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Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 1st day of November 1997, by and between XXXXXX
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
XXXXX XXXX residing at 000 Xxxx Xxxx Xxxxx, Xxxxxxxxx XXXXXXXXXXXX 00000
(hereinafter called the "Employee").
WITNESSETH
WHEREAS, the Employee has been employed by the Company under an Employment
Agreement, dated October 3, 1988, as amended, which agreement was superseded by
a second Employment Agreement between Employee and Company, dated January 1,
1997; and the Company desires to enter into a new employment agreement with
Employee which agreement shall supersede both prior employment agreements; and,
WHEREAS, Employee desires to enter into the new employment agreement with
the Company;
NOW THEREFORE, it is agreed as follows:
1. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any employment
agreements, oral or written, entered into between Employee and the Company prior
to the date of this Agreement, including, but not limited to, the Employment
Agreements between the Employee and the Company, dated October 3, 1988, as
amended and January 1, 1997, respectively.
2. RETENTION OF SERVICES. The Company hereby retains the services of
Employee, and Employee agrees to furnish such services, upon the terms and
conditions hereinafter set forth.
3. TERM. Subject to earlier termination on the terms and conditions
hereinafter provided, the term of the Agreement shall be comprised of a five (5)
year period commencing on November 1, 1997 and ending on October 31, 2002 and a
"consulting period" commencing at
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the end of such five year period and continuing for a period of five (5) years.
4. DUTIES AND EXTENT OF SERVICES DURING PERIOD OF EMPLOYMENT
(a) During the five year period of active employment, Employee
shall be employed as an executive of the Company. In such
capacity, Employee agrees that he shall serve the Company
under the direction of the Chief Executive Officer of the
Company to the best of his ability, shall devote full time
during normal business hours to such employment, shall perform
all duties incident to his offices on behalf of the Company,
and shall perform such other duties as may from time to time
be assigned to him by the Chief Executive Officer of the
Company.
(b) Effective with the termination of the five year period of
active employment, Employee shall cease to be an employee of
the Company. However, in recognition of the continued value to
the Company of Employee's extensive knowledge and expertise,
Employee shall serve as a consultant to the Company during the
consulting period. In such capacity, Employee shall consult
with the Company and its respective senior executive officers
with respect to its respective businesses and operations. Such
consulting services shall not require more than fifty (50)
days in any one year, it being understood and agreed that
during the consulting period Employee shall have the right to
undertake full time or part time employment with any business
enterprise which is not a competitor of the Company.
Employee's services as a consultant to the Company shall be
required at such times and such places as shall result in the
least inconvenience to Employee, having in mind his other
business commitments which may obligate him to perform
services prior to the performance of his services hereunder.
To the end that there shall be a minimum of interference with
Employees other commitments, his consulting services shall be
rendered by personal consultation at his residence or office
wherever maintained, or by correspondence through mail,
telegram or telephone, or other similar modes of
communications at times,
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including weekends and evenings, most convenient to him.
During the consulting period, Employee shall not be obligated
to serve as a member of the Board of Directors of the Company
or to occupy any office on behalf of the Employer or any of
its subsidiaries or affiliates.
5. REMUNERATION
(a) During the five year period of active employment,
Employee shall be entitled to receive the following
compensation for his services:
(i) The Company shall pay to Employee an annual salary
at the rate of TWO HUNDRED SEVENTY-FIVE THOUSAND
($275,000) DOLLARS commencing November 1, 1997 and
terminating October 31, 2002, payable in weekly
installments, or in such other manner as shall be
agreeable to the Company and Employee.
(ii) In addition to his salary set forth in Paragraph
5(i) above, Employee shall receive an increment in
an amount equal to the cumulative cost of living
on his base salary as reported in the "Consumer
Price Index, New York Northeastern New Jersey, all
items", published by the United States Department
of Labor, Bureau of Labor Statistics, using
January 1,1997 as the base year for computation.
Such cost of living increment with respect to the
aforesaid salary of Employee shall be made
semi-annually as follows:
(A) With respect to the first six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first day
of August of such year; and
(B) With respect to the last six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first day
of February of the following calendar year.
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If Employee's employment shall terminate during any six-month period
referred to in this Paragraph 5 (ii), then the cost of living
increment provided for herein shall be prorated accordingly.
