EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (the “Agreement”),
is
made and is effective as of July 1, 2007 (the “Effective
Date”),
by
and between Blue Holdings, Inc., a Nevada corporation (the “Company”),
and
Xxxxx X. Xxxxxx, a resident of the State of New Jersey (“Executive”).
PRELIMINARY
STATEMENTS
A. The
Company desires to employ Executive in the capacity of Chief Executive Officer
and President, upon the terms and conditions hereinafter set forth;
and
B. Executive
is willing to enter into this Agreement with respect to his employment and
services upon the terms and conditions hereinafter set forth.
Now,
therefore, for good, valuable and binding consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to
be legally bound hereby, now agree as follows:
STATEMENT
OF AGREEMENT
1. Term
of Employment.
The
term of employment under this Agreement shall commence on the Effective Date
and
shall expire on December 31, 2010 (the “Expiration
Date”),
unless such employment is terminated or extended prior to the expiration of
said
period as hereinafter provided. Subject to the provisions of Section
8
of this
Agreement, this Agreement and the employment of Executive hereunder shall be
automatically renewed for successive renewal periods of one (1) year each (each,
a “renewal
period”),
upon
and subject to the terms and conditions hereof, commencing on the Expiration
Date and on each anniversary of the Expiration Date thereafter, unless either
party hereto gives the other party hereto notice of such former party’s intent
to terminate this Agreement and Executive’s employment hereunder at least ninety
(90) days prior to the Expiration Date or the end of any renewal
period.
2. Duties
of Executive.
2.1. During
the term of this Agreement Executive shall serve as the President and Chief
Executive Officer of the Company. Executive agrees that during the term of
this
Agreement, he will devote his full professional and business-related time,
skills and efforts to the businesses of the Company. In addition, Executive
shall devote all necessary time and efforts in the performance of such duties
for the benefit of the Company and its affiliates as is consistent with
Executive’s position or related thereto and as may be assigned to him from time
to time by the Board of Directors of the Company (“Board”).
Executive shall devote his full professional and business skills to the Company
as his primary responsibility. Executive may engage in personal, passive
investment activities provided such activities do not interfere with the
performance of his duties hereunder or violate the provisions of the Employee
Proprietary Information and Inventions Agreement attached hereto as Exhibit
A.
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2.2. Within
ninety (90) days of the Effective Date the Company shall cause Executive to
be
elected to its Board and at each annual meeting of its shareholders during
the
term hereof the Company shall nominate Executive for re-election to its
Board.
3. Compensation.
3.1. Base
Salary.
The
Company shall pay Executive as follows: $87,500 for the third quarter of fiscal
2007; $87,500 for the fourth quarter of fiscal 2007; and at an annual rate
of
Four Hundred Thousand Dollars ($400,000)
(the “Base
Salary”)
for
the remainder of the term of employment. Executive’s Base Salary shall be
reviewed by the Board (or a committee thereof) on an annual basis no later
than
January 15 of each year commencing 2008 to determine if Executive’s Base Salary
should be increased. Executive’s Base Salary shall be subject to all appropriate
federal and state withholding taxes and shall be payable in accordance with
the
Company’s standard payroll practices for executive employees.
3.2. Annual
Bonus.
(a)
Executive shall be eligible to receive an annual bonus (the “Bonus”)
equivalent to 2.5% of the Company’s earnings before interest, taxes,
depreciation and amortization (EBITDA) for each calendar year during the term
commencing with 2008, which shall be paid no later than March 31st
of the
following year. Executive shall be eligible to receive a bonus for the period
ended December 31, 2007, if any, as determined by the Compensation Committee
of
the Board by January 31, 2008 and paid no later than March 31, 2008. Except
in
the case of termination for cause, expiration or termination of Executive’s
employment shall not relieve the Company of the obligation to pay any Bonus,
or
portion thereof, due Executive in respect of the year during which this
Agreement terminates or expires.
(b) Notwithstanding
anything to the contrary contained in this Agreement other than Section 3.2(c),
in the event that this Agreement or Executive’s employment hereunder shall
terminate or expire for any reason whatsoever during any particular year, any
Bonus which might otherwise have been payable to Executive in respect of such
year shall be pro rated based on the period of Executive’s employment hereunder
during such year, and such pro rated amount (i.e.,
in
respect of the portion of such year during which Executive performed services
hereunder prior to the expiration or termination hereof) shall be payable in
accordance with the provisions of Section
9.4.
