EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as April 21, 1999
(the "Effective Date"), between Xxxxxxx Xxxxx ("Executive") and Consolidated
Technology Group Ltd., a New York corporation ("Employer").
In consideration of the premises and the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. Employment of Executive
Employer hereby agrees to employ Executive, and Executive hereby agrees
to be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth.
2. Employment Period
Subject to earlier termination as provided in section 5, the term of
Executive's employment under this Agreement shall commence as of the date hereof
and shall continue for a period of three (3) years (the "Initial Employment
Period"). Unless either party gives notice of non-renewal at least six (6)
months prior to the expiration of the Initial Employment Period or any extension
thereof, the term of this Agreement shall be extended for an additional one (1)
year period (the Initial Employment Period and any extension thereof is
hereafter referred to as the "Employment Period").
3. Duties and Responsibilities
3.1 General. During the Employment Period, Executive shall have the
titles of President and Chief Operating Officer of the Employer and shall be
charged with pursuing a growth strategy of building the Employer's business.
Executive shall devote all of his business time and expend his best efforts,
energies and skills to the Employer. Executive shall perform such duties,
consistent with his status as President and Chief Operating Officer of Employer,
as he may be assigned from time to time by Employer's Board of Directors (the
"Board"). Employer shall nominate Executive to the Board and use its best
efforts to see that Executive is appointed to the Board. Any such appointment
shall be subject to Board approval.
4. Compensation and Related Matters
4.1 Base Salary. For each twelve-month period during the Employment
Period, commencing with the twelve-month period beginning on the date of this
Agreement (each such period, an "Employment Year"), Employer shall pay to
Executive a base salary equal to $135,000, subject to increase at the discretion
of the Board (the initial base salary, including any Board approved increase
thereof, the "Base Salary"). The Base Salary for each Employment Year shall be
payable in advance in monthly increments.
-1-
4.2 Annual Bonus. For each fiscal year during the Employment Period
(each, a "Bonus Year"), at the discretion of the Board, Executive may receive a
cash bonus of up to 100% of the Base Salary (the "Bonus") based upon attainment
of annual performance objectives to be reasonably established by the Board for
the Bonus Year, such performance objectives to be established as soon as
possible following the beginning of the Bonus Year; provided, however, that for
the first Bonus Year (commencing on May 1, 1999), the performance objectives
shall be established as soon as possible following the date hereof. Any Bonus
earned shall be payable promptly following the determination thereof, on the
later of (i) fifteen (15) days after the members of the Board have received the
audited financial statements for such Bonus Year, or (ii) the first meeting of
the Board following the end of such Bonus Year. Except as otherwise set forth in
Section 6 hereof, the Bonus payable for any Bonus Year in which the Employment
Period terminates shall equal the Bonus that would have been paid had the
Employment Period not so terminated, multiplied by a fraction, the numerator of
which shall be the number of days of the Employment Period within the Bonus Year
and the denominator of which shall be 365.
4.3 Life Insurance. Employer shall maintain in effect at all times
during the Employment Period, at Employer's expense, a key man policy of term
insurance on the life of Executive in the amount equal to three times Base
Salary, naming the Company as the owner and beneficiary thereof. Executive
agrees that Employer shall have the right to obtain other life insurance on
Executive's life, at Employer's sole expense and with Employer or an affiliate
thereof as the sole beneficiary thereof. Executive shall (i) cooperate fully
with Employer in obtaining all such insurance, (ii) sign any necessary consents,
applications and other related forms or documents, and (iii) take any required
medical examinations.
4.4 Automobile; Tax and Financial Planning. Employer shall provide
Executive with a monthly allowance during the Employment Period of $1,000 to
cover the costs of an automobile, including maintenance, fuel, and insurance. In
addition, during the Employment Period, Employer shall pay for or reimburse
Executive (as determined by Employer for the cost of reasonable financial
planning services.
