[XXXXXX & XXXXXXX LETTERHEAD]
June 25, 2007
General Xxxxxx X. Xxxxx
P.O. Box 3276
Little Rock, AR 72203
Dear General Xxxxx:
This letter agreement amends and restates in its entirety any and all
prior agreements, written or oral, between Xxxxxx & Xxxxxxx Holding, LLC (the
"Company") and you relating to the subject matter hereof, and sets forth the
rights and obligations of the parties from and after January 3, 2006. We are
pleased to extend you (the "Employee" or "you") an offer for the position of
Chairman of the Company and for the position of Chairman of Xxxxxx and Xxxxxxx
Capital, LLC, the Company's merchant banking affiliate (the "Rodman Merchant
Bank"). In connection with your employment with the Company, you may be
registered with, and become an "associated person" (as such term is defined in
the rules and regulations of the National Association of Securities Dealers,
Inc.) of Xxxxxx & Xxxxxxx, LLC ("R&R").
You will receive a salary at an annualized rate of $250,000 payable
according to the Company's prevailing payroll schedule. You will be eligible to
receive as additional consideration for your services as Employee, the following
cash bonuses: (a) a bonus based on the pay outs set forth on Annex A hereto, and
(b) a discretionary bonus at the end of each calendar quarter.
You will be eligible and entitled to participate, on the same basis and
at the same level as other employees performing similar functions for the
Company, in any pension, profit-sharing, bonus and stock option plans or
programs of the Company, if any, and in any group medical, dental, life and
disability insurance plans or programs of the Company, if any. You will also be
entitled to such other fringe benefits and conditions of employment, including
without limitation, customary holidays and vacation, as appropriate for an
employee of rank comparable to the Employee.
On December 22, 2006, you were granted an option to purchase 229,885
shares of common equity membership interests in the Company (the "Membership
Interests"), at $7 per share, which represented 2% of the Company's outstanding
equity, fully diluted for all employee options outstanding on August 1, 2006.
The terms and conditions of the grant, including the periods over which they
vest and become excercisable, were as set forth in a certain Option Certificate
and Option Subscription Agreement dated December 22, 2006 (the "OSA"),.
As additional compensation, the Company shall pay to you a Contingent
Amount, but only if a Change of Control Event, as defined below, occurs during
the period of your employment. In such event, payment shall be made within 30
days after the Change of Control Event occurs. The "Contingent Amount" shall be
equal to the product of (A) the
greatest number of Option Shares, as defined in the OSA, with respect to which
the Employee, on or before the Valuation Date, could have exercised the Option
granted to him pursuant to the OSA (i.e., the total shares with respect to which
the Option became vested and excercisable on or before the Valuation Date
pursuant to section 2b of the OSA, taking into account any acceleration in
vesting by reason of a liquidity event, and disregarding any actual exercise
thereof, a maximum of 229,885 shares), and (B) (i) the lesser of (a) the fair
market value of one share of Membership Interests on the Valuation Date, and (b)
$7, less (ii) $0.41. The foregoing formula for computing the Contingent Amount
shall be adjusted to the same extent that any adjustments are made to the terms
of the Option pursuant to section 3 of the Option Certificate ("OC"). For
example, if the Company's shares are split 2 for 1 and, as a result, under
section 3 of the OC the Employee becomes vested with an Option to purchase
459,770 shares at $3.50 instead of 229,885 shares at $7, the formula shall
change accordingly, i.e., the maximum number of shares shall be 459,770 and
(B)(i)(b) shall be $3.50 and (B)(ii) shall be $0.205. The Contingent Amount
payable pursuant to this letter agreement shall never, under any and all
circumstances, exceed $1,514,942. Notwithstanding the foregoing, in the event
that the payment of the Contingent Amount may otherwise constitute an "excess
parachute payment " within the meaning of Section 280G of the Internal Revenue
Code, then such payment shall be made only if the shareholders of the Company,
or its successor, approve such payment in the manner specified in Internal
Revenue Code Section 280(G)(b)(5)(B).
The "Valuation Date" shall be the date on which a Change of Control
Event occurs.
