EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT
dated as
of August 22, 2007 (the “Agreement”),
is by
and between Neuro-Hitech, Inc., a Delaware corporation (the “Company”)
and
Xxxx Xxxxxxxx (“Executive”).
The
Company and Executive will be referred to collectively as the “Parties”
and
may
each be referred to individually as a “Party”.
WHEREAS,
the
Board of Directors of the Company (the “Board”)
has
determined that it is in the best interest of the Company and its shareholders
to employ Executive as Chief Executive Officer and President and Executive
desires to be employed in such capacity;
NOW
THEREFORE,
in
consideration of the mutual covenants and promises contained herein, the receipt
and adequacy of which are acknowledged, the parties agree as
follows:
1. Acceptance
of Employment.
Subject
to the terms and conditions set forth below, the Company agrees to employ
Executive and Executive accepts such employment.
2. Term.
The
period of employment and term of this Agreement will be from August 27, 2007
through August 27, 2011, unless further extended or sooner terminated as
hereinafter set forth (the “Term”).
3. Position
and Duties.
Executive shall serve as Chief Executive Officer and President of the Company
and will perform such duties as are commensurate with those positions, and
such
other reasonably related duties consistent with such position that are assigned
to Executive by the Board. Subject to reasonable business travel requirements,
Executive shall generally perform his duties from the Company’ general and
administrative offices and shall not be required by the Company to be personally
based or transferred anywhere other than the Philadelphia metropolitan areas,
without Executive’s prior written consent. Executive will perform his duties in
a professional and competent manner. Executive shall devote all of his working
time and attention and his reasonable best efforts and skills to the business
and affairs of the Company, except (i) with respect to incidental business
activities, including consulting engagements which
Executive has undertaken prior to the date hereof, which have been generally
described to the Board and which Executive will complete as soon as reasonably
possible, up to two non-executive outside directorships, and civic and
charitable activities, which shall be fully disclosed to the Board prior to
engaging in such activities and which, in the determination of the Board, do
not
cause a conflict of interest or interfere with Executive’s performance of his
duties under this Agreement; and (ii) as otherwise approved by the
Board.
During
the Term, the Company shall nominate and take such action as may be necessary
or
appropriate to seek stockholder election of Executive to the Board. Executive
agrees to resign from the Board in connection with, and effective upon,
termination of his employment with the Company, unless specifically requested
by
the Board in writing to complete his term.
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4.
Base
Salary and Incentives.
(a) Base
Salary. During
the Term, the Company will pay Executive a base salary at the rate of $450,000
per annum, less customary withholdings and deductions (the “Base
Salary”)
payable in accordance with the payroll procedures for the Company’s salaried
employees in effect during the Term.
(b) Bonuses.
In
addition to the Base Salary, Executive shall be eligible to receive an annual
cash bonus of up to 50% of Base Salary (the “Target
Bonus”)
in
such amount as shall be determined by the Compensation Committee of the Board
following Executive’s achievement of performance objectives determined by the
Compensation Committee. The performance objectives shall be established by
the
Compensation Committee and Executive at the beginning of each fiscal year and
the achievement of such goals reviewed at the beginning of the ensuing fiscal
year. Payment of the bonus shall be made at such time as determined by the
Compensation Committee; provided,
however,
that
such bonus must be paid on or before January 31 immediately following the end
of
the fiscal year for which such bonus is payable.
(c) Stock
Options.
To
induce Executive to enter into this Agreement, the Company hereby grants to
Executive stock options (the “Stock
Options”)
in the
Company upon the terms and conditions set forth on Appendix
1
hereto
and in
accordance with the terms of the Company’s 2006 Incentive Stock Plan, as amended
from time-to-time (the “Plan”).
(d) Annual
Incentive Award Opportunity.
Executive shall be eligible to receive additional grants of Stock Options to
purchase up to 66,667 shares of Common Stock on each anniversary of the
commencement of the Term. Actual awards will be based on the achievement of
specified performance objectives, as determined by the Compensation Committee
of
the Board.
5. Benefits.
During
the Term, Executive will be eligible for the following benefits in connection
with his employment (collectively, the “Benefits”):
(a) Retirement
Benefits.