4.5 Other Benefits. During the Employment Period, subject to, and to
the extent Executive is eligible under their respective terms, Executive shall
be entitled to receive such fringe benefits as are, or are from time to time
hereafter generally provided by Employer to Employer's senior management
employees or other employees (other than those provided under or pursuant to
separately negotiated individual employment agreements or arrangements) under
any pension or retirement plan, disability plan or insurance, group life
insurance, medical and dental insurance, accidental death and dismemberment
insurance, travel accident insurance or other similar plan or program of
Employer. Employer shall provide short-term and long-term disability insurance
for Executive which provides benefits equal to at least 60% of Base Salary. To
the degree that Employer's medical insurance does not fully cover the cost of an
annual physical examination for Executive, Employer shall reimburse Executive
for such expense promptly after such expense is incurred. Executive's Base
Salary shall (where applicable) constitute the compensation on the basis of
which the amount of Executive's benefits under any such plan or program shall be
fixed and determined.
4.6 Expense Reimbursement. Employer shall reimburse Executive for all
business expenses reasonably incurred by him in the performance of his duties
under this Agreement upon his presentation of signed, itemized accounts of such
expenditures, all in accordance with Employer's procedures and policies as
adopted and in effect from time to time and applicable to its senior management
employees.
-2-
4.7 Vacations. Executive shall be entitled to 20 days vacation for each
calendar year during the Employment Period, which vacations shall be taken at
such time or times as shall not unreasonably interfere with Executive's
performance of his duties under this Agreement.
4.8 Annual Equity Incentives. In order to provide further incentive to
Executive and align the interests of Executive with those of the stockholders of
Employer, Employer shall grant to Executive annual equity incentives consisting
of (i) shares of common stock of Employer (the "Common Stock"), subject to
forfeiture and restricted as to transfer ("Restricted Stock") or (ii) options to
purchase Common Stock ("Options").
(a) Restricted Stock Award. Employer may at any time hereafter grant to
Executive a Restricted Stock Award consisting of shares of Restricted Stock (the
"Restricted Stock Award"). Any Restricted Stock Award shall vest and become
transferable in two installments over a period of three years from the date
hereof and shall have such other terms and conditions as set forth in the
Restricted Stock Award Agreement attached hereto as Exhibit A.
(b) Option Award. As of the date hereof, Employer shall grant to
Executive an Option with respect to 250,000 shares of Common Stock with an
exercise price equal to the closing price of the Common Stock on the NASD OTC
Bulletin Board as of the trading day immediately prior to the date hereof (the
"Option Award"). The 250,000 Option Award shall not be adjusted in terms of the
number of shares issuable upon exercise in the event of a reverse stock split of
up to 1 for 30 effected within one year of the date hereof, but the exercise
price will be adjusted. The Options shall vest and become exercisable when, as
and after the date that the Company's market capitalization (the total number of
outstanding shares of common stock and common stock equivalents, i.e., debt and
preferred stock convertible into common stock, computed on an as converted
basis, multiplied by the transaction price reported by a stock exchange, an
automated quotation system such as the Nasdaq Stock Market or the OTC Bulletin
Board, or a market maker) first equals or exceeds $25,000,000; and the Options
shall have such other terms and conditions as set forth in the Stock Option
Agreement attached hereto as Exhibit B.
(c) Additional Option Purchase. On the last day of each fiscal year
during the Employment Period, provided Executive has met or exceeded the
performance objectives agreed upon by the Board and Executive for such fiscal
year, Executive shall have the right to purchase from Employer an additional
Option with respect to 100,000 shares of Common Stock (the "Additional Option").
The Additional Option shall have a per share exercise price equal to the closing
price of the Common Stock on the NASD OTC Bulletin Board on the trading day
immediately prior to the date of purchase. The Additional Option shall be fully
vested and shall have such other terms and conditions as are mutually agreed
upon between Employer and the Executive. The purchase price for any Additional
Option shall be determined by Employer's independent accountants based on a
Black-Scholes valuation methodology.
4.9 Relocation Expenses; Temporary Living Expenses. In the event that
the Company's headquarters is located anywhere other than in the Houston
metropolitan area, upon submission of properly documented receipts, Employer
shall reimburse Executive for (i) reasonable moving costs in connection with
Executive's relocation of his family from the Houston area to a location near
the Employer's main headquarters and (ii) reasonable real estate commissions
with respect to the sale of Executive's current residence in the Houston area in
connection with or following such relocation. In addition, in the event that
Employee is required to relocate, for a period of one year from the date hereof
or until Executive relocates to such location, if earlier, Employer shall
reimburse Executive for the reasonable cost of temporary housing in such
location and reasonable travel between Houston and such location for the purpose
of visiting his family. Such reimbursement shall not exceed $20,000 and shall be
subject to submission of properly documented housing and travel receipts.