The Company may make payment of the Contingent Amount, in its absolute
discretion, in cash or other property, or a combination of both, including
shares of its Membership Interests, or the shares or other property which may
have been received in the transaction which constituted the Change of Control
Event, such shares or other property to be transferred at their fair market
value on the Valuation Date. A good faith determination by the Board of
Directors of the Company (excluding the Employee) of the fair market value of
any shares or other property transferred to the Employee, shall be binding and
conclusive for all purposes of the computation of the Contingent Amount and its
satisfaction.
A "Change of Control Event" shall mean the acquisition by any one
person, or more than one person acting as a group (which person or group was not
previously in control or affiliated with the Company), by purchase, merger,
consolidation, or similar business transaction with the Company, or its
successor, (i) of more than 50% of the total fair market value or total voting
power of the shares of Membership Interests, or (ii) of substantially all of the
assets of the Company. In no event shall a Change of Control Event be deemed to
occur by reason of any transfer of assets or shares of the Company, including a
transfer in liquidation, to any person which is controlled, directly or
indirectly, by the members or shareholders of the Company immediately after such
transfer. A good faith determination by the Board of Directors of the Company
(excluding the Employee) of whether or not a Change of Control Event shall have
occurred, shall be binding and conclusive for all purposes of this letter
agreement. The Acumen Spin Off, as described below, or a sale or other
disposition of Acumen BioFin, Inc. not part of a disposition of the Company,
shall not be considered to be a Change of Control Event.
2
As an example of the computation of the Contingent Amount, assume 100%
of the shares or assets of the Company are sold to an unaffiliated person for $8
cash per share (or equivalent) on July 1, 2007, a date through which the
Employee continues to be employed by the Company. The Contingent Amount will be
$1,514,942 ($7 minus $0.41 multiplied by 229,885) and will be due on or before
July 31, 2007. As a further example, assume that the sale is made at $5 cash per
share rather than $8. In such case, the Contingent Amount will be $1,055,172 ($5
minus $0.41 multiplied by 229,885).
In the event that the Company is a party to any transaction which
constitutes a "Reorganization", as described in section 3d of the OC, but which
does not constitute a Change of Control Event, any subsequent computation of the
Contingent Amount shall be made with reference to the value and number of shares
of the reorganized company that are equivalent to the shares of Membership
Interests which were originally granted to the Employee. For example, assume all
of the shares of the Company are acquired by a corporation controlled by the
same interests which control the Company and, as a result, the Employee receives
options to purchase 321,839 shares of the new corporation at $5 per share, in
lieu of the options to purchase 229,885 shares at $7 originally granted. Assume
further that 100% of the assets or shares of the new corporation are
subsequently sold for $8 cash per share (or equivalent) on July 1, 2007. The
Contingent Amount would be the same as computed above, i.e., $1,514,942, but
computed using $5 (the lesser of the fair market value of one share and the
exercise price) minus $0.2928 (the $0.41, adjusted for the increased number of
shares subject to options), multiplied by 321,839 vested shares.
The "Acumen Spin Off" refers to the Company's proposal to transfer the
Life Science business and related assets now held by Xxxxxx & Xxxxxxx, LLC,
after receiving NASD approval, to Acumen BioFin, Inc., a new subsidiary of the
Company ("ABF"), to merge ABF into a public shell and/or issue ABF shares to the
public through an offering, and then distribute the shares of ABF held by the
Company to the Member-owners of its shares. In no event shall this proposal be
construed to impose any obligation on the Company to effectuate the Acumen Spin
Off. If such transaction is effectuated (or, if ABF is sold), prior to the
exercise of the Employee's options to purchase Membership Interests, (a) the
strike price of Employee's unexcercised options shall be reduced to reflect the
value of the distribution of the ABF shares (or distribution from the proceeds
of sale); and (b) the computation of the Contingent Amount shall be adjusted to
reflect the distribution of the ABF shares (or proceeds of sale). See Annex B.
The Company shall be authorized to withhold from any amount payable to
the Employee pursuant to this letter agreement, including the Contingent Amount,
all federal, state or local taxes of any kind required to be withheld with
respect to any amounts payable hereunder.