Executive
will be eligible to participate in the Company’s 401(k) Plan in accordance with
the terms of that plan, as they may be amended from time-to-time by the Company.
(b)
Other
Fringe Benefits.
In
addition to any other benefits specifically set forth herein, Executive shall
be
eligible to participate in all employee benefit plans and programs offered
by
the Company to its senior executives generally, in accordance with the terms
of
those plans and programs (collectively, the “Fringe
Benefits”),
as
the Fringe Benefits may be amended or terminated from time-to-time by the
Company.
(c) Business
and Travel Expenses.
Executive shall be entitled to reimbursement of all reasonable and necessary
business-related expenses he incurs in performing his duties, in accordance
with
and to the extent permitted by the Company’s policies in effect from time to
time.
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(d) Indemnification.
Executive shall be entitled to such indemnification rights as are set forth
in
the Indemnification Agreement, a copy of which is attached hereto and
incorporated by reference as Appendix 2.
6. Termination
of Employment and Effect of Termination.
(a) By
Company for Death.
Executive’s employment hereunder shall terminate upon his death, in which event
the Company shall have no further obligation to Executive or his estate other
than the payment of accrued and/or vested but unpaid Base Salary, accrued and/or
vested but unpaid bonuses, vacation pay and other Benefits as of the termination
date, unless otherwise required by law, the Plan or employee benefit plan
documents. Notwithstanding anything to the contrary herein or in the Plan,
as
may be amended from time to time, the Options shall be transferred after
Executive’s death to the persons entitled thereto under his will or the laws of
descent and distribution and the legal representative of the estate or the
legatee of the Executive under the will of the Executive may exercise the
Options, to the extent exercisable at Executive’s death, for a period of one (1)
year after the date of such death or until the expiration of the stated term
of
such Options, whichever period is shorter.
(b) By
Company for Disability.
If
Executive incurs a Disability and such Disability continues for a period of
six
(6) consecutive months, then the Company may, to the extent permitted by
applicable law, terminate Executive’s employment upon written notice to
Executive, in which event the Company shall have no further obligation to
Executive other than the payment of accrued and/or vested but unpaid Base
Salary, accrued and/or vested but unpaid bonuses, vacation pay and other
Benefits as of the termination date, unless otherwise required by law, the
Plan
or employee benefit plan documents. For the purposes of this Agreement, a
“Disability” means a physical or mental impairment that substantially limits a
major life activity and that precludes Executive from performing all of the
essential functions of his position, with or without reasonable accommodation,
as such applicable terms are defined by the federal Americans with Disabilities
Act, as it may be amended from time-to-time.
(c) By
Executive for Good Reason.
Executive may terminate his employment hereunder for Good Reason after giving
at
least 30 days’ notice to the Company. The date of such termination must be no
more than 90 days from the date of the occurrence giving rise to the Good
Reason. For purposes of this Agreement, Good Reason means that, without
Executive’s prior written consent: (i) the Company relocates its general and
administrative offices or Executive’s place of employment to an area other than
the Philadelphia Standard Metropolitan Statistical Area; (ii) Executive is
assigned duties substantially inconsistent with his responsibilities as
described in Section 3 of this Agreement or a substantial adverse alteration
is
made to the nature or status of such responsibilities; (iii) Executive’s title
is diminished; (iv) the Company reduces Executive’s Base Salary as in effect on
the date hereof; or (v) any material reduction in Benefits provided to Executive
pursuant to Sections 4 and 5 of this Agreement, other than in connection with
a
reduction in benefits generally applicable to senior executives of the Company.
In the event that Executive elects to terminate this Agreement for Good Reason,
Executive shall be entitled to: (aa) payment of accrued and/or vested but unpaid
Base Salary, accrued and/or vested but unpaid bonuses, vacation pay and other
Benefits as of the termination date, unless otherwise required by law, the
Plan
or employee benefit plan documents; (bb) payment of one year of Base Salary
at
the rate in effect as of the date of termination in installments in accordance
with the Company’s payroll practices in effect at the time; (cc) continuation of
Fringe Benefits for one year after the date of termination; and (dd) all of
the
Executive’s Outstanding Options shall become immediately vested and exercisable
in full. In the event the Company’s Fringe Benefit plans do not permit continued
participation by Executive after his termination, then Executive will instead
be
entitled to a lump sum payment from the Company of the expected cost to
Executive to purchase and continue all such Fringe Benefit programs, as an
individual or family policyholder, grossed up for all local, state and Federal
taxes at the maximum tax rates. Executive’s entitlement to the Base Salary
described in (bb) and the Fringe Benefits described in (cc) is conditional
on
his execution of a Severance Agreement and General Release in substantially
the
same form attached hereto as Appendix 3. The Company agrees to provide to
Executive within ten (10) days of termination the Severance Agreement and
General Release for execution.
