[XxxXxxxxxx.xxx, Inc. Letterhead]
PERSONAL AND CONFIDENTIAL
-------------------------
As of January 1, 2000
Xx. Xxxxxxx X. Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. 07090
Dear Xxxxxxx:
This is to confirm our mutual understanding with respect to your
employment by XxxXxxxxxx.xxx, Inc. (the "Company"), as follows:
1. Employment: Authority. The Company hereby agrees to employ you, and
you hereby agree to be employed by the Company, on the terms and conditions set
forth in this letter. You will serve the Company as its Chief Executive Officer
with all the responsibility and authority customarily associated with such
position. You will serve as a member of the Company's Executive Committee. You
also agree to perform such duties and services, and to have such other
responsibilities, as the Company's Board of Directors may, from time to time,
assign to you consistent with your position. You hereby represent and warrant to
the Company that you are not now under any contractual obligation to any third
party that is inconsistent with the terms of this letter or that would prevent,
limit or impair in any way your performance of your duties under this letter.
2. Compensation. As full compensation for all services provided and
duties performed by you (inclusive of your services as an officer of the Company
and member of its Executive Committee) during your employment by the Company
under the terms of this letter, you will be entitled to receive:
a. Base Salary. A base salary (your "Base Salary") at the rate of
$300,000 per annum, effective as of the date hereof, payable semi-monthly in
accordance with the Company's normal payroll practices; provided, that the rate
of Base Salary is subject to annual merit increases, based on individual
performance and the Company's annual compensation guidelines as determined by
the compensation committee of the Company's Board of Directors (the
"Compensation Committee"); provided further, that upon the completion by the
Company of an initial public offering of its Common Stock (or any other equity
securities) (an "IPO") your Base Salary shall be increased to no less than
$450,000.
b. Annual Bonus. An annual bonus (your "Annual Bonus") determined by
the Compensation Committee. You shall participate in the compensation package,
including, without limitation, any bonus plan(s), offered to senior executives
of the Company as approved by the Compensation Committee; provided, however,
that your target award (as determined by the Compensation Committee) for the
purposes of your Annual Bonus shall be 50% of your Base Salary for such year. If
the scheduled term (as defined in Section 4 below) does not expire at the end of
the Company's fiscal year, your Annual Bonus for the year
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as of January 1, 2000
page 2
in which the scheduled term expires shall be an amount equal to the product of
(x) the Annual Bonus that you would have received had the scheduled term expired
at the end of such year and (y) a fraction, the numerator of which is the number
of months from the beginning of such year until the actual expiration of the
scheduled term, and the denominator of which is 12.
c. Benefits. During your employment hereunder, you shall be intitled to
all benefits generally available to the Company's senior executives and for
which you may qualify, inclusive of hospitalization and major medical insurance,
health and disability insurance, pension plans or benefits, any supplemental
retirement plans or benefits and any perquisites that are generally made
available to executives of the Company. The benefits and perquisites to which
you are entitled pursuant to this paragraph are sometimes referred to herein as
your "Benefits".
d. Certain Changes. While the Company retains the right to change,
eliminate, discontinue or substitute any plan, program or benefit, or any
provision thereof, the Company agrees with you that upon any such change,
elimination, discontinuation or substitution there will be a replacement plan,
program or benefit under the terms of which you will have no less of an
opportunity to receive an equal or greater benefit than as currently provided;
provided, however, that no such change, elimination, discontinuation or
substitution will (x) reduce your Base Salary or Annual Bonus or (y) eliminate
or reduce any sums that have been granted to you or that you are otherwise
entitled to receive (but have not yet been paid) on the date that any such
change, elimination, discontinuation or substitution becomes effective.
e. Tax Reporting. All payments made to you pursuant to this letter
(whether specified in this Section 2 or not) are subject to all applicable tax
withholding by the Company. In addition, you acknowledge and agree that all
payments to be made to you as Base Salary, as Annual Bonus or otherwise under
this letter shall, to the extent required by law, be reported for all tax
purposes as compensation for services rendered, and you shall not state or claim
any different position in any tax return or report (or any audit thereof).
3. Expenses. During your employment hereunder, the Company will
reimburse you for your travel and other expenses incident to your providing
services and performing duties under this letter, in conformity with the
Company's regular policies from time to time in effect regarding reimbursement
of expenses, with the proviso that such reimbursement will only be made upon
presentation of expense vouchers in such detail as may from time to time be
necessary for the Company to comply with all applicable tax and accounting
requirements.
