Xxxxxx Entities harmless from and against any and all damages,
liabilities, losses, costs and expenses (including, without limitation,
reasonable attorneys' fees and the costs of investigation) resulting or arising
directly or indirectly from any breach of the foregoing representations or from
allegations, claims, proceedings or actions by third parties relating to the
confidential information belonging to them and disclosed by the Executive to the
Company or any other Xxxxxx Entity. The Executive shall be indemnified and held
harmless to the fullest extent permitted by applicable law, including (S) 145 of
the General Corporation Law of the State of Delaware, from and against any and
all damages, liabilities, losses, costs and expenses (including, without
limitation, reasonable attorneys' fees and the costs of investigation) resulting
or arising directly or indirectly as a consequence of the Executive's service as
an officer and/or director of the Company or any of the Xxxxxx Entities. The
Company shall maintain at all times during the Employment Period and for a
period of no less than two (2) years thereafter, directors and officers
liability insurance having terms not less favorable than the policies in effect
on the date hereof.
11. WITHHOLDING. Any payments provided for in this Agreement shall be
paid net of any applicable withholding of taxes required under federal, state or
local law.
12. RECITALS; HEADINGS; CONSTRUCTION. The Recitals set forth in the
preamble of this Agreement shall be deemed to be included and form an integral
part of this Agreement. The headings of Sections in this Agreement are provided
for convenience only and will not affect its construction or interpretation.
All references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement unless otherwise specified. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms. All references herein to the word "or"
shall mean "and/or." The parties, in acknowledgment that all of them have been
represented by counsel and that this Agreement has been carefully negotiated,
agree that the construction and interpretation of this Agreement and other
documents entered into in connection herewith shall not be affected by the
identity of the party or parties under whose direction or at whose expense this
Agreement and such documents were prepared or drafted.
13. TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
14. GOVERNING LAW. This Agreement shall be governed by the substantive
laws of the State of Delaware, without regard to its conflicts of laws
principles. In particular, Delaware substantive law will govern any controversy
or claim between or among the parties hereto, including any claim arising out of
or relating to this Agreement or based on or arising from an alleged tort.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral agreements and understandings between the
parties with respect to the subject matter of this Agreement. This Agreement
may not be amended except by a written agreement executed by both parties.
16. NOTICES. Any notice, demand or other communication which may or is
required to be given under this Agreement shall be in writing and shall be: (a)
personally delivered; (b) transmitted by United States postage prepaid mail,
registered or certified mail, return receipt requested; (c) transmitted by
reputable overnight courier service such as Federal Express; or (d) transmitted
by legible facsimile (with answer back confirmation) to the parties' respective
addresses as set forth opposite their signatures hereto). Except as otherwise
specified herein,
6
all notices and other communications shall be deemed to have been duly given on
(i) the date of receipt if delivered personally, (ii) 2 calendar days after the
date of posting if transmitted by registered or certified mail, return receipt
requested, (iii) the first (1st) business day after the date of deposit if
transmitted by reputable overnight courier service or (iv) the date of
transmission with confirmed answer back if transmitted by facsimile, whichever
shall first occur. A notice or other communication not given as herein provided
shall only be deemed given if and when such notice or communication is actually
received in writing by the party to whom it is required or permitted to be
given. The parties may change their address for purposes hereof by notice given
to the other parties in accordance with the provisions of this Section, but such
notice shall not be deemed to have been duly given unless and until it is
actually received by the other party.
17. COMMON LAW OR OTHER DUTIES. The Executive's and the Company's duties
obligations, and agreements hereunder are in addition to (and not in limitation
of) any duties or obligations under common law or statute owed to the Company or
the other Xxxxxx Entities by the Executive or by the Company to the Executive by
reason of his position as officer, director or Executive, as applicable, of the
Company or the other Xxxxxx Entities.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
19. ATTORNEYS' FEES. The Executive shall be reimbursed for reasonable
attorneys' fees and expenses incurred in the negotiation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
COMPANY:
EVERCOM, INC., formerly known as
XXXXXX HOLDINGS, INC.,
a Delaware corporation
By: /s/XXXXXXX X. XXXXXXX
---------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
Address: 0000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
EXECUTIVE:
By: /s/ XXXXXX X. XXXXXXX
---------------------
Name: Xxxxxx X. Xxxxxxx
Address: 00 Xxxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
7
EXHIBIT A
(a) Base Salary: $300,000 per year, subject to annual review by the
Compensation Committee for possible increase (but not
decrease).
(b) Bonus: The bonus for the period from the date hereof through
December 31, 1998 shall be $75,000. A bonus program will be
established annually beginning in 1999. The bonus program
shall be based upon the Company's annual budget for each
year. The Executive's target bonus shall equal 100% of Base
Salary which shall be earned upon achievement of annual
budget objectives, with the Executive being eligible to earn
a maximum bonus equal to 200% of Base Salary. Determination
of bonuses above or below target will be mutually agreed
upon by the Company, acting through its Compensation
Committee, and the Executive each year, provided that, in no
event will the bonus for 1999 be less than $150,000. The
bonus program will be established as part of the Company's
budget process each year.
(c) Options: The Executive will be awarded options to purchase 500 shares
of Company common stock, having a strike price equal to
$2,000 per share. Such options will vest 50% on the first
anniversary of the date hereof, 25% on the second
anniversary of the date hereof, and 25% on the third
anniversary of the date hereof, provided that, if the
Executive is terminated without Cause, or the Executive
terminates for "Good Reason" for events described in Section
5(c)(i), (ii) or (iii), vesting shall be accelerated to the
date of termination with respect to those options which
would vest on the next anniversary date (e.g., if Executive
is terminated after the 1st anniversary but prior to the
second anniversary, 50% of the options would be vested on
the 1st anniversary, 25% would be vested on termination and
25% would be forfeited) and provided further that, if the
Executive terminates for "Good Reason" for events described
in Section 5(c)(iv), vesting shall be accelerated as to all
options.