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(d) By
Executive without Good Reason.
Executive may terminate this Agreement without Good Reason upon ninety (90)
days’ prior written notice to the Company. In the event Executive’s employment
is terminated pursuant to this Section 6(d), the Company may in its discretion
relieve Executive of his duties and provide him with Base Salary and Benefits
through the date of termination. In the event Executive terminates his
employment without Good Reason, Executive shall be entitled to payment of
accrued and/or vested but unpaid Base Salary, vacation pay and other Benefits
as
of the termination date, unless otherwise required by law or employee benefit
plan documents.
(e) By
Company for Cause.
The
Board may terminate this Agreement for Cause upon written notice to Executive.
“Cause” shall be defined as: (i) the commission of a felony or a crime involving
moral turpitude or the commission of any other act or omission involving
dishonesty or fraud with respect to the Company or any of its affiliates or
any
of their customers or suppliers; (ii) substantial failure on the part of
Executive in his performance of the duties of the office held by him as
reasonably directed by the Board (other than any such failure resulting from
Executive’s incapacity due to physical or mental illness), after notice to
Executive and a reasonable opportunity to cure; (iii) gross negligence or
willful misconduct by Executive with respect to the Company or any of its
affiliates (including, without limitation, disparagement that adversely affects
the reputation of the Company or any of its affiliates); or (iv) any material
breach by Executive of Sections 3, 7 or 8 of this Agreement. For purposes of
this Agreement, an act, or failure to act, on the Executive’s part shall be
considered “gross negligence” or “willful misconduct” only if done, or omitted,
by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company and its affiliates. The
Executive’s employment shall not be deemed to have been terminated for “Cause”
unless the Company shall have given or delivered to the Executive (A) reasonable
notice setting forth the reasons for the Company’s intention to terminate the
Executive’s employment for “Cause”; (B) a reasonable opportunity, at any time
during the 30 day period after the Executive’s receipt of such notice, for the
Executive, together with his counsel, to be heard before the Board; and (C)
a
notice of termination stating that, in the good faith opinion of not less than
a
majority of the entire membership of the Board, the Executive was guilty of
the
conduct set forth in clauses (i), (ii), (iii) or (iv) of the first sentence
of
this Section 6(e).
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In
the
event Executive is terminated for Cause, the Company’ only obligation to
Executive will be the payment of accrued and/or vested but unpaid Base Salary,
vacation pay and other Benefits as of the termination date, unless otherwise
required by law or employee benefit plan documents.
(f) By
the Company for Other than Cause.
The
Board may terminate this Agreement for reasons other than Cause after giving
at
least ninety (90) days’ prior written notice of such termination to Executive.
In the event the Company terminates Executive pursuant to this Section 6(f),
Executive shall be entitled to: (aa) payment of accrued and/or vested but unpaid
Base Salary, vacation pay and other Benefits as of the termination date, unless
otherwise required by law or plan documents; (bb) payment of one
year of
Base
Salary at the rate in effect as of the date of termination in installments
in
accordance with the Company’s payroll practices in effect at the time; (cc)
continuation of Fringe Benefits for one year after
the
date of termination; and (dd) all of the Executive’s Outstanding Options shall
become immediately vested and exercisable in full. In the event the Company’s
Fringe Benefit plans do not permit continued participation by Executive after
his termination, then Executive will instead be entitled to a lump sum payment
from the Company of the expected cost to Executive to purchase and continue
all
such Fringe Benefit programs, as an individual or family policyholder, grossed
up for all local, state and Federal taxes at the maximum tax rates. Executive’s
entitlement to the Base Salary described in (bb) and the Fringe Benefits
described in (cc) is conditional on his execution of a Severance Agreement
and
General Release in substantially the same form attached hereto as Appendix.
