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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of the 9th day of December, 1996, by and between Sonoma International, a Nevada
corporation ("Employer"), and Xxxxx X. Xxxx ("Employee"), but shall be
effective for all purposes as of January 15, 1997. This Agreement supersedes
and replaces all prior employment agreements by and between Employer and
Employee.
W I T N E S S E T H:
WHEREAS, Employee is the President and Chief Executive Officer of
Employer; and
WHEREAS, Employee and Employer have determined that it is in their
mutual best interests to enter into this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Employment. Employer hereby employs Employee and Employee hereby
accepts employment with Employer upon the terms and conditions hereinafter set
forth.
2. Duties. Employee shall perform such management and other duties
as the President and Co-Chief Executive Officer of a company that is similar in
type and size to Employer and as the Board of Directors of Employer shall from
time to time reasonably request.
3. Term. The employment of Employee under this Agreement shall
commence on January 15, 1997, and shall continue, unless earlier terminated
pursuant to Section 6 below, through January 14, 1999; provided, however, that
this Agreement shall automatically extend for a successive one year period on
each January 15, commencing on January 15, 1999, unless either Employer or
Employee provides the other written notice at least 30 days prior to the end of
the then existing term of its intent to terminate this Agreement at the end of
the then applicable term. The initial term of this Agreement and any renewal
term as provided above are collectively referred to herein as the "Term".
4. Compensation. As compensation for his services rendered under
this Agreement, during the Term Employee shall be entitled to receive the
following:
(a) Salary. Employee shall be paid a yearly salary of
$100,000, payable bi-weekly in equal installments, subject to increase
from time to time as may be determined by the Board of Directors of
Employer.
(b) Bonus. Employee may be paid an annual cash bonus with the
amount to be determined by the Compensation Committee of the Board of
Directors. Each annual
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bonus, if any, shall be paid within five days after final audited
financial statements of Employer have been completed and delivered to
Employer.
(c) Benefits. Employee shall be entitled to receive such
group benefits as Employer may provide to its other employees at
comparable salaries and responsibilities to those of Employee, including
up to 100% of the premium costs of medical, dental, life, and disability
plans.
(d) Stock Options.
(i) Employee shall receive a grant from Employer
of a certain number of shares of common stock of Employer
("Common Stock") pursuant to the terms of Employer's 1996
Long-Term Incentive Plan (the "Plan"), with such options
being considered incentive stock options to the greatest
extent possible.
(ii) As of the date hereof, Employee shall
receive a grant from Employer of additional stock options
as agreed to by Employee and Employer in accordance with
the terms of the Plan.
(iii) As soon as possible after the date hereof,
Employee shall be entitled to receive additional options
to purchase Common Stock, either inside or outside the
Plan, as may be approved by the Board of Directors of
Employer or any committee thereof.
(e) Expenses. Employer shall pay directly for Employee's
business related car phone expenses, long distance calling card and
ordinary and necessary business travel and entertainment. In addition,
Employer shall reimburse Employee for all other ordinary and reasonable
expenses incurred by Employee in rendering services required under this
Agreement on a monthly basis upon submission of a detailed monthly
statement and reasonable documentation, including reimbursement of auto
expense when on the business of Employer at the rate of $0.31 per mile.
5. Confidentiality.
(a) Acknowledgment of Proprietary Interest. Employee
recognizes the proprietary interest of Employer and its affiliates in
any Trade Secrets (as hereinafter defined) of Employer and its
affiliates. Employee acknowledges and agrees that any and all Trade
Secrets learned by Employee during the course of his engagement by
Employer shall be and is the property of Employer and its affiliates.
Employee further acknowledges and understands that his disclosure of any
Trade Secrets and/or proprietary information may result in irreparable
injury and damage to Employer and its affiliates. As used herein,
"Trade Secrets" means all confidential and proprietary information of
Employer and its affiliates, including, without limitation, information
derived from reports, investigations, experiments, research, work in
progress, drawings, designs,
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plans, proposals, codes, marketing and sales programs, client lists,
client mailing lists, financial projections, cost summaries, pricing
formula, and all other concepts, ideas, materials, or information
prepared or performed for or by Employer or its affiliates.
(b) Covenant Not-to-Divulge Trade Secrets. Employee
acknowledges and agrees that Employer and its affiliates are entitled to
prevent the disclosure of Trade Secrets. Employee agrees at all times
during the Term to hold in strict confidence and not to disclose or
allow to be disclosed to any person, firm or corporation, other than to
persons engaged by Employer and its affiliates to further the business
of Employer and its affiliates.
(c) Return of Materials at Termination. In the event of any
termination or cessation of his employment with Employer for any reason
whatsoever, Employee shall, upon the written request of Employer,
promptly deliver to Employer all documents, data and other information
pertaining to Trade Secrets. Employee shall not take any documents or
other information, or any reproduction or excerpt thereof, containing or
pertaining to any Trade Secrets.
(d) Competition During Employment. Employee agrees that
during the Term, neither he, nor any of his affiliates, will be actively
involved in, or directly or indirectly compete with Employer or its
affiliates in any way, and that he will not act as an officer, director,
employee, consultant, shareholder, lender, or agent of any entity which
is engaged in any business of the same nature as, or in competition
with, the businesses in which Employer and its affiliates are now
engaged or in which Employer or its affiliates become engaged during the
Term; provided, however, that this Section 5(d) shall not prohibit
Employee or any of his affiliates from (i) serving as a director (or
similar capacity) of any entity which is not in direct competition with
Employer or its affiliates or (ii) purchasing or holding an aggregate
equity interest of up to 5%, so long as Employee and his affiliates
combined do not purchase or hold an aggregate equity interest of more
than 5%, in any business in competition with Employer and its
affiliates.
