1
EXHIBIT 10(f)
ROYALTY AGREEMENT WITH XXXX X. XXXXXX, XX.
2
ROYALTY AGREEMENT
THIS AGREEMENT, effective as of June 30, 1997 ("Agreement"), is made by and
between INNOVA/PURE WATER, INC., a Florida corporation (the "Corporation"), and
Xxxx X. Xxxxxx, Xx. (the "Executive").
WITNESSETH:
WHEREAS, the Corporation, desires to obtain the exclusive rights to the
inventions of the Executive in accordance with the terms and conditions in this
Agreement and to ensure the availability of the Executive's services to the
Corporation;
WHEREAS, the Executive desires to accept such agreement providing his
patents and intellectual property rights and render his services to the
corporation in accordance with the terms and conditions contained in this
Agreement;
WHEREAS, the Executive and the Corporation desire to enter into this
Agreement, which will fully recognize the contributions of the Executive and
assure harmonious management of the Corporation's affairs.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Corporation
and the Executive agree as follows:
1. Term of Agreement
(a) Offer/Acceptance/Effective Date. The Corporation hereby offers
employment to the Executive and the Executive hereby accepts
employment subject to the terms and conditions set forth under
this Agreement, to be effective this 1st of July, 1997.
(b) Term. The term (the "Term") of this Agreement shall commence
on the date that this Agreement becomes effective, and shall
continue without interruption for a term of five (5) years.
2. Duties.
(a) General Duties. The Executive shall serve as Chairman of the
Corporation and shall continue to serve in that position, with
duties and responsibilities that are customary for such
executives.
(b) Best Efforts. The Executive convenance to use his best efforts
to perform his duties and discharge his responsibilities
pursuant to this Agreement in a competent, careful and
faithful manner.
3
(c) Devotion of Time. The Executive will devote substantially all
of his time, attention and energies during normal business
hours (exclusive of periods of sickness and disability and of
such normal holiday and vacation periods as have been
established by the Corporation) to the Corporation's affairs.
3. Compensation and Expenses
(a) Compensation. Compensation to Xxxx X. Xxxxxx, Xx., shall be
paid in the form of royalty payments for patents assigned to
the Corporation and upon which one or more corporate products
are based. These patents are described in the patent list
attached, and include current patents to be filed or which are
pending consisting of Low Density filtration products and
filters combined with valve caps commonly referred to as "sip
bottle filters" and such other patents as may be awarded in
the future and assigned or licensed to the Corporation.
Minimum royalties of $100,000 per year will be paid during the
term of employment. Royalty payments are not to exceed
$300,000 in any one year.
Royalty payments of 5% will be calculated on net sales of
products and incorporating one or more such patents.
The minimum payment will be made by month or quarter as may be
elected by the assignor/licenser.
Royalties due in excess of the stated minimum shall be paid
quarterly within thirty days of the end of each quarter.
Excess royalties may be paid in common stock or cash at the
discretion of the Corporation based upon the average per share
price over the last thirty day period, discounted by 25% if
restricted.
Upon termination, voluntary or otherwise, a 3% royalty shall
be paid over the residual life of the subject patents, as
shall be directed by the Licensor/Assignor.
(b) Minimum Royalty Adjustment. The minimum royalty may not be
decreased hereunder during the term of this Agreement, but may
be increased upon review by and within the sole discretion of
the Corporation's Board of Directors.
2
4
(c) Bonus. Executive shall be entitled to receive bonus
compensation in an amount as approved by the Corporation's
Board of Directors based upon the performance criteria as may
be established by the Board of Directors from time to time.
Such bonuses may be paid in cash or issued in shares of the
Corporation's common stock on such terms as recommended and
approved by the Board of Directors.
(d) Expenses. In addition to any compensation received pursuant to
Section 3, the Corporation will reimburse the Executive for
all reasonable, ordinary and necessary travel, educational,
seminar, trade shows, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties
under this Agreement, provided that the Executive properly
accounts for such expenses to the Corporation in accordance
with the Corporation's practices.
4. Benefits.
(a) Vacation. For each calendar year during the Term during which
the Executive is employed, the Executive shall be entitled to
vacation (which shall accrue and vest, except as may be
hereafter provided to the contrary, on each January 1st
thereof) in the amount of thirty (30) work days.