The options shall expire as follows: (A) so long as the
Executive remains employed by the Company hereunder
(including renewals), the options shall expire on September
7, 2008; (B) in the event the Agreement is not renewed or
the Executive's employment with the Company is terminated
pursuant to Section 5(b) (other than as a result of death or
disability), unvested options shall expire upon termination
and vested options shall expire on September 7, 2008; (C) in
the event the Executive's employment with the Company is
terminated (i) as a result of death or disability pursuant
to Section 5(b), or (ii) as a result of the Executive's
voluntary termination of employment without Good Reason or
(iii) as a result of termination by the Company for Cause
pursuant to Section 5(a), unvested options shall expire upon
termination and vested options shall expire as follows, if
such termination occurs at any time on or prior to the
second anniversary of the Effective Date, the vested options
shall expire on the date which is two (2) years following
the date of termination of employment, and if such
termination occurs at any time after the second anniversary
of the Effective Date, the vested options shall expire on
the earlier of September 7, 2008, or the date which is five
(5) years following the date of termination of employment.
In the event the Agreement is not renewed or the Executive's
employment with the Company is terminated for any reason and
if the Company's common stock is not Publicly Traded
(hereinafter defined) at the time of non-renewal or
termination, the Executive shall have the right within six
(6) months following such non-renewal or termination, to
require the Company upon written notice during said six
month period to redeem and cash out his vested options at a
price determined by taking the number of shares subject to
such vested options and multiplying it by the excess of the
fair market value of the Company's common stock as of the
date such notice is given over the option exercise price.
The fair market value of the Company's common stock shall be
determined by an independent investment banking firm or
appraiser mutually selected in good faith by the Company and
the Executive within thirty (30) days after receipt of the
aforesaid notice. If the parties cannot agree within such
30 day period, each party will select within ten (10) days
thereafter, an
8
investment or merchant banking firm to act as its
representative, and such representatives shall in good faith
select an impartial third party firm or appraiser to
determine the fair market value. Once the firm or appraiser
is selected, it shall promptly determine the fair market
value of the Company's stock, and shall deliver its
determination of the fair market value to both the Company
and the Executive. The cost for such appraisal shall be
borne by the Company. The Executive shall have a period of
thirty (30) days from the receipt of the determination to
elect to proceed with the redemption and cash out by
delivery of written notice to the Company. If the Executive
fails to deliver such notice within such thirty (30) day
period, the redemption and cash out rights shall terminate.
If the Executive elects to proceed by delivering such
written notice within such thirty (30) day period, a closing
for the redemption and cash out shall occur within ninety
(90) days after the date such notice to proceed is delivered
to the Company.
However, in the event that the cash out and redemption of
the options would cause a default under the Company's senior
secured credit facility and/or the Company's 11% Senior
Notes, the following provisions shall apply. During the 90
day period the Company shall use commercially reasonable
efforts to obtain the necessary consents to permit the cash
out and redemption of all options without causing such
default. At the end of the 90 day period, the Company shall
cash out and redeem the maximum amount of options which may
be redeemed without causing such default. As to those
options which cannot be cashed out and redeemed without
causing such default: (i) such options shall continue to be
held by the Executive and their period for exercise shall be
extended day for day (but not beyond September 7, 2008)
until such options are redeemed or the Executive elects to
withdraw his election to redeem as provided below; (ii) the
Company shall continue to use commercially reasonable
efforts to obtain necessary consents to permit the cash out
without default; (iii) every six months following the 90 day
period, the Company shall cash out and redeem the maximum
amount of options which may be redeemed without default
provided that the cash out price (i.e. fair market value
previously determined less $2,000 strike price) shall
increase at a per annum rate which is 1-1/2% in excess of
the interest rate charged under the Company's senior secured
credit facility from the expiration of the 90 day period
until the option is cashed out; (iv) at any time options
remain unredeemed, the Executive may withdraw his election
to have such options cashed out by the Company, in which
event the Company shall have no further obligation to redeem
and cash out such options; and (v) at any time the
determination of the fair market value of the Company's
stock is more than one year old, the Executive (but not the
Company) may demand a redetermination of fair market value
in accordance with the procedures set forth in the preceding
paragraph, in which event (A) the next scheduled cash out
and redemption shall be made using such redetermined fair
market value in lieu of the cash out price set forth in
subsection (iii) above; (B) the closing for the next
scheduled cash out and redemption shall be delayed, if
necessary, in order to allow time to complete the
redetermination and permit the Executive the thirty (30) day
period to review it; and (C) the appraisal costs incurred
with respect to the redetermination shall be borne by the
Company. For purposes hereof, the Company's common stock
will be considered Publicly Traded if it is listed on the
New York Stock Exchange or NASDAQ National Market Issue.
As soon as reasonably possible after the Company's common
stock is Publicly Traded, the Company shall file a
registration statement on Form S-8 with respect to the
shares which are subject to the options, and shall use its
reasonable efforts to keep such registration statement
effective.
The options will not be issued under or governed by the
Company's 1998 Stock Option Plan. Options shall be subject
to the terms of (and Executive and the Company shall enter
into) an option agreement reflecting the foregoing terms.
Such option agreement shall provide that the Company is
entitled to delay filing the Form S-8 registration statement
or suspend offers and sales under the Form S-8 registration
statement for a reasonable period
9
(not to exceed 120 days in any year for all such
postponements or suspensions) upon the good faith
determination of the Board of Directors. In addition,
Executive will be entitled to participate in future option
programs and grants in the amounts determined by the
Compensation Committee on an annual basis.
10