-3-
5. Termination of Employment Period
5.1 Termination Without Cause; Voluntary Termination by Executive.
Employer may, by notice to Executive at any time during the Employment Period,
terminate the Employment Period without Cause (as defined below). The effective
date of such termination of the Executive from the Employer shall be the date
that is thirty (30) days following the date on which such notice is given.
Executive may, by notice to Employer at any time during the Employment Period,
voluntarily resign from the Employer and terminate the Employment Period. The
effective date of such termination of the Executive from the Employer shall be
the date that is thirty (30) days following the date on which such notice is
given.
5.2 By Employer for Cause. Employer may, at any time during the
Employment Period, by notice to Executive, terminate the Employment Period for
"Cause" effective on the giving of such notice. As used herein, "Cause" means
any of the following: (A) fraud on the part of Executive in the course of his
employment with Employer; (B) a willful breach of this Agreement by Executive
that is injurious to Employer; (C) Executive's conviction by a court of
competent jurisdiction of, or pleading "guilty" or "no contest" to, (x) a
felony, or (y) any other criminal charge (other than minor traffic violations)
which could reasonably be expected to have a material adverse impact on
Employer's reputation and standing in the community; (D) consistent drunkenness
by Executive or his illegal use of narcotics which is, or could reasonably be
expected to become, materially injurious to the reputation or business of the
Employer or which impairs, or could reasonably be expected to impair, the
performance of Executive's duties hereunder; or (E) willful failure by Executive
to follow the lawful directions of the Board, representing disloyalty to the
goals of the Employer. An act or failure to act on the part of Executive shall
be considered "willful" if done, or omitted to be done, by Executive in bad
faith or without a reasonable belief that the act or omission was in the best
interest of Employer.
5.3 By Executive for Good Reason. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement for "Good Reason" (as defined below) effective immediately. For
the purposes hereof, "Good Reason" means any of the following without
Executive's consent: (A) subject to Section 3 above, a material and adverse
change in the nature and scope of Executive's authority and duties from those
exercised or performed by Executive immediately after the Effective Date; (B) a
material breach of this Agreement by Employer or (C) a change in the composition
of the Board in which the individuals who constitute the Board, as of the date
hereof (the "Incumbent Board"), cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election was
approved by a vote of at least a majority of the Incumbent Board will be
considered as though such individual were a member of the Incumbent Board;
provided, however, that the circumstances set forth in this Section 5.3(A) and
(B) will not be Good Reason if within 30 days of notice by the Executive to the
Employer, Employer cures such circumstances.
-4-
5.4 Disability. During the Employment Period, if, as a result of
physical or mental incapacity or infirmity, Executive shall be unable to perform
his duties under this Agreement for (i) a continuous period of at least 120
days, or (ii) periods aggregating at least 180 days during any period of 12
consecutive months (each a "Disability Period"), and at the end of the
Disability Period there is no reasonable probability that Executive can promptly
resume his duties hereunder, Executive shall be deemed disabled (the
"Disability") and Employer, by notice to Executive, shall have the right to
terminate the Employment Period for Disability at, as of or after the end of the
Disability Period. The existence of the Disability shall be determined by a
reputable, licensed physician selected by Employer in good faith, whose
determination shall be final and binding on the parties. Executive shall
cooperate in all reasonable respects to enable an examination to be made by such
physician. Notwithstanding the foregoing, Employer may conclusively determine
Executive to be disabled and terminate the Employment Period on account of
Disability at any time after Executive has commenced receiving benefits under
the long-term disability insurance policy obtained pursuant to Section 4.5
hereof.
5.5 Death. Notwithstanding any other provision of this agreement, the
Employment Period shall end on the date of Executive's death.