The Executive shall take his vacation at such times as the
Executive may select and the affairs of the Corporation may
permit.
(b) Employee Benefit Programs. In addition to the compensation to
which the Executive is entitled pursuant to the provisions of
Section 3 hereof, during the Term, the Executive will be
entitled to participate in any stock option plan, stock
purchase plan, pension or retirement plan, insurance or other
employee benefit plan that is maintained at that time by the
Corporation for its employees, including programs of life,
disability, basic medical and dental, supplemental medical and
dental insurance.
Notwithstanding the foregoing, the Corporation shall provide
the following benefits:
(i) Health insurance to the Executive and Executive's
immediate family.
(ii) Split dollar life insurance policy in the amount of
$1,000,000.00 payable to the Executive's beneficiary
or
3
5
beneficiaries ("Life Insurance Policy"). The
Corporation shall make the premium payments on the
Life Insurance Policy through five (5) years) after
the termination of the employment of the Executive.
Notwithstanding any provision of this Agreement to the
contrary, the Corporation shall not be obligated to provide
the Executive with any of the foregoing benefits contained in
this Section 4 (b) if the Executive, for whatever reason, is
or becomes uninsurable with respect to coverage relating to
any such benefit(s).
(c) Automobile Allowance. The Corporations shall reimburse the
Executive for all automobile expenses incurred by Executive in
the performance of his duties on behalf of the Corporation. In
the event the Executive leases a new automobile for use in the
Executive's performance of his duties on behalf of the
Corporation, the Corporation shall reimburse the Executive the
monthly payments made by the Executive in connection with said
lease.
5. Termination.
(a) Termination for Cause. The Corporation may terminate the
Executive's services pursuant to this Agreement at any time
for cause upon written notice. Such termination will become
effective upon the giving of such notice. Upon any such
termination for cause, the Executive shall have no right to
compensation, bonus or reimbursement under Section 3 or to
participate in any employee benefit programs or other benefits
to which he may be entitled under Section 4 for any period
subsequent to the effective date of termination. For purposes
of this Agreement, the term "cause" shall mean:
(i) the Executive's conviction for a felony charge;
(ii) the Executive's misappropriation of assets or
otherwise defrauding the Corporation or any of its
subsidiaries or affiliates;
(iii) material breach by the Executive of any provision of
this Agreement.
(b) Death or Disability. This Agreement and the Corporation's
obligations hereunder will terminate upon the death or
disability of the Executive. For purposes of this Section
5(b), "disability" shall mean that for a period of six (6)
months in any twelve-month
4
6
period the Executive is incapable of substantially fulfilling
the duties set forth in this Agreement because of physical,
mental or emotional incapacity resulting from injury, sickness
or disease as determined by an independent physical mutually
acceptable to the Corporation and the Executive. Upon any such
termination upon death or disability, the Corporation, will
pay the Executive or his legal representative, as the case may
be, his Royalty (which may include any accrued, but unused
vacation time) at such time pursuant to Section 3(a) through
the date of such termination of employment (or, if terminated
as a result of a disability, until the date upon which the
disability policy maintained pursuant to Section 4(b)(ii)
begins payment of benefits) plus any other compensation that
may be due and unpaid.
(c) Voluntary Termination by Executive. Prior to the termination
of this Agreement, the Executive may, on sixty (60) days prior
written notice to the Corporation, at any time terminate his
employment. Upon any such termination, the Corporation shall
pay the Executive his Base Salary at such time pursuant to
Section 3(a) through the date of such termination of
employment (which shall include any vested and accrued, but
unused vacation time).
(d) Lump Sum Payment Upon Termination Without Cause. The
Corporation may terminate Executive's employment pursuant to
this Agreement, without cause upon thirty (30) days written
notice to Executive. Upon any such termination, the
Corporation shall pay Executive a lump-sum payment equal to
the Executive's compensation set forth in Section 3 of this
Agreement for the remainder of the Term of Executive's
employment as set forth in Section 1(b) of this Agreement, in
addition to any other compensation that may be due and unpaid.
6. Restrictive Covenants.
(a) Competition with the Corporation. The Executive covenants and
agrees that, during the Term of this Agreement, and for a
period of five (5) years after the termination of this
Agreement unless terminated without cause, the Executive will
not, without the prior written consent of the Corporation,
directly or indirectly (whether as a sole proprietor, partner,
stockholder, director, officer, employee or in any other
capacity as principal or agent), compete with the Corporation.