In addition, you were given the opportunity to purchase 300,000 shares
of common equity membership interests in the Rodman Merchant Bank, representing
3% of its outstanding shares of common equity membership interests, which
purchase was concluded on December 22, 2006. The remaining 9,700,000 shares of
common equity membership interests in the Xxxxxx
3
Merchant Bank are held by the Company. The terms and conditions of the issuance,
including the terms of vesting, are as set forth in the Amended and Restated
Limited Liability Company Agreement of Xxxxxx & Xxxxxxx Capital, LLC and a
Subscription Agreement, each dated December 22, 2006.
Your employment and all of the above compensation and benefits are and
shall remain expressly conditioned upon your attaining and maintaining all
appropriate licenses, and your continuing compliance with the securities and
compliance rules of, or applicable to, the Company, R&R, and the Rodman Merchant
Bank, the Constitution of the United States of America, bylaws, rules and
regulations of the NASD Regulation, Inc., and the rules and regulations of the
Securities and Exchange Commission, national and regional exchanges, clearing
corporations, and all other federal and state regulatory agencies having
jurisdiction over your business conduct, as may be in force from time to time.
Both during and after your employment with the Company and the Rodman
Merchant Bank, you shall keep secret and maintain in strictest confidence, and
shall not use for the benefit of yourself or others except in connection with
the business of the Company and its affiliates, all information or materials
relating to the actual or prospective business of the Company or its affiliates
(and all information or material received from others in the course of the
Company's and the Rodman Merchant Bank's actual or prospective business) which
is obtained by you in the course of your employment with the Company and the
Rodman Merchant Bank and is not otherwise publicly available (PROVIDED that you
were not responsible, directly or indirectly, for such information entering the
public domain without the Company's or the Rodman Merchant Bank's consent).
Promptly upon your resignation or termination, you shall surrender to the
Company or the Rodman Merchant Bank all documents, work papers, lists,
memoranda, records and other data (including all copies) constituting or
pertaining in any way to any of the foregoing information.
The Employee understands and acknowledges (a) the competitive nature of
the Company's and the Rodman Merchant Bank's business, (b) that his services to
the Company and the Rodman Merchant Bank will bring him into close contact with
many trade secrets and confidential information of the Company and the Rodman
Merchant Bank, and (c) that the covenants in this paragraph are essential to
protect the business of the Company and the Rodman Merchant Bank, and the
Company and the Rodman Merchant Bank would not retain the Employee's services
but for the agreements and covenants made by him in this paragraph. Accordingly,
the Employee is entering into these covenants and agreements in order to induce
the Company and the Rodman Merchant Bank to employ him on the terms set forth
herein. During the Employee's employment by the Company or the Rodman Merchant
Bank and for a period of two years following the Employee's resignation or
termination of employment hereunder, whether For Cause (as defined below) or
otherwise (the "Restricted Period"), the Employee shall not, in the United
States of America and the rest of the world, directly or indirectly (i) engage
in the Company's (or any of its affiliate's) business (as it exists at the date
of the Employee's termination or resignation) or in any business directly
competitive with the Company's (or any of its affiliate's) business; (ii) assist
or become interested in any person engaged in any such business, whether as an
owner, officer, director, manager, agent, employee, consultant or otherwise,
PROVIDED, HOWEVER, that the Employee may own, solely as an
4
investment, securities of any person which are traded on a national securities
exchange or in the over-the-counter market if the Employee does not own 5% or
more of any class of securities of such person; (iii) solicit or encourage any
employee to leave the employment of the Company or any of its affiliates, or
hire any such employee who has terminated his employment within one year
thereafter without the Company's or the Rodman Merchant Bank's (as applicable)
prior written consent; or (iv) solicit or participate in the solicitation of any
part of the business of the Company (or any of its affiliates) from any person
which was a client or a customer or a prospective client or customer of the
Company (or any of its affiliates) at the time of the Employee's resignation or
termination of employment hereunder, nor shall the Employee interfere with or
disrupt any other then existing relationship, contractual or otherwise, between
the Company (or any of its affiliates) and any other person. Notwithstanding
anything to the contrary in the foregoing, the parties acknowledge that the
Employee is a consultant for GS Capital Partners 2000, L.P. and its affiliates
and his activities in connection therewith shall be permitted under this
paragraph.