(iii) Not later than one hundred twenty (120) days after
the end of the fiscal year of the Company and each
subsequent fiscal year of the Company ending
during the five year period of employment, the
Company shall pay to Employee, as incentive
compensation four (4%) percent of the Consolidated
Pretax Earnings of the Company in excess of the
Company's Minimum Consolidated Pretax Earnings, as
defined below in this clause (iii), and in no
event more than Employee's annual salary set forth
in clause (i) immediately above. For purposes
hereof, the term "Consolidated Pretax Earnings" of
the Company shall mean, with respect to any fiscal
year, the consolidated income, if any, of the
Company for such fiscal year as set forth in the
audited, consolidated financial statements (the
"Financial Statements") of the Company and its
subsidiaries included in its Annual Report to
stockholders for such fiscal year, before
deduction of taxes based on income or of the
incentive compensation to be paid to Employee for
such fiscal year under this Agreement. For
purposes hereof the term "Minimum Consolidated
Pretax Earnings" of the Company shall mean, with
respect to any fiscal year, the amount of
Consolidated Pretax Earnings of the Company equal
to ten percent (10%) of (x) the Company's
Stockholders' Equity, as set forth in the
Financial Statements for the beginning of such
fiscal year, plus (y) the proceeds from the sale
of the Company's equity securities, less (z) the
purchase price from the acquisition of the
Company's equity securities, on a
time-proportioned basis, during such fiscal year.
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(b) During the consulting period, Employee shall be entitled to a
consulting fee at the rate of SIXTY THOUSAND ($60,000) dollars
per annum, paid on a monthly basis.
6. EMPLOYEE BENEFITS - EXPENSES
a) During the period of active employment, Employee shall receive
all fringe benefits in the nature of health, medical, life
and/or other insurance, a Company car and related expenses as
received by other officers of the Company.
b) The Company shall reimburse Employee for all proper expenses
incurred by him, including disbursements made in the
performance of his duties to the Company; provided, however
that no extraordinary expenses and/or disbursements shall be
incurred by Employee without the prior approval of the Chief
Executive Officer or the Board of Directors of the Company.
c) Employee shall be eligible to participate in the Company's
stock option and stock purchase plans and to acquire warrants
to purchase the Company's stock to the extent determined in
the sole discretion of the Board of Directors of the Company
or a committee thereof.
d) During the five year period of employment, Employee shall be
furnished with office space and facilities commensurate with
his position and adequate for the performance of his duties;
he shall be provided with the perquisites customarily
associated with the position of a Senior Executive of the
Company; and he shall be entitled to six weeks regular
vacation during each year.
e) In the event of the death of Employee, within 30 days
thereafter the Company shall promptly make a lump sum payment
to Employee's widow, or to such other person or persons as may
be designated by Employee in his Will, or to
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his estate in the event of Employee's intestacy, of the salary
and compensation to which Employee is entitled hereunder for
the two year period from date of death and one-half of such
salary for the balance of the period covered by this Agreement
(provided that no payment shall be required for any period
beyond October 31, 2002), and in the year of death an
additional payment equal to the pro rata amount for said year
of the compensation set forth in paragraph 5 (iii), the
Company's contribution to the 401(k), and the pro-rata cost of
living increment, which additional payment shall be made in
accordance with paragraph 5 (ii).
f) Disability for Employee shall occur if he becomes unable, for
twelve consecutive months or more, due to ill health or other
incapacity to perform the services described above. In that
event, the Company may thereafter, upon at least 90 days
written notice to employee, place him on disability status and
terminate this agreement. If employee is so determined by the
Company as disabled, he shall be entitled to his annual
compensation as set forth in paragraph 5 (i) and 5 (ii) hereof
payable in weekly installments for the first two years after
notice of disability and thereafter one-half of such
compensation (provided that no payment shall be required for
any period beyond October 31, 2002), payable in weekly
installments for the balance of the period covered by this
agreement.
7. NON-COMPETITION. Employee agrees that, during term of this
Agreement, he will not, without the prior written approval of the
Board of Directors of the Company, directly or indirectly through
any other individual or entity,(a) become an officer or employee of,
or render any services to, any competitor of the Company, (b)
solicit, raid, entice or induce any customer of the Company to cease
purchasing goods or services from the Company or to become a
customer of any competitor of the Company, and Employee will not
approach any customer for any such purpose or authorize the taking
of any such actions by any other individual or entity, or (c)
solicit, raid, entice or induce any
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employee of the Company to become employed by any competitor of the
Company, and Employee will not approach any such employee for any
such purpose or authorize the taking of any such action by any other
individual or entity. However, nothing contained in this paragraph 7
shall be construed as preventing Employee from investing his assets
in such form or manner as will not require him to become an officer
or employee of, or render any services (including consulting
services) to, any competitor of the Company.