(c) Notwithstanding
anything to the contrary contained in this Agreement, in the event that the
Company shall terminate this Agreement or the employment of Executive hereunder
for cause, as defined in Section
8
below,
no Bonus shall be payable to Executive in respect of the year of the Company
during which such termination occurs.
3.3. Stock
Options.
Executive shall be granted an option to purchase 625,000 shares of the Company’s
Common Stock at an exercise price per share of $1.40 (the “Option”).
The
Option will be subject to the terms and conditions set forth in a stock option
agreement between the Company and Executive. Executive shall vest in 125,000
shares on the date of grant and 125,000 shares on each six-month anniversary
of
the date of grant thereafter until fully vested.
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4. Benefits.
During
Executive’s term of employment hereunder, Executive and, to the extent
applicable, Executive’s spouse, dependents and beneficiaries, shall be allowed
to enjoy and participate in all benefit plans and programs, including
improvements or modifications of the same, which are now, or may hereafter
be,
available to other executive employees of the Company. Such benefit plans and
programs shall be similar to and consistent with the Company’s past practice and
shall include, without limitation, medical insurance, disability insurance,
vacation and sick leave plan, and such similar benefits, plans and programs
as
may be maintained by the Company. The Company shall not, however, be obligated
to institute, maintain, or refrain from changing, amending, or discontinuing,
any such benefit plan or program, so long as such changes are similarly
applicable to executive employees generally.
5. Vacations.
The
Executive shall be entitled to four (4) weeks of paid vacation annually;
provided, however, that Executive shall not be entitled to utilize more than
two
consecutive weeks of vacation at any time without board approval; and provided,
further, that Executive shall not be entitled to use any vacation days for
the
six-month period beginning on the Effective Date. The Executive shall also
be
entitled to all paid holidays given by the Company to its senior
executives.
6. Reimbursement
of Expenses.
The
Company recognizes that Executive will incur legitimate business expenses in
the
course of rendering services to the Company hereunder. Accordingly, during
the
term of this Agreement, Executive shall be entitled to receive reimbursement,
upon presentation of receipts or other adequate documentation, for all
appropriate business expenses incurred by him in connection with his duties
under this Agreement in accordance with the policies of the Company as in effect
from time to time. In addition, during the term of this Agreement, Executive
shall be entitled to receive reimbursement in an amount up to and not to exceed
$2,000 per month for all expenses incurred by him with respect to his personal
automobile including, without limitation, lease payments, insurance, tolls,
parking, maintenance, repairs and gas.
7. Housing/Travel.
The
Company will provide Executive a furnished apartment or comparable living space
in Los Angeles, California suitable to his position for the initial twelve
months of the term of this Agreement. Executive agrees that he will establish
a
permanent place of abode within twenty miles of Los Angeles, California no
later
than the one year anniversary of the Effective Date. Additionally, the Company
will pay for no more than two coach or economy class round trip tickets from
Los
Angeles to New Jersey for Executive to visit with his family for no more than
two weekends, per month prior to Executive’s relocation to Los Angeles,
California.
8. Termination.
The
employment relationship between Executive and the Company created hereunder
shall terminate before the expiration of the stated term of this Agreement
only
upon the occurrence of any one of the following events:
8.1. Death
or Permanent Disability.
The
death or Permanent Disability of Executive shall automatically terminate this
Agreement. For the purpose of this Agreement, the “Permanent
Disability”
of
Executive shall mean Executive’s inability, because of his injury, illness, or
other incapacity (physical, emotional or mental), to perform the essential
functions of the position contemplated herein, with or without reasonable
accommodation to Executive with respect to such injury, illness or other
incapacity, for a continuous period of one hundred and fifty (150) days or
for one hundred and eighty (180) days out of a continuous period of three
hundred and sixty (360) days. Such Permanent Disability shall be deemed to
have occurred on the one hundred and fiftieth (150th)
consecutive day or on the one hundred eightieth (180th)
day
within the specified period, whichever is applicable.
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8.2. Termination
for Cause.
The
following events, which for purposes of this Agreement shall constitute
“Cause”
for
termination by the Company:
(a) a
material breach of any provision of this Agreement and the failure by Executive
to cure such breach within ten 10 days written notice to Executive of the
particular details thereof other than any breach and failure to cure resulting
from the death or disability of Executive;
(b) a
material breach of the Employee Proprietary Information and Inventions Agreement
executed by Executive;
(c) conviction
of, or a plea of nolo contendere for, any felony criminal offense or any offense
involving dishonesty or moral turpitude;
(d) engaging
in dishonest or fraudulent activities which are injurious to the
Company;
(e) refusal
to follow any lawful material directive of the Board and failure to cure the
same within ten days of written notice thereof other than a failure to perform
or cure resulting from the death or disability of Executive;
(f) any
act
or failure to act constituting gross negligence or willful misconduct which
is
injurious to the Company other than any action or failure to act resulting
from
the death or disability of Executive; or
(g) breach
of
a fiduciary duty to the Company which involves personal profit.