Notwithstanding this restriction, Executive shall be entitled
to invest in stock of other competing public companies so long
as his ownership is less than 5% of such company's outstanding
shares.
5
7
(b) Disclosure of Confidential Information. The Executive
acknowledges that during this agreement he will gain and have
access to confidential information regarding the Corporation.
All records, files, materials and confidential information
(the "Trade Secrets") obtained by the Executive in the course
of his employment with the Corporation shall be hereby deemed
confidential and proprietary and shall remain the exclusive
property of the Corporation. The Executive will not, except in
connection with and as required by his performance of his
duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he
may be associated, disclose any Trade Secrets to any person,
firm, corporation, association or other entity for any reason
or purpose whatsoever without the prior written consent of the
Board of Directors of the Corporation, unless such information
previously shall have become public knowledge through no
action by or omission of the Executive.
(c) Subversion, Disruption or Interference.s24 At no time during
the term hereof and for a period of five (5) years beyond the
termination of this Agreement, shall Executive, directly or
indirectly, interfere, induce, influence, combine or conspire
with, or attempt to induce, influence, combine or conspire
with, any of the employees or sponsors of, or consultants to,
the Corporation to terminate their relationship with or
compete or ally against the Corporation or any of its
subsidiaries or affiliates of the Corporation in the business
in which the Corporation or any one of its subsidiaries or
affiliates is presently engaged or in which the Corporation or
any one of its subsidiaries or affiliates desires to engage in
the future.
(d) Enforcement of Restrictions. The parties hereby agree that any
violation by Executive of the covenants contained in this
Section 6 will cause irreparable damage to the Corporation or
any of its subsidiaries and affiliates and may, as a matter of
course, be restrained by process issued out of a court of
competent jurisdiction, in addition to any other remedies
provided by law.
7. Change of Control.
(a) For the purposes of this Agreement, a "Change of Control shall
mean:
(i) the acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended
("Exchange Act")(a
6
8
"Person") of beneficial ownership (within the meaning
of Rule 13(d)(3) promulgated under the Exchange Act)
of fifty percent (50%) or more of either (I) the then
outstanding shares of common stock of the
Corporation, or (ii) the combined voting power of the
then outstanding voting securities of the Corporation
entitled to vote generally in the election of
directors, which acquisition is effected without the
consent of at least a majority in interest of the
shareholders so the Corporation as of the date
hereof.
(ii) any capitalization of the Corporation which carries
with it a prerequisite that Executive's
responsibilities and authority shall be substantially
diminished, limited or obviated.
(b) The Corporation and Executive hereby agree that, if Executive
is in the employ of the Corporation on the date on which a
Change of Control occurs (the "Change of Control Date:), the
Corporation will continue to employ the Executive and the
Executive will remain in the employ of the Corporation for the
period commencing on the Change of Control Date and ending on
the expiration of the Term, to exercise such authority and
perform such executive duties as are commensurate with the
authority being exercised and duties being performed by the
Executive immediately prior to the Change of Control Date. If
after a Change of Control, the Executive is requested, and, in
his sole and absolute discretion, consents to change his
principal business location, the Corporation will reimburse
the Executive for his relocation expenses, including without
limitation, moving expenses, temporary living and travel
expenses for a time while arranging to move his residence to
the changed location, closing costs, if any, associated with
the sale of his existing residence and the purchase of a
replacement residence at the changed location, plus an
additional amount representing a gross-up of any state or
federal taxes payable by Executive as a result of any such
reimbursements. If the Executive shall not consent to change
his business location, the Executive may continue to provide
the services required of him hereunder in Clearwater, Florida
and the Corporation shall continue to maintain an office for
the Executive at that location commensurate with the
Corporation's office prior to the Change of Control Date.
(c) During the remaining Term after the Change of Control, the
Corporation will (i) continue to honor the terms of this
Agreement, including as to Royalty and other compensation set
forth in Section 3 hereof, and (ii) continue employee benefits
as set forth in Section 4 hereof at levels in effect on the
Change of Control Date (but
7
9
subject to such reductions as may be required to maintain such
plans in compliance with applicable federal law regulating
employee benefits).