The
Company agrees to provide to Executive within ten (10) days of termination
the
Severance Agreement and General Release for execution.
(g) Termination
Following a Change in Control.
If the
Executive’s employment is terminated by the Company during the Protection Period
(as defined below) other than for Cause, Disability or as a result of the
Executive’s death, or if the Executive terminates his employment during the
Protection Period for Good Reason, the Company shall, subject to Section 7
of
this Agreement, provide Executive with the following within ten (10) days of
the
effective date of the Severance Agreement and General Release described below
(the “Effective
Date”)
unless
otherwise indicated below:
(i) the
Executive’s Base Salary and vacation pay (for vacation not taken) accrued but
unpaid through the date of termination of employment;
(ii) a
lump
sum severance payment in an amount equal to the product of 2 times the Base
Salary at the rate in effect as of the date of termination and 2 times the
Target Bonus then in effect as of the date of termination;
(iii) the
Company shall provide continuation of Fringe Benefits for two years after the
date of termination. In the event the Company’s Fringe Benefit plans do not
permit continued participation by Executive after his termination, then
Executive will instead be entitled to a lump sum payment from the Company of
the
expected cost to Executive to purchase and continue all such Fringe Benefit
programs, as an individual or family policyholder, grossed up for all local,
state and Federal taxes at the maximum tax rate; and
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(iv) all
of
the Executive’s Outstanding Options shall become immediately vested and
exercisable in full.
Executive’s
entitlement to the foregoing benefits described in (g) is conditional on his
execution of a Severance Agreement and General Release in substantially the
same
form as is attached hereto as Appendix 3. The Company agrees to provide to
Executive within ten (10) days of termination the Severance Agreement and
General Release for execution.
For
the
purposes of this Section 6(g) and Section 6(h) of this Agreement, the following
terms are defined below:
“Change
in Control”
shall
mean a change in control of a nature that would be required to be reported
in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities and Exchange Act of 1934, as amended (the “Exchange
Act”),
whether or not the Company is then subject to such reporting requirements;
provided that, without limitation, a Change in Control shall be deemed to have
occurred if (i) any person (as such term is used in section 13(d) and 14(d)
of
the Exchange Act) is or becomes beneficial owner (as defined in Rule 13d-3
under
the Exchange Act), directly or indirectly, of securities of the Company
representing 25 percent or more of the combined voting power of the Company’s
then outstanding securities; or (ii) during any period of two consecutive
years, the following persons (the “Continuing
Directors”)
cease
for any reason to constitute a majority of the Board: individuals who at the
beginning of such period constitute the Board and new directors each of whose
election to the Board or nomination for election to the Board by the Company’s
security holders was approved by a vote of at least two thirds of the directors
then still in office who either were directors at the beginning of the period
or
whose election or nomination for election was previously so approved; or (iii)
the securityholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
before the merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of such surviving
entity) a majority of the voting securities of the Company or of such surviving
entity outstanding immediately after such merger or consolidation; or (iv)
the
security holders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of its assets.
The
“Change
in Control Date”
shall
be any date during the term of this Agreement on which a Change in Control
occurs. Notwithstanding any contrary provision in this Agreement, if the
Executive’s employment or status as an elected or appointed officer with the
Company is terminated by the Company within six months before the date on which
a Change in Control occurs, and it is reasonably demonstrated that such
termination (i) was at the request of a third party who has taken steps
reasonably calculated or intended to effect a Change in Control or
(ii) otherwise arose in connection with or anticipation of a Change in
Control, then for the purposes of this Agreement the “Change in Control Date”
shall mean the date immediately before the date of such
termination.