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 3
4. Term
a. The term of your employment under this letter commenced on January
1, 2000 and shall continue until December 31, 2002 or such other date as may be
determined in accordance with Section 4.b. below (the "scheduled term"), unless
earlier terminated by reason of death, Disability (as defined below),
termination by you after the occurrence of a Change in Opportunity (as defined
below) or otherwise or termination by the Company (with or without Cause (as
defined below))(in each case, and subject to any provisions in this Section 4 or
in Section 5, upon no less than 30 days' prior written notice). Any decision to
terminate your employment (with or without Cause) or not to extend the term of
your employment as described in Section 4.b. below must be and shall not be
valid unless adopted by an affirmative vote of the majority of the members of
the Company's Board of Directors (which majority must include the chairman of
the Board of Directors (the "Chairman") so long as the Chairman is Xxx
Xxxxxxxxx).
b. At any time no more than six months and no less than three months
prior to the termination of the then current scheduled term (as such may have
been extended) you or the Company may notify each other, in writing, of a lack
of intention to extend the term of your employment by the Company under this
letter beyond the then current scheduled term, in which case your employment by
the Company under this letter shall end upon the expiration of the scheduled
term. In the absence of such notice, at the end of the then current scheduled
term, the scheduled term under this letter will be automatically extended by
twelve months.
5. Consequence of Termination.
a. Death or Disability. Anything herein to the contrary
notwithstanding, if your employment under this letter is terminated early (i.e.,
before expiration of the scheduled term) by reason of your death or your
Disability (as defined below), you (or your estate, as the case may be) shall be
entitled to receive your Base Salary and all other amounts owing to you in
respect of your services under this letter through the date of such termination
(including, without limitation, your Annual Bonus for the calendar year in which
such termination occurs, pro-rated to reflect the portion of such year elapsed
through the date of such termination (and based on target amounts (the pro-rata
portion of which shall be determined by the Compensation Committee), not actual
performance)) and any Benefits that by their terms continue thereafter), but the
Company shall have no further liability or obligation whatsoever to you
hereunder.
b. Termination without Cause. If your employment under this letter is
terminated early (i.e., before expiration of the scheduled term) by the Company
without Cause or by you voluntarily within 90 days after the occurrence of a
Change in Opportunity (as defined below), you shall be entitled, in lieu of any
other or further compensation of any kind from the Company (other than your
vested rights in any retirement, life insurance, disability insurance or other
pension or benefit plan of the Company), to receive severance (your "Severance")
consisting of:
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 4
(1) Continued payment of your Base Salary (at the rate in effect
hereunder immediately prior to the termination) through the expiration of the
scheduled term, payable as and when it would otherwise have been paid had you
continued in the Company's employ;
(2) Continued payment of your Annual Bonus in an annual amount equal to
your maximum Annual Bonus (i.e., 50% of your Base Salary as in effect
immediately prior to your termination) through the expiration of the scheduled
term, such amount to be payable within 30 days after the end of each year as to
which such Annual Bonus is determined, with payment for the final period (i.e.,
the period ending with the expiration of the scheduled term, to be made in
accordance with the pro ration provision in the last sentence of Section 2.b.
hereof);
(3) Your Benefits (to the extent permitted by applicable law and the
terms of any applicable plans, in each case as if you continued as an active
employee or, if the Company is not able to provide any such Benefit to you, the
economic equivalent thereof) until the expiration of the scheduled term;
(4) You shall retain all options to purchase stock of the Company which
you shall hold at such time, all of which shall be or shall become vested as of
the date of termination of your employment. Such options may be exercised by you
at any time until the second anniversary of the termination of your employment
with the Company; and
(5) Continued office and secretarial support through the expiration of
the scheduled term or such time as you obtain other employment, whichever occurs
first.
In the event that the termination of your employment pursuant to this Section
5.b. is initiated by the Company, your employment shall not be deemed to have
been terminated pursuant to this Section 5.b. unless there shall have been
delivered to you a copy of a notice of termination from the Company (no less
than 30 days prior to the effective date of such termination, or, in the event
of non-extension of the scheduled term as provided in Section 4.b. as described
therein) providing, in reasonable detail, a description of the reasons therefor,
and unless you have had an opportunity, together with your counsel, to be heard
before the Company's Board of Directors.
