EMPLOYMENT AGREEMENT
Employment
Agreement dated as of March
4,
2008, between ACORN ENERGY, INC., a Delaware corporation (with its successors
and assigns, referred to as the “Corporation”) and XXXX X. XXXXX (hereinafter
referred to as “XXXXX”).
PRELIMINARY
STATEMENT
The
Corporation desires to employ XXXXX as Chief Executive Officer of the
Corporation, and XXXXX wishes to be employed by the Corporation in that
capacity, upon the terms and subject to the conditions set forth in this
Agreement. The Corporation and XXXXX also wish to enter into the other
agreements set forth in this Agreement, all of which are related to XXXXX’x
employment under this Agreement.
AGREEMENT
XXXXX
and
the Corporation therefore agree as follows:
1.
Commencement
of Employment: Term.
The
parties acknowledge that XXXXX commenced employment with the Corporation as
Chief Executive Officer prior to the date hereof and shall continue to serve
in
that capacity until the earlier of the third anniversary of the date hereof
or
the date his employment is terminated by either or both of the parties in
accordance with the provisions of this Agreement (the “Term”). The termination
of the Term for any reason shall end XXXXX’x employment under this Agreement,
but, except as otherwise set forth herein, shall not terminate XXXXX’x or the
Corporation’s other rights and obligations under this Agreement.
2.
Position
and Duties.
XXXXX
has been serving, and shall continue to serve, as the Chief Executive Officer
(“CEO”) of the Corporation and shall carry out such duties and responsibilities
consistent with his title, and shall perform and discharge such additional
duties and responsibilities as may be determined by time to time by the Board
of
Directors of the Corporation (the “Board”). XXXXX shall also hold such
additional positions and titles with the Corporation and its subsidiaries as
the
Board may determine from time to time. XXXXX shall report to the Board. During
the Term, XXXXX shall devote substantially all of his full time and attention
to
performing his duties as CEO of the Corporation; provided, however, that XXXXX
shall not be precluded from spending time on personal business and investment
matters that do not interfere with his duties and responsibilities hereunder.
Additionally, XXXXX may also serve as a member of the board of directors of
privately-held and publicly-held companies, subject only to his obtaining prior
approval from the Board, which approval shall not be unreasonably withheld,
conditioned or delayed. XXXXX will be based at the Corporation’s corporate
headquarters, which is currently located at Montchanin, Delaware.
3.
Compensation.
(a)
Base
Salary.
The
Corporation shall pay XXXXX a base salary of $325,000 per annum, retroactive
to
January 1, 2008, payable in accordance with the Corporation’s regular pay cycle
for professional employees. Commencing January 1, 2009, the base salary shall
be
increased to $350,000 per annum, and the base salary commencing January 1,
2010
through the end of the Term shall be increased to $375,000 per annum. The Board,
in accordance with its customary review of executive management compensation,
may from time to time review XXXXX’x base salary and make adjustments the Board
(or any committee of the Board delegated authority over employee compensation
matters) feels are appropriate, but in any event XXXXX’x base salary shall not
be lower than the amounts referred to above.
(b) Other
and Additional Compensation.
(i) Annual
Bonus.
During
the Term, XXXXX shall receive an annual cash bonus of up to $200,000, based
upon
the attainment of agreed upon personal and company performance goals and
milestones for the preceding fiscal year, as determined by the Board (and any
committee of the Board delegated authority over employee compensation matters)
in its sole discretion.
The
Board
(or any such committee) shall negotiate, in good faith, with XXXXX the
applicable targets for the applicable fiscal year during the period commencing
thirty (30) days prior and completing thirty (30) days after the start of such
fiscal year (with the first year target to be agreed within thirty (30) days
of
the date hereof). Payment of the annual bonus to XXXXX will be made within
ten
(10) days following completion of the Corporation’s financial audit or relevant
peer group comparison, as applicable, and determination by the Board of whether
the targeted performance goals and milestones have been met or
exceeded.
(ii) Stock
Options.
Effective as of the date hereof (the “Award Date”), the Corporation has granted
XXXXX ten (10) year non-qualified options for the purchase of up to 200,000
shares of the Corporation’s common stock, par value $0.01 per share (the “Common
Stock”) under the Corporation’s 2006 Stock Incentive Plan (“Plan”) at an
exercise price of $5.11 per share, which represents the closing stock price
of
the Corporation’s Common Stock on the trading date immediately prior to the
Award Date (the “Stock Option Grant”). The terms of the Stock Option Grant,
including the vesting schedule, shall be as set forth in a separate option
agreement executed by and between the parties. Such option agreement shall
provide, among other things, that the options shall vest pro rata on a quarterly
basis (commencing 90 days from the date hereof) over a period of four years,
subject to acceleration as provided herein. Any subsequent stock option grants
will be determined annually by the Board (and any committee of the Board
delegated authority over employee compensation matters). The Corporation hereby
represents and warrants to XXXXX that the shares of Common Stock issuable upon
exercise of the options referred to herein are covered by an existing effective
registration statement of the Corporation on Form S-8 (a “Form S-8”).