“Good
Reason”
means:
(i) the
assignment to the Executive within the Protection Period of any duties
inconsistent in any respect with the Executive’s position (including status,
offices, titles and reporting requirements, authority, duties, or
responsibilities) or any other action that results in a diminution in such
position, authority, duties, or responsibilities excluding for this purpose
an
isolated, insubstantial, and inadvertent action that is not taken in bad faith
and is remedied by the Company promptly after receipt of notice given by the
Executive;
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(ii) a
reduction by the Company in the Executive’s Base Salary in effect immediately
before the beginning of the Protection Period or as increased from time to
time
after the beginning of the Protection Period;
(iii) a
failure
by the Company to maintain plans providing Benefits at least as beneficial
as
those provided by any benefit or compensation plan (including, without
limitation, any incentive compensation plan, bonus plan, or program, retirement,
pension or savings plan, life insurance plan, health and dental plan, or
disability plan) in which the Executive is participating immediately before
the
beginning of the Protection Period or any action taken by the Company that
would
adversely affect the Executive’s participation in, or reduce the Executive’s
opportunity to benefit under, any of such plans or deprive the Executive of
any
material fringe benefit enjoyed by him immediately before the beginning of
the
Protection Period; provided,
however,
that a
reduction in benefits under the Company’ tax qualified retirement, pension, or
savings plans or its life insurance plan, health and dental plan, disability
plans, or other insurance plans, which reduction applies generally to
participants in the plans and has a de minimis effect on the Executive shall
not
constitute “Good Reason” for termination by the Executive;
(iv) the
Company requiring the Executive, without the Executive’s written consent, to be
based at any office or location in excess of 25 miles from his office location
immediately before the beginning of the Protection Period, except for travel
reasonably required in the performance of the Executive’s responsibilities;
(v) any
purported termination by the Company of the Executive’s employment for Cause
otherwise than as provided in Section 6(e) of this Agreement; or
(vi) any
failure by the Company to obtain the assumption of the obligations contained
in
this Agreement by any successor as contemplated in Section 9(c) of this
Agreement.
“Protection
Period”
means
the period beginning on the Change in Control Date and ending on the last day
of
the 24th calendar month following the Change in Control Date.
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(h) Adjustment
in Benefits.
In the
event that Executive becomes entitled to the payments and benefits described
in
this Section 6 (together with any other benefits to which Executive is entitled
hereunder following a termination entitling Executive to the payments and
benefits of this Section 6, the “Severance
Benefits”),
if
(x) the Severance Benefits equal or exceed 110% of three times Executive’s “base
amount” determined for purposes of Section 280G of the Code, the Company shall
pay to Executive an additional amount (the “Gross-Up
Payment”)
equal
to the sum of any excise tax imposed under Section 280G of the Code
(“Excise
Tax”)
on
Executive by reason of receiving the Severance Benefits plus the amount
necessary to place Executive in the same after-tax position (taking into account
any and all applicable federal, state and local excise, income and other taxes
on the Gross-Up Payment) as if no Excise Tax had been imposed on the Severance
Benefits and no Gross-Up Payment had been made to Executive, and if (y) the
Severance Benefits are less than 110% of three times Executive’s “base amount”
determined for purposes of Section 280G of the Code, the Severance Benefits
shall be limited to no more than 2.99 times Executive’s “base amount” determined
for purposes of Section 280G of the Code. For purposes of determining whether
any of the Severance Benefits will be subject to the Excise Tax and the amount
of such Excise Tax, (i) any other payments or benefits received or to be
received by Executive in connection with a Change in Control or Executive’s
termination of employment (whether pursuant to the terms of this Agreement
or
any other plan, arrangement or agreement with the Company, any person whose
actions result in a change in control or any person affiliated with the Company
or such person) shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within the
meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company’
independent auditors and reasonably acceptable to Executive such other payments
or benefits (in whole or in part) do not constitute parachute payments,
including without limitation by reason of Section 280G(b)(4)(A) of the Code,
or
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code in excess of the Base Amount as defined in Section
280G(b)(3) of the Code allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Severance
Benefits that shall be treated as subject to the Excise Tax shall be equal
to
the lesser of (a) the total amount of the Severance Benefits or (b) the amount
of excess parachute payments within the meaning of Section 280G(b)(1) of the
Code (after applying clause (i) above), and (iii) the value of all non-cash
benefits or any deferred payment or benefit shall be determined by the Company’
independent auditors in accordance with the principles of Section 280G(d)(3)
and
(4) of the Code. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of his residence on the date of
termination, net of the maximum reduction in federal income taxes which could
be
obtained from deduction of such state and local taxes. In the event that the
Excise Tax is subsequently determined to be less than the amount taken into
account hereunder in the computation of the Gross-Up Payment, Executive shall
repay to the Company (without interest), at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable the Excise tax and federal, state and local income and
employment tax imposed on the portion of the Gross-Up Payment being repaid
by
Executive to the extent that such repayment results in a reduction in the Excise
Tax and/or in a federal, state or local income or employment tax deduction).