If the Employee breaches, or threatens to commit a breach of, any of the
provisions of the above paragraph (the "Restrictive Covenants"), the Company and
the Rodman Merchant Bank shall have the following rights and remedies, in
addition to any other rights and remedies available to the Company and the
Rodman Merchant Bank under law or in equity:
(i) The right and remedy to have the Restrictive Covenants
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company or the Rodman Merchant Bank and that money
damages will not provide an adequate remedy to the Company or the Rodman
Merchant Bank.
(ii) The right and remedy to require the Employee to account
for and pay over to the Company or the Rodman Merchant Bank all compensation,
profits, monies, accruals, increments or other benefits (collectively,
"Benefits") derived by the Employee as the result of any breach of any of the
Restrictive Covenants, and the Employee shall account for and pay over such
Benefits to the Company or the Rodman Merchant Bank.
If any court determines that any of the Restrictive Covenants or any
part thereof, is invalid or unenforceable, the remainder of the Restrictive
Covenants shall not thereby be affected and shall be given full effect, without
regard to the invalid portions. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be and, in
its reduced form, such provision shall then be enforceable and shall be
enforced. The parties intend to and hereby confer jurisdiction to enforce the
Restrictive Covenants upon the court of any jurisdiction within the geographical
scope of such Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the parties that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to breaches of such
Restrictive Covenants
5
in such other respective jurisdictions, such Restrictive Covenants as they
relate to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
For the purposes of this agreement, "For Cause" shall mean (i) you are
convicted of, or plead guilty or nolo contendere to, a crime under state or
federal law; (ii) an enforcement, disciplinary or other proceeding, whether
civil, administrative or self-regulatory brought against you by any
governmental, regulatory or self-regulatory authority results in an order by
such regulatory authority that you be removed or disqualified from acting as an
employee of the Company or the Rodman Merchant Bank; (iii) you have willfully
breached any statute, rule or regulation of any governmental, regulatory or
self-regulatory authority having or asserting jurisdiction, or the compliance
rules or procedures of the Company or the Rodman Merchant Bank; (iv) you have
willfully failed to substantially perform your duties to the Company or the
Rodman Merchant Bank, which failure has not been cured within 30 calendar days
after a written demand for substantial performance is delivered to you by the
Chief Executive Officer or his designee that specifically identifies the manner
in which the Chief Executive Officer or his designee believes that you have not
substantially performed your duties, provided, however, such failure is not the
result of a disability; or (v) you have committed an act constituting a breach
of fiduciary duty, gross negligence, fraud, dishonesty, misrepresentation, or
willful misconduct with respect to any material aspect of your employment.
This letter agreement contains all of the terms of your employment on
which we have agreed, and cannot be changed except by in writing signed by both
parties. None of the provisions of this letter agreement shall be construed to
be for the benefit of, or enforceable by, any person other than the parties to
this agreement. Nothing in this letter agreement changes the agreement between
us that you are an employee at-will. This letter agreement also supersedes all
prior verbal and/or written communications between you and the Company relating
to the Rodman Merchant Bank.
[Signature Page Follows]
6
Sincerely,
/s/ Xxxxxx Xxxxx
-----------------------------
Xxxxxx Xxxxx
Chief Financial Officer
Xxxxxx & Xxxxxxx Holding, LLC
Accepted:
/s/ General Xxxxxx X. Xxxxx
-------------------------------
General Xxxxxx X. Xxxxx
7
ANNEX A
Company Bonus
-------------
As part of your employment, you will from time to time introduce to R&R
individuals and/or management groups and/or entities that may need investment
banking services. If such individual and/or management team and/or entity
engages R&R for the purposes of raising funds (a "Financing") or providing
merger and acquisition or other advisory services (a "Transaction"), the Company
will pay to you an amount equal to up to 15% of the aggregate fee that R&R
receives with respect to a Financing or Transaction which is completed for such
individual, management team or entity during your employment with the Company or
within a period of 18 months after your resignation or the termination (other
than For Cause) of your employment with the Company. The exact percentage of
such fee that you will be entitled to will be determined by the Company based on
your contribution and the level of involvement in the Financing or Transaction
by the individual and/or management team and/or entity that you introduced to
R&R. Payment to you hereunder will be made during the Company's next regular
payroll immediately following the end of the calendar quarter during which R&R
receives the fee with respect to which you are entitled to receive a payment.