Notwithstanding anything to the contrary contained in the foregoing, if at
any
time such shares of Common Stock issuable upon exercise of the options referred
to herein are not covered by an existing effective Form S-8, (a) the Corporation
agrees that if, at any time, and from time to time, it shall authorize the
filing of a registration statement under the Securities Act of 1933, as amended
(the “Securities Act”), in connection with the proposed offer of any of its
securities by it or any of its stockholders, the Corporation shall: (1) promptly
notify XXXXX that such registration statement to cover all such shares of Common
Stock issuable upon exercise of the options referred to herein will be included
in such registration statement at XXXXX’x request, (2) cause such registration
statement to cover all such shares of Common Stock issuable upon exercises
of
the options referred to herein for which XXXXX requests inclusion, (3) use
best
efforts to cause such registration statement to become effective as soon as
practicable, and (4) take all other reasonable action necessary under any
federal or state law or regulation of any governmental authority to permit
all
such shares of Common Stock issuable upon exercise of the options referred
to
herein to be sold or otherwise disposed of, and will maintain such compliance
with each such federal and state law and regulation of any governmental
authority for the period necessary for XXXXX to promptly effect the proposed
sale or other disposition; and (b) XXXXX may make a written request that the
Corporation effect a registration under the Securities Act covering such shares
of Common Stock issuable upon exercise of the options referred to herein and
the
Corporation shall (1) use best efforts to cause such registration statement
to
become effective as soon as practicable, and (2) take all other reasonable
action necessary under any federal or state law or regulation of any
governmental authority to permit all such shares of Common Stock issuable upon
exercise of the options referred to herein to be sold or otherwise disposed
of,
and will maintain such compliance with each such federal and state law and
regulation of any governmental authority for the period necessary for XXXXX
to
promptly effect the proposed sale or other disposition.
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(c) Additional
Compensation.
The
foregoing establishes the minimum compensation during the Term and shall not
preclude the Board, in its discretion, from awarding XXXXX a higher salary
or
any additional bonuses, stock options or stock awards based upon XXXXX’x
performance during a fiscal year and/or other criteria as the Board may deem
appropriate.
4.
Employee
Benefits.
(a) General.
During
the Term, XXXXX shall be entitled to the employee benefits generally made
available to the Corporation’s executive officers, including four-weeks paid
vacation and all U.S. national holidays, dental insurance benefits,
participation in the Corporation’s 401(k) plan and other plans that may be made
available from time to time to the Corporation’s executive officers and health
insurance benefits.
(b) Disability
Insurance. The
Corporation shall also obtain at its expense short-term and long-term disability
insurance for the benefit of XXXXX, provided that XXXXX complete a physical
examination to the Corporation’s satisfaction.
(c) Corporation
Automobile. XXXXX
shall have an automobile expense allowance of $1,000 per month, to be used
for
his leasing of an automobile in connection with his employment hereunder and
the
payment of insurance, maintenance and gasoline expenses, to be paid either
directly by the Corporation or to be reimbursed to XXXXX upon his presentation
of reasonable documentation to the Corporation, in accordance with the
Corporation’s controls and procedures and consistent with applicable
law.
(d) Indemnification;
Liability Insurance.
The
Corporation hereby represents that its By-Laws currently provide for the
indemnification of its officers, employees and directors, subject to the terms
thereof, and XXXXX acknowledges having received a copy of the By-Laws and having
reviewed such section to his satisfaction. The Corporation agrees to obtain
and
maintain directors’ and officers’ liability insurance on terms and amounts
customary for similarly situated public companies.
5.
Expenses.
During
the Term, the Corporation shall reimburse XXXXX for actual out-of-pocket
expenses incurred by him in the performance of his services for the Corporation
upon the receipt of appropriate documentation of such expenses.
6.
Termination.
(a)
General.
The Term
shall end immediately upon XXXXX’x death, or upon termination by the Corporation
for Cause or Disability or by XXXXX for Good Reason, each as defined in Section
7. Upon termination of the Term due to XXXXX’x death, all compensation due XXXXX
under this Agreement will cease. In all other cases, (i) the Corporation may
terminate this Agreement upon sixty (60) days prior written notice, and (ii)
XXXXX may terminate this Agreement upon sixty (60) days written notice. The
parties agree that the mere act of providing notice to the other party of
termination shall not in any event be deemed to provide such other party the
right to immediately terminate this Agreement. For all purposes of this
Agreement, a termination of employment shall be considered to have occurred
if
and only if there has been a “termination of employment” as defined in Treasury
Reg. §1.409A-1(h)(1)(ii).