Any
notice of discharge shall describe with reasonable specificity the cause or
causes for the termination of Executive’s employment, as well as the effective
date of the termination (which effective date may be the date of such notice).
If the Company terminates Executive’s employment for any of the reasons set
forth above, the Company shall have no further obligations hereunder from and
after the effective date of termination (other than as set forth below) and
shall have all other rights and remedies available under this or any other
agreement and at law or in equity.
8.3. Termination
by the Company Without Cause.
The
provision by the Company of at least thirty (30) days’ prior written notice to
Executive.
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8.4. Termination
for Good Reason.
The
following events, which for purposes of this Agreement shall constitute
“Good
Reason”
for
termination by Executive:
(a) the
assignment to Executive of any duties materially inconsistent with his
positions, duties, responsibilities and status with the Company, or a material
change in his reporting responsibilities, or titles as of the Effective Date,
or
any removal of Executive from or any failure to re-elect Executive to any such
positions, except in connection with the expiration of the term of this
Agreement or the termination of his employment for Cause, death, Disability,
or
retirement, or by Executive other than for Good Reason; or
(b) a
reduction in Executive’s base salary or any significant reduction in the
aggregate value of Executive’s benefits (unless such reduction is pursuant to a
general change in benefits applicable to all similarly situated employees of
the
Company and its affiliates);
provided,
however,
that
prior to Executive’s termination of employment under this Section 8.4,
Executive must give written notice to the Company of any such event and such
event remains uncorrected for thirty (30) days following such written
notice.
8.5. Voluntary
Termination by Executive.
The
provision by Executive of at least thirty (30) days’ prior written notice to the
Company.
9. Compensation
Upon Termination.
9.1 General.
Upon
the termination of Executive’s employment under this Agreement before the
expiration of the stated term hereof for any reason or upon the expiration
of
the stated term, Executive shall be entitled to (a) the unpaid Base Salary
earned by him before the effective date of termination or expiration, as
provided in Section 3.1,
prorated on the basis of the number of full days of service rendered by
Executive during the year to the effective date of termination, (b) any
accrued, but unpaid, vacation or sick leave benefits, and (c) any
authorized but unreimbursed business expenses.
9.2 Termination
Without Cause or for Good Reason.
If the
employment relationship is terminated (a) by the Company for any reason other
than Executive’s death or Permanent Disability or for Cause, or (b) by
Executive for Good Reason, then Executive shall be entitled to receive as a
severance payment an amount equal to 12 months Base Salary plus a pro-rated
bonus for the year during which such termination occurs. The Company shall
also
maintain medical coverage for Executive until the earlier of (i) the end of
the
12-month period described above and (ii) Executive obtaining alternate medical
insurance coverage.
9.3 Termination
For Cause, Death or Disability; Expiration of Term.
If the
employment relationship hereunder (i) is terminated by the Company for Cause
or
Executive’s death or Permanent Disability, (ii) is terminated voluntarily by
Executive, or (iii) expires by its terms on the Expiration Date or the end
of
any renewal period pursuant to a party’s provision of written notice of
non-renewal to the other at least ninety (90) days prior to the Expiration
Date
or the end of any renewal period, Executive shall not be entitled to any
severance compensation, except as provided in Section 9.1.
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9.4 Payment
of Compensation.
All
compensation payable pursuant to termination shall be payable to Executive
in a
lump sum payment within thirty (30) days immediately following the effective
date of Executive’s termination.
10. Property
of Company.
Executive acknowledges that from time to time in the course of providing
services pursuant to this Agreement Executive shall have the opportunity to
inspect and use certain property, both tangible and intangible, of the Company,
and Executive hereby agrees that such property shall remain the exclusive
property of the Company, and Executive shall have no right or proprietary
interest in such property, whether tangible or intangible, including, without
limitation, Executive’s customer and supplier lists, contract forms, books of
account, computer programs and similar property.
11. Equitable
Relief.