6. Termination Compensation
6.1 Termination without Cause by Employer or for Good Reason by
Executive. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 5.1 hereof or by Executive pursuant to the provisions of
Section 5.3 hereof, Employer will pay to Executive (i) Executive's Base Salary
through the date of termination, (ii) within five (5) days following the date of
termination in one lump sum an amount equal to the lesser of (a) the Base Salary
multiplied by the number of years (and fractional portions thereof) remaining in
the Employment Period (the "Severance Period") or (b) the Base Salary for a one
year term, and (iii) on the date due pursuant to the provisions of Section 4.2
hereof, the bonus for the then current Bonus Year, prorated for the period of
time during the Bonus Year that Executive was employed. All other benefits
provided for in Sections 4.3, 4.4 and Section 4.5 (except for pension and
retirement benefits) shall be continued at the expense of Employer for the
Severance Period. In the event that any such benefits cannot be continued under
the terms of the applicable benefit programs or Employer chooses not to continue
such benefits, the Employer shall pay to Executive a lump sum amount having an
equal value of such remaining benefits. In addition, if the Employment Period is
terminated by Employer pursuant to the provisions of Section 5.1 hereof or by
Executive pursuant to the provisions of Section 5.3 hereof, (i) the restrictions
with respect to all unvested shares of Restricted Stock, if any, previously
granted to Executive shall immediately lapse and such shares shall become
transferable and no longer subject to forfeiture and (ii) all unvested portions
of the Options previously granted to Executive shall immediately become vested
and exercisable. Employer shall have no obligation to continue any other
benefits provided for in Section 4 past the date of termination.
6.2 Certain Other Terminations. If the Employment Period is terminated
by Employer pursuant to the provisions of Sections 5.2 or 5.4, or by death,
pursuant to the provisions of Section 5.5, Employer shall pay to Executive,
within thirty (30) days of the date of termination, Executive's Base Salary
through the date of termination. Provided the date of termination is after the
end of a calendar year for which a Bonus is payable, but prior to the date of
payment, Employer shall also pay to Executive, when due pursuant to provisions
of Section 4.2 hereof, the Bonus for such Bonus Year. Employer shall have no
obligation to continue any other benefits provided for in Section 4 past the
date of termination.
-5-
6.3 No Other Termination Compensation. Executive shall not, except as
set forth in this Section 6, be entitled to any compensation following
termination of the Employment Period.
7. Professional Liability Insurance; Indemnification
7.1 Insurance. The Employer will provide coverage for Executive under
the Employer's director and officer professional liability insurance policy.
7.2 Indemnification. Employer shall indemnify the Executive to the
fullest extent permitted by law in effect as of the date hereof, or as hereafter
amended, against all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, fines, penalties, ERISA excise taxes,
penalties and amounts paid in settlement) reasonably incurred by the Executive
in connection with a Proceeding. For the purposes of this Section, a
"Proceeding" shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which the Executive is made, or is
threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Employer or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Employer.
(a) Notification and Defense of Claim. Promptly after receipt by the
Executive of notice of the commencement of any Proceeding, the Executive will,
if a claim in respect thereof is to be made against the Employer under this
Agreement, notify the Employer in writing of the commencement thereof; but the
omission to so notify the Employer will not relieve the Employer from any
liability that it may have to the Executive otherwise than under this Agreement.
Notwithstanding any other provision of this Agreement, with respect to any such
Proceeding as to which the Executive gives notice to the Employer of the
commencement thereof:
(i) The Employer will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided in this Section 7.2(a)(ii)
to the extent that it may wish, the Employer, jointly with any other
indemnifying party similarly notified, shall be entitled to assume the defense
thereof, with counsel satisfactory to the Executive. After notice from the
Employer to the Executive of its election to so assume the defense thereof, the
Employer shall not be liable to the Executive under this Agreement for any legal
or other expenses subsequently incurred by the Executive in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. The Executive shall have the right to employ the Executive's own
counsel in such Proceeding, but the fees and expenses of such counsel incurred
after notice from the Employer of its assumption of the defense thereof shall be
at the expense of the Executive unless (a) the employment of counsel by the
Executive has been authorized by the Employer, (b) the Executive shall have
reasonably concluded that there may be a conflict of interest between the
Employer and the Executive in the conduct of the defense of such Proceeding
(which conclusion shall be deemed reasonable if, without limitation, such action
shall seek any remedy other than money damages and the Executive would be
personally affected by such remedy or the carrying out thereof), or (c) the
Employer shall not in fact have employed counsel to assume the defense of the
Proceeding, in each of which cases the fees and expenses of counsel shall be at
the expense of the Employer. The Employer shall not be entitled to assume the
defense of any Proceeding brought against the Executive by or on behalf of the
Employer or as to which the Executive shall have reached the conclusion provided
for in clause (b) above.