(d) If during the remaining Term on or after the Change of Control
Date (i) the Executive's employment is terminated by the
Corporation, or (ii) there shall have occurred a material
reduction in Executive's compensation or employment related
benefits, or a material change in Executive's status, working
conditions or management responsibilities, or a material
change in the business objectives or policies of the
Corporation and the Executive voluntarily terminates
employment within sixty (60) days of any such occurrence, or
the last in a series of occurrences, then the Executive shall
be entitled to receive, subject to the provisions of
subparagraphs (e) and (f) below, a lump-sum payment equal to
200% of Executive's current Royalty (the "Lump-Sum Payment")
in addition to any other compensation that may be due and
owing to the Executive under Section 3 hereof. The Lump-Sum
Payment shall be in addition to any stock options that
Executive may exercise pursuant to Section hereof. Such
Lump-Sum Payment does not affect continuing royalties which
may come due.
(e) The amounts payable to the Executive under any other
compensation agreement maintained by the Corporation which
became payable, after payment of the lump-sum provided for in
paragraph (d), upon or as a result of the exercise by
Executive of rights which are contingent on a Change of
Control (and would be considered a "parachute payment" under
Internal Revenue Code 280G and regulations thereunder), shall
be reduced to the extent necessary so that such amounts when
added to such lump-sum, do not exceed 200% of the Executive's
Minimum Royalty (as computed in accordance with provisions of
the Internal Revenue Code of 1986, as amended and any
regulations promulgated thereunder) for determining whether
the Executive has received an excess parachute payment. Any
such excess amount shall be deferred and paid in the next tax
year.
(f) The Corporation will allow the Executive to participate in all
meetings and negotiations related thereto.
This Section 7 shall survive termination/expiration of this Agreement.
8. Assignability. The rights and obligations of the Corporation under
this Agreement shall inure to the benefit and be binding upon the
successors and assigns of the Corporation, provided that such
successor or assign
8
10
shall acquire all or substantially all of the assets and business of
the Corporation. The Executive's rights and obligations hereunder may
not be assigned or alienated and any attempt to do so by the Executive
will be void and constitute a material breach hereunder.
9. Severability. If any provision of this Agreement is otherwise deemed
to be invalid or unenforceable or is prohibited by the laws of the
state or jurisdiction where it is to be performed, this Agreement
shall be considered divisible as to such provision and such
provision shall be inoperative in such state or jurisdiction and shall
not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid
and binding and/or like effect as though such provision were not
included.
10. Notice. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight
courier, or telecopier to the following addresses:
To Company: Innova/Pure Water, Inc.
0000 000xx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
With copy to: -----------------------------------
-----------------------------------
-----------------------------------
To Executive: Xxxx X. Xxxxxx, Xx.
-----------------------------------
-----------------------------------
With copy to: -----------------------------------
-----------------------------------
-----------------------------------
Either party may, from time to time, designate any other address to which
any such notice to it or him shall be sent. Any such notice shall be deemed
to have been delivered upon the earlier of actual receipt or four days
after deposit in the mail, if by certified mail.
11. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal,
substantive laws of the State of Florida without giving effect
to the conflict of laws rules thereof.
9
11
(b) Waiver/Amendment. The waiver by any party of this Agreement of
a breach of any provision hereof by any other party shall not
be construed as a waiver of any subsequent breach by any
party. No provision of this Agreement may be terminated,
amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the
enforcement of the termination, amendment, supplement, waiver
or modification is sought.
(c) Attorney's Fees. In the event any such action is commenced,
the prevailing party shall be entitled to a reasonable
attorney fee, costs and expenses.
(d) Entire Agreement. This Agreement represents the entire
agreement between the parties with respect to the subject
matter of this Agreement.
(d) Counterparts. This Agreement may be executed in counterparts,
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.
WITNESSES: EXECUTIVE:
-------------------------------------- Xxxx X. Xxxxxx, Xx.
Print Name:
---------------------------
--------------------------------------
Print Name:
---------------------------
WITNESSES: CORPORATION:
INNOVA PURE WATER, INC.
a Florida corporation
Print Name: By:
--------------------------- -------------------------------
Title:
----------------------------
--------------------------------------
Print Name:
---------------------------
10