You shall not be required to mitigate the amount of Severance due to you
hereunder by seeking employment or otherwise, nor shall any amounts received by
you from other employment or otherwise by you offset in any manner the Company's
obligation to provide such Severance.
c. Termination with Cause. If your employment under this letter is
terminated by the Company with Cause, the Company shall (without limiting any
right or remedy to which it may be entitled) be obligated to continue to pay you
your Base Salary, Annual Bonus (except that you shall be entitled to receive
your Annual Bonus for the year in which the effective date of your termination
occurs on a pro rata basis (as such is determined by the Compensation
Committee), based on actual performance), Benefits or any other amounts
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 5
provided herein until the effective date of such termination, but shall have no
further liability or obligation whatsoever to you hereunder; provided, that
nothing in this provision shall be interpreted so as to limit any Benefits to
which you or your dependents or estate are entitled according to the specific
terms of any applicable employee benefit plan, program or practice after such
termination of your employment. In addition, in the event of termination of your
employment pursuant to this Section 5.c., the Company shall be entitled to
repurchase from you, at a cash price equal to the Termination Price, 75% of the
issued and outstanding shares of the Company owned by you as of the date of such
termination (but excluding up to ____ shares subject to call options to certain
individuals, to the extent such call options are in effect on the date of
termination). If the Company wishes to effect such repurchase it shall notify
you of its intention within 30 days of the termination of your employment and
such repurchase shall be effected within 60 days of such termination.
d. Termination by You. If your employment under this letter is
terminated early by you (other than voluntarily within 90 days after the
occurrence of a Change in Opportunity (as defined below) in accordance with
Section 5.b. of this letter), the Company shall (without limiting any right or
remedy to which it may be entitled) be obligated to continue to pay you your
Base Salary, Benefits and any other amounts provided herein until the effective
date of such termination, but shall have no further liability or obligation
whatsoever to you hereunder; provided, that nothing in this provision shall be
interpreted so as to limit any Benefits to which you or your dependents or
estate are entitled according to the specific terms of any applicable employee
benefit plan, program or practice after such termination of your employment. In
addition, in the event of termination of your employment pursuant to this
Section 5.d. prior to December 31, 2001, the Company shall be entitled to
repurchase from you, at a cash price equal to the Termination Price, 75% of the
issued and outstanding shares of the Company owned by you as of the date of such
termination (but excluding up to ___shares subject to call options to certain
individuals, to the extent such call options are in effect on the date of
termination). If the Company wishes to effect such repurchase it shall notify
you of its intention within 30 days of the termination of your employment and
such repurchase shall be effected within 60 days of such termination.
6. Certain Definitions. For purposes of this letter, the following
definitions shall apply:
"Cause" means: (i) willful and repeated failure or refusal to
perform your duties; (ii) embezzlement or similar criminal
misappropriation of Company funds; (iii) conviction of a crime
constituting a felony that will have a material adverse effect on the
Company; or (iv) a material breach of any term of this letter;
provided, in each case, that your employment shall not be deemed to
have been terminated for Cause unless (x) you shall have been provided
a notice from the Company's Board of Directors no less than 30 days
prior to the effective date of such termination stating that any event
that had occurred or, in the event of clause (iii) above, that will
occur, constitutes Cause and that the Board of Directors intends to
terminate your employment for Cause pursuant to Section 5.c hereof and
describing in reasonable detail, the reasons therefor, and (y) you have
had both an opportunity to cure such Cause and, together with your
counsel, to be heard before the Company's Board of Directors during
such 30-day period.
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 6
"Change in Opportunity" means, without your express written
consent, any of the following:
(i) the assignment to you of any duties materially
inconsistent with your position, authority, duties or responsibilities
as contemplated hereby, or any other action by the Company that results
in a material diminution of such position, authority, duties or
responsibilities;
(ii) the Company's requirement that you move your personal
residence or perform your principal executive functions outside of
Manhattan;
(iii) the Company's requirement that you report to an
executive other than the Chairman or the Company's Board of Directors;
or
(iv) the failure of the Company to provide you with a total
compensation package substantially equivalent to that set forth in this
letter or any other material breach by the Company of the terms herein;
provided, in each case, that you shall not be deemed to have terminated
your employment for "Change of Opportunity" unless there shall have
been delivered to the Company a copy of a notice of termination from
you (no less than 30 days prior to the effective date of such
termination) providing, in reasonable detail, a description of the
reasons therefor, and unless the Company shall have had an opportunity
to cure any events causing such Change of Opportunity.