In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the computation of the Gross-Up Payment
(including by reason of any payment the existence or amount of which cannot
be
determined at the time of the Gross-Up payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by Executive with respect to such excess) at
the
time that the amount of such excess is finally determined. Executive and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Severance Benefits.
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(i) Notice
of Termination.
Termination of this Agreement by the Company or termination of this Agreement
by
Executive shall be communicated by written notice to the other Party hereto,
specifically indicating the termination provision relied upon.
(j) Property.
Upon
the termination of Executive’s employment under this Agreement, for any reason,
or at any time upon request from the Company, Executive shall return all
property of the Company, and all copies, excerpts or summaries of such property
in whatever form, that are in his possession, custody or control.
7. Noncompetition
and Nonsolicitation.
Executive acknowledges that in the course of his employment with the Company
he
has and will become familiar with the Company’s and its affiliates’ trade
secrets and with other confidential information concerning The Company and
its
affiliates and that his services will be of special, unique and extraordinary
value to the Company and its affiliates. Therefore, Executive agrees
that:
(a) Noncompetition.
During
the Term and (i) in the case of termination by the Company without Cause or
resignation by Executive for Good Reason, for a period of two years thereafter,
or (ii) in the case of termination or resignation for any other reason, for
a
period of one year thereafter (as applicable, the “Noncompete
Period”),
Executive shall not, directly or indirectly, either alone or in association
with
others, own, manage, operate, sell, control or participate in the ownership,
management, operation, sales or control of, be involved with the development
efforts of, serve as a technical advisor to, license intellectual property
to,
provide services to or in any manner engage in any business that is engaged
in
the development of Huperzine A or any of the other compounds the Company is
developing on the termination date; provided,
however, that Executive may own as a passive investor up to 5.0% of any class
of
an issuer’s publicly traded securities.
(b) Nonsolicitation.
During
the Noncompete Period, Executive shall not, directly or indirectly, alone or
in
association with others, (i) induce or attempt to induce any employee of
the Company or any of its affiliates to leave the employ of the Company or
such
affiliate, or in any way interfere with the relationship between the Company
and
any of its affiliates and any employee thereof; (ii) hire any person who
was an employee of the Company or any of its affiliates within one year prior
to
the time such employee was hired by Executive; (iii) induce or attempt to
induce any customer, supplier, licensee or other business relation of the
Company or any of its affiliates to cease doing business with the Company or
such affiliate or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and the Company or any of
its
affiliates; or (iv) acquire or attempt to acquire an interest in any
business which relates to any business of the Company or any of its affiliates
and with which the Company and any of its affiliates has entered into
substantive negotiations or has requested and received confidential information
relating to the acquisition of such business by the Company or any of its
affiliates in the two-year period immediately preceding the termination of
employment.
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(c) Enforcement.
If, at
the time of enforcement of this Section 7, a court holds that the restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum duration, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period, scope
or
area and that the court shall be allowed to revise the restrictions contained
herein to cover the maximum duration, scope and area permitted by law.
(d) Additional
Acknowledgments.
Executive acknowledges that the provisions of this Section 7 are
in
consideration of employment with the Company and the additional good and
valuable consideration as set forth in this Agreement. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration
to
the restraints imposed upon Executive by this Agreement, and is in full accord
as to their necessity for the reasonable and proper protection of confidential
and proprietary information of the Company and its affiliates now existing
or to
be developed in the future. Executive expressly acknowledges and agrees that
each and every restraint imposed by this Agreement was discussed in good faith
between the parties hereto and is reasonable with respect to subject matter,
time period and geographical area. During the Term and the Noncompete Period,
Executive agrees to provide the Company (upon the Company’s reasonable request)
with such information as may be necessary to demonstrate Executive’s compliance
with the terms and provisions of this Agreement.
8. Confidential
Information.