8. TERMINATION FOR CAUSE.
a) The Company has been intimately familiar with the ability,
competence and judgment of Employee, which are acknowledged to
be of the highest caliber. Accordingly, the Company and
Employee agree that Employee's services hereunder may be
terminated by the Company only (i) for an act of moral
turpitude materially adversely affecting the financial
condition of the Company, or (ii) breach of the terms of this
Agreement which shall materially adversely affect the
financial condition of the Company.
b) If the Company terminates Employee's employment hereunder for
any reason other than as set forth in paragraph 8 (a) hereof,
Employee's compensation shall continue to be paid to him as
provided in paragraph 5 hereunder for the remainder of the
term of this Agreement. Employee shall have no duty to
mitigate the Company's damages hereunder. Therefore, no
deduction shall be made by the Company for any compensation
earned by Employee from other employment or for monies or
property otherwise received by Employee subsequent to such
termination of his employment hereunder. Employee and the
Company acknowledge that the foregoing provisions of this
paragraph 8(b) are reasonable and are based upon the facts and
circumstances of the parties at the time of entering into this
Agreement, and with due regard to future expectations.
9. CONSOLIDATION OR MERGER. In the event of any consolidation or merger
of the Company into or with any other corporation during the term of
this Agreement, or the
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sale of all or substantially all of the assets of the Company to
another corporation during the term of this Agreement, such
successor corporation shall assume this Agreement and become
obligated to perform all of the terms and provisions hereof
applicable to the Company, and Employee's obligations hereunder
shall continue in favor of such successor corporation.
10. INDEMNIFICATION. The Company agrees to indemnify the Employee to the
fullest extent permitted by applicable law consistent with the
Company's Certification of Incorporation and By-Laws as in effect on
the effective date of this Agreement with respect to any action or
failure to act on his part while he was an officer, director and/or
employee (a) of the Company or any subsidiary thereof or (b) of any
other entity if his service with such entity was at the request of
the Company. This provision shall survive the termination of this
Agreement.
11. NOTICES. Notice is to be given hereunder to the parties by telegram
or by certified or registered mail, addressed to the respective
parties at the addresses herein below set forth or to such addresses
as may be hereinafter furnished, in writing:
TO: Xxxxx Xxxx
000 Xxxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
TO: XXXXXX INDUSTRIES, INC.
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxx, Chairman
12. CHANGE OF CONTROL In the event there shall be a change in the
present control of the Company as hereinafter defined, or in any
person directly or indirectly presently controlling the Company, as
hereinafter defined, Employee shall have the right to immediately
receive as a lump sum payment an amount equal to (i) two (2) times
his "base amount", within the meaning of Section 280G of the
Internal
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Revenue Code of 1986, as amended (hereinafter "the Code"), reduced
by (ii) $100.00.
For purposes of this Agreement, a change in control of the Company,
or in any person directly or indirectly controlling the Company,
shall mean:
a) a change in control as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934
("Exchange Act"); or
b) if any "person" (as such term is used in Section 13(d) and 14
(d) of the Exchange Act) other than the Company or any
"person" who on the date of this Agreement is a director or
officer of the Company, becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing thirty
percent (30%) of the voting power of the Company's then
outstanding securities; or
c) if during any period of two (2) consecutive years during the
term of this Agreement, individuals who at the beginning of
such period constitute the Board of Directors cease for any
reason to constitute at least a majority thereof, unless the
election of each director who is not a director at the
beginning of such period has been approved in advance by
directors representing at least two-thirds (2/3) of the
directors then in office who were directors at the beginning
of the period.
13. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company.
Unless clearly inapplicable, reference herein to the Company shall
be deemed to include such other successor. In addition, this
Agreement shall be binding upon and inure to the benefits of the
Employee and his heirs, executors, legal representatives and
assigns, provided, however, that the obligations of Employee
hereunder may not be delegated without the prior written approval of
Directors of the company.
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14. AMENDMENTS. This agreement may not be altered, modified, amended or
terminated except by a written instrument signed by each of the
parties hereto.
15. GOVERNING LAW. This agreement shall be governed by and construed and
interpreted in accordance with the laws of Delaware, without
reference to principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXX INDUSTRIES, INC.
BY: ______________________________
Xxx Xxxxx, Chairman and CEO
BY: ______________________________
Xxxxx Xxxx, Employee
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