6. Termination. This Agreement and the employment relationship
created hereby shall terminate upon the occurrence of any of the following
events:
(a) The expiration of the Term as set forth in Section 3
above;
(b) The death of Employee;
(c) The "disability" (as hereinafter defined) of Employee;
(d) Resignation by Employee;
(e) Written notice to Employee from Employer of termination
for "just cause" (as hereinafter defined); or
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(f) Written notice to Employee from Employer of termination
for any reason other than as set forth in this Section 6.
For purposes of Section 6(c) above, the "disability" of Employee shall
mean his inability, because of mental or physical illness or incapacity, to
perform his duties under this Agreement for a continuous period of 120 days or
for 120 days out of a 150-day period. For purposes of Section 6(e) above,
"just cause" shall mean (a) that Employee (i) breached his fiduciary duty for
personal profit or (ii) is liable for gross negligence or intentional
misconduct in the performance of his duties to Employer, and, in either case,
such adjudication is no longer subject to direct appeal; (b) conviction of
Employee of a felony involving fraud or moral turpitude by a court of competent
jurisdiction; (c) Employee fails to give Employer not less than 30 days' notice
of Employee's resignation; or (d) Employee's material breach of any material
term of this Agreement, and such breach continues for more than thirty (30)
days after written notice of such breach is delivered to Employee by Employer.
In the event of the termination of Employee's employment pursuant to
Sections 6(a), (b), (c), (d) or (e) above, Employee shall be entitled only to
the compensation earned by him, or accrued for his benefit (with any bonuses
accruing on a daily basis) as of the date of termination. If Employee's
employment is terminated during this Agreement's initial two (2) year term
pursuant to Section 6(f) above, then Employee shall be entitled to receive the
compensation payable pursuant to Section 4 above for a period equal to the
remainder of the initial term of this Agreement. If Employee is terminated on
or after January 15, 1999 pursuant to Section 6(f) above then Employee shall be
entitled to receive the compensation payable pursuant to Section 4 above for a
period of 30 days after such date of termination stated in such notice.
7. Remedies. Employee recognizes and acknowledges that in the event
of any default in, or breach of any of, the terms, conditions or provisions of
this Agreement by Employee, Employer's remedies at law shall be inadequate.
Accordingly, Employee agrees that in such event, Employer shall have the right
of specific performance and/or injunctive relief in addition to any and all
other remedies and rights at law or in equity, and such rights and remedies
shall be cumulative.
8. Notices. Any notices, consents, demands, requests, approvals and
other communications to be given under this Agreement by either party to the
other shall be deemed to have been duly given if given in writing and
personally delivered or sent by mail, registered or certified, postage prepaid
with return receipt requested, as follows:
If to Employer: Sonoma International
3000 Lexington Financial Center
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Chairman of the Board
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If to Employee: Xxxxx X. Xxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Notices delivered personally shall be deemed communicated as of actual receipt;
mailed notices shall be deemed communicated as of three days after mailing.
9. Entire Agreement. This Agreement contains the entire agreement
of the parties hereto and supersedes all prior agreements and understandings,
oral or written between the parties hereto, including, without limitation, that
certain Employment Agreement, dated as of December 9, 1996, by and between
Employer and Employee. No modification or amendment of any of the terms,
conditions or provisions herein may be made otherwise than by written agreement
signed by the parties hereto.
10. Governing Law. This Agreement and the rights and obligations of
the parties hereto shall be governed, construed and enforced in accordance with
the laws of the State of Kentucky.
11. Parties Bound. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of Employer and
Employee, and their respective heirs, personal representatives, successors and
assigns. Employer shall have the right to assign this Agreement to any
affiliate or to its successors or assigns. The terms "successors" and
"assigns" shall include any person, corporation, partnership or other entity
that buys all or substantially all of Employer's assets or all of its stock, or
with which Employer merges or consolidates. The rights, duties or benefits to
Employee hereunder are personal to him, and no such right or benefit may be
assigned by him. The parties hereto acknowledge and agree that Employer's
affiliates are third-party beneficiaries of the covenants and agreements of
Employee set forth in Sections 5 and 6 above.
12. Estate. If Employee dies prior to the payment of all sums owed,
or to be owed, to Employee pursuant to Section 4 above, then such sums, as they
become due, shall be paid to Employee's estate.
13. Enforceability. If, for any reason, any provision contained in
this agreement should be held invalid in part by a court of competent
jurisdiction, then it is the intent of each of the parties hereto that the
balance of this Agreement be enforced to the fullest extent permitted by
applicable law. Accordingly, should a court of competent jurisdiction
determine that the scope of any covenant is too broad to be enforced as
written, it is the intent of each of the parties that the court should reform
such covenant to such narrower scope as it determines enforceable.
14. Waiver of Breach. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by any party.
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15. Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
16. Costs. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which he or it may be entitled.
17. Affiliate. An "affiliate" of any party hereto shall mean any
person controlling, controlled by or under common control with such party.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument, but only one of which need be produced.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EMPLOYER:
SONOMA INTERNATIONAL
By: /s/ R. Xxxxxx Xxxx
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Chairman
EMPLOYEE:
By: /s/ Xxxxx X. Xxxx
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