8
ANNEX B
1. ADJUSTMENT OF STRIKE PRICE. Employee holds options to purchase 229,885
shares of Membership Interest at $7 per share. The strike price was determined
by valuing the Company at $70 million and having 10 million shares outstanding.
If the Acumen Spin Off is effectuated prior to the exercise by the Employee of
his options to purchase Membership Interests, the strike price shall be
recomputed for any options unexcercised at the time of the Acumen Spin Off ("New
Strike Price") by the Board of Directors of the Company (excluding the
Employee), in such manner as it shall reasonably determine, taking into account
the fair market value of the Company and of the distribution, and any other
relevant facts and circumstances connected therewith, and for this purpose it is
assumed that the fair market value of the Company will be $70 million less the
fair market value of the ABF shares distributed to its shareholders in the
Acumen Spin Off (the "Net Value"), and the New Strike Price shall be the Net
Value divided by 10 million (such 10 million subject to adjustment for splits of
Company's shares, etc.). For example, if the Board determines that the fair
market value of the ABF shares distributed to its shareholders is $20 million,
the Net Value would be $50 million ($70 million minus $20 million) and the New
Strike Price would be $5 ($50 million divided by 10 million). For purposes of
this paragraph 1, if ABF is sold and the proceeds distributed to the Company's
members, the Net Value shall be computed by deducting the amount of such
distribution from $70 million.
2. ADJUSTMENT TO COMPUTATION OF CONTINGENT AMOUNT. In the event the Acumen
Spin Off is effectuated prior to the exercise by Employee of his options to
purchase shares of Membership Interests, the Contingent Amount shall be computed
to reflect two components: (a) the excess, if any, of the lesser of (i) the fair
market value of one share of Membership Interests on the Valuation Date, or (ii)
the New Strike Price, over $0.41, multiplied by a maximum of 229,885 shares, and
(b) the fair market value of the ABF shares distributed divided by 10 million
(subject to adjustments for splits of the Company's shares, etc.), multiplied by
a maximum of 229,885 shares. For purposes of this paragraph 2, if ABF is sold
and the proceeds distributed to the Company's members, the adjustment in
paragraph (b) shall be computed by substituting the amount of such distribution
for the fair market value of the ABF shares. In no event shall the adjustment
under this paragraph result in the Contingent Amount exceeding $1,514,942.
9
3. EXAMPLE. Assume the Acumen Spin Off is effectuated on April 1, 2007 and
that 20 million ABF shares are distributed to the members of Company at a value
of $1 per ABF share, and that as of the time of distribution Employee has not
exercised any of his options. The New Strike Price would be $5 ($70 million less
$20 million, divided by 10 million). Assume further that the Company is sold for
$6 per Company share on July 1, 2007, a date through which the Employee
continues to be employed by the Company . The Contingent Amount would be
$1,514,942 computed as follows: Under 2 (a) above, the excess of $5 (the New
Strike Price which is less than the fair market value of one share) over $0.41
($4.59), multiplied by 229,885 shares (all vested and none excercised prior to
the Acumen Spin Off), or $1,055,172; and under 2 (b) above, $2 per Company share
of ABF distribution multiplied by 229,885 shares, or $459,770.
For purposes of computing the Contingent Amount and the adjustments to the
strike price of Employee's options, the fair market value of the ABF shares and,
if deemed relevant, the fair market value of the Company, shall be determined as
at the date of distribution to the Company's members, by a good faith
determination of the Board of Directors of the Company (excluding the Employee),
which shall be binding and conclusive for these purposes.
10