Executive acknowledges that the services to be rendered by him are of a special,
unique, unusual, extraordinary, and intellectual character, which gives them
a
peculiar value, and the loss of which cannot reasonably or adequately be
compensated in damages in an action at law, and that a breach by him of any
of
the provisions contained in this Agreement will cause Company irreparable injury
and damage. Executive further acknowledges that he possesses unique skills,
knowledge and ability and that a breach of the provisions of this Agreement
or
the Employee Proprietary Information and Inventions Agreement would be extremely
detrimental to Company. By reason thereof, Executive agrees that Company shall
be entitled, in addition to any other remedies it may have under this Agreement
or otherwise, to seek injunctive and other equitable relief to prevent or
curtail any breach of this Agreement by him
all
without the necessity of proving the amount of any actual damage to the Company
or any affiliate thereof resulting therefrom; provided,
however,
that
nothing contained in this section shall be deemed or construed in any manner
whatsoever as a waiver by the Company of any of the rights which the Company
may
have against Executive at law, in equity, by statute or otherwise arising out
of, in connection with or resulting from Executive’s breach of any of his
covenants, agreements, duties or obligations hereunder.
12. Successors
Bound.
This
Agreement shall be binding upon Company and Executive, their respective heirs,
executors, administrators or successors in interest.
13. Severability
and Reformation.
The
parties hereto intend all provisions of this Agreement to be enforced to the
fullest extent permitted by law. If, however, any provision of this Agreement
is
held to be illegal, invalid, or unenforceable under present or future law,
such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision were never
a
part hereof, and the remaining provisions shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision
or
by its severance.
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14. Integrated
Agreement.
This
Agreement constitutes the entire Agreement between the parties hereto with
regard to the subject matter hereof, and there are no agreements,
understandings, specific restrictions, warranties or representations relating
to
said subject matter between the parties other than those set forth herein or
herein provided for.
15. Notices.
Any
notice required to be given or delivered to the Company or Executive shall
be in
writing and addressed to the below addresses, as applicable, or at such other
addresses as shall be specified by the parties by like notice. All notices
shall
be deemed effectively given upon personal delivery, (a) five (5) days after
deposit in the United States mail by certified or registered mail (return
receipt requested), (b) two (2) business day after its deposit with any return
receipt express courier (prepaid), or (c) one (1) business day after
transmission by facsimile.
|
If
to the Company:
|
If to Executive: | |||
|
0000
X. Xxxxxxx Xxxxxx
|
00
Xxxxx Xxxx Xxxx
|
|||
|
Xxxxxxxx,
XX 00000
|
Xxxxxx,
Xxx Xxxxxx 00000
|
|||
|
Fax
- 000-000-0000
|
||||
With,
in
the case of Executive, a copy to:
|
Xxxxxxx
X. XxXxxx, Esq.
|
|
Xxxxx
& Xxx Xxxxxx LLP
|
|
0
Xxxx Xxxxxx
|
|
Xxx
Xxxx, Xxx Xxxx 00000
|
|
Fax
- 000 000 0000
|
16. Further
Actions.
Whether
or not specifically required under the terms of this Agreement, each party
hereto shall execute and deliver such documents and take such further actions
as
shall be necessary in order for such party to perform all of his or its
obligations specified herein or reasonably implied from the terms
hereof.
17. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California without giving effect to its conflict of law
principles.
18. Assignment.
This
Agreement is personal to Executive and may not be assigned in any way by
Executive without the prior written consent of the Company. This Agreement
shall
not be assignable or delegable by the Company, other than to an affiliate of
Company, provided,
however,
if
there is a change of control of the Company, the Company may assign its rights
and obligations hereunder to the person, corporation, partnership or other
entity that has gained such control.
19. Counsel.
Executive acknowledges that Executive has been advised to consult with legal
counsel prior to signing this Agreement, and that Executive has consulted with
legal counsel prior to signing this Agreement. The Company agrees to reimburse
Executive for the reasonable fees and expenses of his counsel in connection
with
the negotiation, execution and delivery of this Agreement and the Option
Agreement in an aggregate amount up to, but not to exceed, Five Thousand Dollars
($5,000). The foregoing reimbursement shall be made following presentation
of
one or more appropriate invoices therefor.
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20. Counterparts.
This
Agreement may be executed in counterparts, each of which will take effect as
an
original and all of which shall evidence one and the same
Agreement.
[Signature
Page Follows]
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8
In
witness whereof, the parties hereto have executed this Agreement as of the
date
first above written.
| Blue Holdings, Inc. | Xxxxx X. Xxxxxx | |||
| By: | ||||
| Name: |
Xxxxx Xxxxxx |
(Signature) |
||
| Title: | Chief Financial Officer | |||
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EXHIBIT
A
Employee
Proprietary Information and Inventions Agreement
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