(a) Obligation
to Maintain Confidentiality.
Executive acknowledges that the information, observations and data obtained
by
him during the course of his performance under this Agreement concerning the
business and affairs of the Company and its affiliates are the property of
the
Company or such affiliates, including information concerning acquisition
opportunities in or reasonably related to the Company’s or any of its
affiliates’ business or industry of which Executive becomes aware during the
Term. Therefore, Executive agrees that he will not disclose to any unauthorized
person or use for his own account any of such information, observations or
data
without the prior written consent of the Board, unless, and then only to the
extent that, the aforementioned matters become generally known to and available
for use by the public other than as a result of Executive’s acts or omissions to
act. Executive agrees to deliver to the Company upon termination of employment,
or at any other time the Company may request in writing, any
and
all property belonging to the Company and its affiliates in his possession
or
under his control including, but not limited to, any memoranda,
notes, plans, records, reports, documents, discs and other data storage media
(and any copies thereof).
(b) Ownership
of Property.
Executive expressly understands and agrees that any and all right, title or
interest he has or obtains in any documentation, trade secrets, technical
specifications, data, know-how, inventions, concepts, ideas, techniques,
innovations, discoveries, improvements, developments, methods, processes,
programs, designs, analyses, drawings, reports, memoranda, marketing plans,
and
all similar or related information (whether or not patentable) conceived,
devised, developed, contributed to, made, reduced to practice or otherwise
had
or obtained by Executive (either solely or jointly with others) during the
Term
that relate to the Company’s or any of its affiliates’ actual or anticipated
business, research and development, or existing or future products or services,
or that arise out of Executive’s employment with the Company or any of its
affiliates (including any of the foregoing that constitutes any proprietary
information or records) (“Work
Product”)
belong
to the Company or the respective affiliate, and Executive hereby assigns, and
agrees to assign, all of the above Work Product to the Company or to such
affiliate. Any copyrightable work prepared in whole or in part by Executive
in
the course of his work for any of the foregoing entities shall be deemed a
“work
made for hire” under the copyright laws, and the Company or such affiliate shall
own all rights therein. To the extent that any such copyrightable work is not
a
“work made for hire,” Executive hereby assigns, and agrees to assign, to the
Company or the respective affiliate all of his right, title and interest in
and
to such copyrightable work. Executive shall promptly disclose such Work Product
and copyrightable work to the Board and perform all actions reasonably requested
by the Board (whether during or after the Employment Period) to establish and
confirm the Company’s or the respective affiliate’s ownership therein (including
executing and delivering any assignments, consents, powers of attorney and
other
instruments).
10
(c) Third
Party Information.
Executive understands that the Company and its affiliates will receive from
third parties confidential or proprietary information (“Third
Party Information”)
subject to a duty on the Company’s and such affiliates’ part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Term and thereafter, and without in any way limiting the
provisions of Section 8(a) above, Executive will hold Third Party Information
in
the strictest confidence and will not disclose to anyone (other than personnel
of the Company or its affiliates who need to know such information in connection
with their work for the Company or such affiliates) or use, except in connection
with his work for the Company or such affiliates, Third Party Information
without the prior written consent of the Board.
(d) Use
of
Information of Prior Employers.
During
the Term, Executive will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employers or any other
person to whom Executive has an obligation of confidentiality, and will not
bring onto the premises of the Company or any of its affiliates any unpublished
documents or any property belonging to any former employer or any other person
to whom Executive has an obligation of confidentiality unless consented to
in
writing by the former employer or person. Executive will use in the performance
of his duties only information which is (i)(x) common knowledge in the industry
or (y) is otherwise legally in the public domain; (ii) is otherwise provided
or
developed by the Company or its affiliates; or (iii) in the case of
materials, property or information belonging to any former employer or other
person to whom Executive has an obligation of confidentiality, approved for
such
use in writing by such former employer or person.