"Disability" means your inability to perform your duties in
any material manner by reason of physical or mental disability for a
period of six consecutive months, or for a period of more than nine
months in the aggregate in any twelve-month period.
"Termination Price" means the number of shares you hold at the
time of termination divided by the number of shares you hold as of the
date of this agreement, not including shares subject to certain call
option agreements in effect at the date hereof, x $1,000,000.
7 .Gross Up. The Company shall provide employee with gross-up payments,
as described in Exhibit A, attached hereto.
8. Non Competition; Non Solicitation. You agree that, without the prior
express written consent of the Company's Board of Directors, you shall not,
during your employment hereunder, and, if you voluntarily terminate your
employment hereunder (other than termination pursuant to Section 6.b. herein) or
if your employment hereunder is terminated by the Company for Cause, for the
duration of the Non-compete Period (as such term is defined below): (i) directly
or indirectly, employ or hire as a consultant or solicit for employment or
consulting, any officer or other employee of the Company; or (ii) enter into or
accept an employment position or any other situation or arrangement with an
organization or person or establish an entity that markets or sells distressed
airline, hotel and other travel services. For
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 7
the purposes of this Section 8, the "Non-compete Period" shall be: (i) if
termination as described herein occurs during the calendar year 2000, for 24
months from the date of such termination; (ii) if termination as described
herein occurs during the calendar year 2001, for 18 months from the date of such
termination; and (iii) if termination as described herein occurs during the
calendar year 2002, for 12 months from the date of such termination.
9. Confidentiality. You acknowledge that you now have and will have
access to and become acquainted with proprietary and confidential information
regarding the Company and its customers that constitute valuable assets of the
Company and that is not available to the public. Accordingly, you agree that you
will not during the term of this letter or at any time thereafter, directly or
indirectly, (i) use or disclose such information, except as is necessary and
appropriate in connection with the rendering by you of services to the Company
under this letter, or (ii) make, or cause to be made, any statement or
publication about or concerning the Company or its shareholders (or any
fiduciary or beneficiary of any shareholder that is a trust or an estate) which
you reasonably believe not to be in the best interests of, or necessary for the
proper conduct of the businesses of, the Company or its shareholders (or any
fiduciary or beneficiary of any shareholder that is a trust or an estate), other
than statements or publications that are consistent with your supervision of the
corporate communication function of the Company as it relates to your duties or
that you reasonably believe to be necessary to protect and enforce your rights
under this letter. Nothing herein is intended to limit or affect any
responsibility you may have under any generally applicable policy, practice or
procedure of the Company.
10. No Disclosure. The financial arrangements contemplated hereby are
sensitive and highly confidential, and, so long as you remain employed by the
Company, you will not use, disclose or make any public announcement regarding
such financial arrangements without the prior written consent of the Company (by
its Board of Directors or its chairman), except: (i) as may be required by
applicable law; (ii) disclosure in connection with your own personal tax or
financial affairs; or (iii) as may be required in order to enforce any term or
provision hereof.
11. Injunctive Relief. You acknowledge and agree that if any provision
of Section 8, 9 or 10 hereof is violated, the Company will immediately and
irreparably be harmed, will not have an adequate remedy at law and will be
entitled to immediate relief enjoining such violation or threatened violation
(including without limitation temporary and permanent injunctions and/or a
decree for specific performance) in any court or judicial body having
jurisdiction over such claim, without the necessity of showing any actual damage
or posting any bond or furnishing any other security, and without having to
pursue any arbitration as provided below.
12. Arbitration; Legal Fees. Any dispute that may arise between you and
the Company in connection with your employment hereunder, including, without
limitation, the terms or interpretation of this letter as they relate to the
existence of Cause, Change in Opportunity and the terms concerning termination
of employment upon such events, either during or following termination of your
employment hereunder shall be submitted to arbitration before three arbitrators
in the City of New York under the then applicable rules of the American
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 8
Arbitration Association. Judgment on any award rendered may be entered in any
court of the forum having jurisdiction. If the arbitrators find that the Company
has breached the substantive terms of this letter and the Company in doing so
acted capriciously, maliciously, or in bad faith, then the Company shall pay for
all of your costs and expenses, including reasonable attorney's fees, arising
from such proceeding.