-6-
8. Confidentiality
Unless otherwise required by law or judicial process, Executive shall
retain in confidence during the Employment Period and after termination of
Executive's employment with Employer pursuant to this Agreement all confidential
information known to the Executive concerning Employer and its businesses. The
obligations of Executive pursuant to this Section 8 shall survive the expiration
or termination of this Agreement.
9. Noncompetition
For the shorter of the duration of: (i) the date of termination of the
Employment Period; (ii) the date of termination of employment hereunder, in the
event of termination of the Executive by the Employer or by the Executive with
Good Reason; or (iii) one-year following the termination of employment hereunder
in the event of termination of employment hereunder by the Executive without
Good Reason (such period referred to herein as the "Non-Compete Period"), the
Executive shall not directly or indirectly, engage in any Competitive Activity
(as defined below) in competition with the Employer. "Competitive Activity"
shall mean: (A) the participation, directly or indirectly, in any business which
is the same as or substantially similar to or is or would be competitive with
the business of the Employer at the time; and (B) becoming an employee,
director, officer, consultant, independent contractor, lecturer or advisor of or
to, or otherwise providing services to, any business, individual, partnership,
firm, association or corporation, if the Executive's duties relate in any manner
to the business of developing, providing, marketing, administering, managing, or
acting as a consultant in the providing of, any business in which the Employer
is engaged at the time. Nothing herein, however, shall prohibit Executive from
acquiring or holding any issue of stock or securities of any business,
individual, partnership, firm, or corporation (collectively "Entity") which has
any securities listed on a national securities exchange or quoted in the daily
listing of over-the-counter market securities, provided that at any one time he
and members of his immediate family do not own more than five percent of the
voting securities of any such Entity. The obligations of Executive pursuant to
this Section 9 shall survive the expiration or termination of this Agreement.
10. Nonsolicitation
During the Non-Compete Period, Executive shall not directly or
indirectly solicit to enter into the employ of any other Entity, or hire, any of
the employees of the Employer (or individuals who were employees of the Employer
within six months of termination of the Non-Compete Period). During the
Non-Compete Period, Executive shall not, directly or indirectly, solicit, hire
or take away or attempt to solicit, hire or take away (i) any customer or client
of the Employer or (ii) any former customer or client (that is, any customer or
client who ceased to do business with the Employer during the one (1) year
immediately preceding such date) of the Employer or encourage any customer or
client of the Employer to terminate its relationship with the Employer without
the Employer's prior written consent. The obligations of Executive pursuant to
this Section 10 shall survive the expiration or termination of this Agreement.
11. Successors; Binding Agreement
This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by Executive and Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other beneficiary or, if there be
no such beneficiary, to Executive's estate.
-7-
12. Survivorship
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
13. Miscellaneous
13.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail, postage paid (deemed given five days after
deposit in the U.S. mails) or personally or by facsimile transmission (deemed
given upon receipt), or at such other address as either party shall designate by
notice given to the other in the manner provided herein.
If to Employer: Consolidated Technology Group
000 Xxxxxx
Xxxxxxx Xxxxx 00000
Attn.: Secretary
If to Executive: Mr. Xxxxxxx Xxxxx
Consolidated Technology Group
000 Xxxxxx
Xxxxxxx Xxxxx 00000
13.2 Taxes. Employer is authorized to withhold (from any compensation
or benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
13.3 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas, without
reference to the principles of conflicts of laws therein.
13.4 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
the city in which the Employer's main corporate headquarters is then located in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction. The costs of the arbitration shall be borne by the non-prevailing
party.
13.5 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
13.6 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
-8-
13.7 Severability. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
13.8 Entire Agreement and Representation. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
Consolidated Technology Group Ltd.
By:__________________________________
Xxxxx XxXxxx
Chairman and CEO
__________________________________
Xxxxxxx Xxxxx
-9-