9. Arbitration.
All
disputes concerning the application, interpretation or enforcement of this
Agreement or otherwise arising out of the relationship between Executive, and
the Company, except for those arising under Section 7 or 8 of this Agreement,
shall be resolved exclusively by final and binding arbitration before a single
arbitrator in accordance with the Employment Rules of the American Arbitration
Association then in effect. The arbitration shall be held in New York, New
York,
and the arbitrator shall have the authority to permit the parties to engage
in
reasonable pre-hearing discovery. In any litigation or arbitration to enforce
this Agreement, the prevailing party will be awarded reasonable attorneys’ fees
and costs. Each Party knowingly and voluntarily waives its right to a trial
by
jury with respect to disputes that are covered by this Section 9.
11
10. Notices.
Any
notice provided for or required by this Agreement must be in writing and must
be
either personally delivered, mailed by first class mail (postage prepaid and
return receipt requested) or sent by reputable overnight courier service
(charges prepaid) to the recipient at the addresses indicated below or to such
other address as a Party may designate in writing to the other
Party:
If
to the
Company:
Xxx
Xxxx
Xxxxx, Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attention:
____________
With
a
copy to:
Arent
Fox
LLP
0000
Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Attention:
Xxxxxxx X. Xxxxxx, Esquire
If
to
Executive:
To
his
last known home address on file with the Company
11. No
Waiver.
The
failure of either Party at any time to enforce any provision of this Agreement
or to exercise any remedy, option, right, power or privilege provided for
herein, or to require the performance by the other party of any of the
provisions hereof, shall in no way be deemed a waiver of such provision at
the
same or at any prior or subsequent time.
12. Governing
Law.
This
Agreement is governed by and shall be construed in accordance with the laws
of
the State of New York, without reference to the principles of conflict of laws
therein. Executive agrees to submit to personal jurisdiction and venue in the
State of New York.
13. Validity.
The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not be deemed to affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. The
court or arbitrator will modify any invalid or unenforceable provision to make
it valid and enforceable to the maximum extent permitted by law.
14. Successors.
This
Agreement shall be binding upon the Company, its successors and assigns,
including any corporation or other business entity which may acquire all or
substantially all of the Company’ assets or business, or within which the
Company may be consolidated or merged, or any surviving corporation in a merger
involving the Company.
12
15. Waiver
or Modification of Agreement.
No
waiver or modification of this Agreement shall be valid unless in writing and
duly executed by both Parties.
16. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which and
together will constitute one and the same instrument.
17. Entire
Agreement.
This
Agreement represents the entire agreement, and supersedes all other agreements,
discussions or understandings concerning the subject matter.
[Signature
Page Next]
13
IN
WITNESS WHEREOF,
the
parties have duly executed this Agreement as of the date and year first above
written.
By: /s/
Xxxx
Xxxxxxxx
Name: Xxxx
Xxxxxxxx
Its: Chairman
of the Board
EXECUTIVE
/s/
Xxxx
Xxxxxxxx
Xxxx Xxxxxxxx
APPENDIX
1
Terms
of Stock Options
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Executive
will be issued a Stock Option Agreement pursuant to which Executive
will
receive Stock Options as of August 22, 2007, which Stock Option Agreement
will be consistent with the terms and conditions set forth in this
Appendix 1. The aggregate number of shares of common stock for which
the
Stock Options granted thereunder is exercisable is 800,000.
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The
exercise price of the shares of common stock of the Company covered
by the
Stock Option Agreement, subject to adjustment as described immediately
below, shall be the fair market value on August 22,
2007.
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In
the event that the outstanding shares of stock subject to a Stock
Option
Agreement are, from time to time, changed into or exchanged for a
different number or kind of shares of the Company or other securities
of
the Company by reason of a merger, consolidation, recapitalization
event,
reclassification, stock split, stock dividend, combination of shares,
or
otherwise, the Company’s stock option plan administrator shall make an
appropriate and equitable adjustment in the number and kind of shares
or
other consideration as to which the Executive’s Stock Option, or portions
thereof then unexercised, shall be exercisable and the exercise price
therefore.
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The
Stock Options shall vest and become exercisable as to 240,000 shares
on
August 27, 2007, and as to the remaining 560,000 shares in equal
one-third
(33 1/3%)
increments on the first, second and third anniversaries of the first
day
of the Term. All of the Stock Options will accelerate and immediately
become 100% vested in the event of: (i) any Change of Control (as
defined in Section 9 of the Agreement) or (ii) termination of
Executive’s employment by the Company without Cause or by the Executive
for Good Reason.
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