13. Miscellaneous.
a. Notice. All notices and other communications provided for hereunder
shall be in writing (including by telex or facsimile transmission) and mailed or
sent or delivered at the addresses specified below. All such notices and
communications shall be given by hand, telex or facsimile transmission; provided
that, in the event that telex and facsimile transmission facilities are not
operational, such notices and communications may be given by mail, but the
sender shall use reasonable efforts to confirm facsimile transmission facilities
shall become operational. All such notices and communications shall be effective
when delivered by hand, or, in the case of mail, upon the earlier of receipt and
confirmation by telex or facsimile transmission as provided below, or, in the
case of facsimile transmission, when sent as addressed as set forth herein and
confirmation of delivery is received, or, in the case of telex, when the telex
is sent and the appropriate answer back is received. The address for you is set
forth in the beginning of this letter. The address for the Company is as
follows:
XxxXxxxxxx.xxx, Inc.
000 Xxxxxxx Xxx.
14th Floor
New York, NY 10022
Telecopy No.: (000) 000-0000
Attention: Chairman
with copies to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Each party to this letter may, from time to time, change its notice address or
copy address or add or substitute a copy party and a copy address, by giving
notice to the other party in the manner provided in this paragraph.
b. Entire Agreement. This letter (inclusive of any annex hereto)
contains the entire understanding and agreement of the parties with respect to
the subject matter hereof, and all prior negotiations, proposals and agreements
(whether written or oral) between them (or their respective affiliates) relating
to the subject matter hereof have, to the extent relating to such subject
matter, been superseded hereby. No agreements or
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 9
representations (whether oral or otherwise, express or implied) that are not
expressly set forth in, but that relate to the subject matter of, this letter,
have been made by either party.
c. Amendment; Waiver. Neither this letter nor any provision hereof may
be amended or modified except in a writing signed by the party against which
enforcement of such amendment or modification is sought. No failure or delay of
any party in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce any such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party under this letter are,
unless otherwise specifically provided herein, cumulative and not exclusive of
any rights or remedies that such party may otherwise have. No waiver by either
party of any provision of this letter nor any consent by either party to any
departure by the other party from any provision of this letter shall in any
event be effective unless the same shall be in writing (by the party against
which enforcement of such waiver or consent is sought), and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice or similar communication by one party
to the other shall entitle such other party to any other or further notice or
similar communication in similar or other circumstances, except as specifically
provided herein.
d. Severability. If anyone or more of the provisions of this letter
shall be invalid, illegal or unenforceable in any respect, it shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability, and shall not in any way affect or impair the validity,
legality and enforceability of the balance of such provision or any other
provision contained herein. Each party shall endeavor in good faith negotiations
to replace the invalid, illegal or unenforceable provision(s) (or such portion
thereof) with such valid, legal and enforceable provision(s), the economic
effect of which on the respective parties is as close as possible to that of the
invalid, illegal or unenforceable provision(s).
e. Successors and Assistants. This letter shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto; provided, that no party may, without the prior written consent
of the other, assign, transfer or delegate this letter or any of such party's
rights or obligations hereunder (whether directly or indirectly, by operation of
law or otherwise) to any other person, firm or entity.
f. Rights of Third Parties. Anything in this letter to the contrary
notwithstanding, no person, firm or entity shall be entitled to the benefit of,
or to enforce, any provision hereof other than the parties hereto (and their
heirs, permitted successors and assigns).
g. Survival. The respective rights and obligations of you and the
Company as provided herein shall survive the termination or expiration hereof to
the extent necessary to the intended preservation of such rights and
obligations.
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 10
h. Governing Law. This letter shall be construed and interpreted
according to the laws of the State of New York, without reference to such
State's principles governing conflicts of laws.
i. Headings. The headings used herein are for convenience of reference
only, are not part of this letter and are not intended to affect the
construction, or to be taken into account in the interpretation, of this letter.
j. Counterparts; Effect. This letter may be signed in counterparts with
the same effect as if the signatures were all upon the same instrument;
provided, that no party shall be bound hereto unless and until all parties have
executed and delivered this letter (or a counterpart).
Xx. Xxxxxxx X. Xxxxxx
as of January 1, 2000
page 11
Please confirm your agreement with the foregoing by signing and
returning to us at least two copies of this letter.
Sincerely,
XXXXXXXXXX.XXX INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------
Xxxxxxx Xxxxxxxxx
Chairman
AGREED TO AND ACCEPTED:
/s/ Xxxxxxx X. Xxxxxx
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XXXXXXX X. XXXXXX