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(b)
Notice
of Termination - Generally.
Any
termination by the Corporation of XXXXX’x employment hereunder shall be in
writing and delivered to XXXXX at the address set forth herein or at such
address kept in the records of the Corporation and shall specify the reasons
for
such termination.
(c) Termination
by the Corporation for Cause; Termination by Xxxxx without Good Reason.
Any
written notice of termination of employment by the Corporation of XXXXX for
Cause shall, to the extent the Cause is curable, allow XXXXX the opportunity
to
cure, but in any event no more than twenty (20) calendar days. Such notice
of
termination shall also state in reasonable detail the Board’s understanding of
the facts leading to the determination of Cause. Upon the Corporation’s final
termination of the Term and Xxxxx’x employment for Cause and upon Xxxxx’x final
termination of the Term and his employment without Good Reason (pursuant to
the
notice provisions of Section 6(a) hereof), all compensation due to XXXXX under
this Agreement shall cease, except that XXXXX shall receive the
following:
(i)
all
accrued but unpaid base salary up to the date of termination (payable in
accordance with the Corporation’s payroll practices);
(ii)
reimbursement of all previously unreimbursed expenses pursuant to Section
5;
(iii)
all
vested and unexercised options granted by the Corporation as of the date of
termination shall be exercisable in accordance with the terms of the Plan and
applicable stock option agreements;
provided that XXXXX shall have only three (3) months to exercise such previously
vested options; and
(iv)
all
options that as of the date of termination have not vested as of such date
shall
terminate.
(d) Termination
by the Corporation upon a Change of Control or Termination by XXXXX for Good
Reason following a Change of Control. In
the
event that within three (3) months prior to or one year following a “Change of
Control”, as defined in Section 7(c), either (i) the Corporation terminates the
employment of XXXXX, other than for Cause (pursuant to the notice provisions
of
Section 6(a) hereof), or (ii) XXXXX terminates the Term and his employment
for
Good Reason (pursuant to the notice provisions of Section 6(a) hereof), XXXXX
shall receive the following (except as otherwise provided in Section
6(g)):
(i) an
amount
equal to (A) twenty four (24) months of then-current base salary (which is
in
addition to the base salary paid to XXXXX after the Corporation’s delivery of
notice of termination pursuant to Section 6(a) and the actual date of
termination) and (B) two (2) times his most recent annual bonus (but if
termination of employment occurs prior to determination of his bonus for fiscal
year 2008, such bonus amount shall equal two (2) times the target bonus of
$200,000, or $400,000), such amount to be payable as provided in Section 8;
and
(ii) reimbursement
of all previously unreimbursed expenses pursuant to Section 5;
(iii) the
full
vesting of any and all stock options granted to XXXXX by the Corporation prior
to such termination, and extended exercisability thereof until their respective
expiration dates; provided, however, that any stock option grant that
constitutes an “Incentive Stock Option” that is not exercised within three (3)
months of the date of termination shall cease to be treated as an Incentive
Stock Option and shall be treated as a Non-Qualified Stock Option on the date
that is three (3) months and one (1) day following such date of termination;
and
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(iv) the
continuation of all medical and dental benefits at the Corporation’s sole
expense for a period of one year after termination.
For
the
avoidance of doubt, XXXXX shall be entitled to the foregoing benefits once
notice of termination is given by the Corporation or by XXXXX pursuant to this
Section 6(d) and his employment has terminated, regardless of his subsequent
Death or Disability.
(e)
Termination
by the Corporation other than upon Change of Control, Death, Disability or
Cause
or termination by XXXXX for Good Reason. In
the
event that (i) the Corporation terminates the employment of XXXXX (including
a
non-renewal of this Agreement at the end of the three year Term provided herein,
but not including the non-renewal following any subsequent renewal of the Term)
, other than upon a Change of Control, Death, Disability or Cause (pursuant
to
the notice provisions of Section 6(a) hereof), or (ii) XXXXX terminates the
Term
and his employment for Good Reason (pursuant to the notice provisions of Section
6(a) hereof), other than in connection with a Change of Control, XXXXX shall
receive the following (except as otherwise provided in Section
6(g)):
(i) an
amount
equal to (A) twelve (12) months of then-current base salary (which is in
addition to the base salary paid to XXXXX after the Corporation’s delivery of
notice of termination pursuant to Section 6(a) and the actual date of
termination) and (B) his most recent annual bonus (but if termination of
employment occurs prior to determination of his bonus for fiscal year 2008,
such
bonus amount shall equal the target bonus of $200,000), such amount to be
payable as provided in Section 8;
(ii) reimbursement
of all previously unreimbursed expenses pursuant to Section 5;
(iii) accelerated
vesting of all unvested options that otherwise would have vested within 24
months of the date of termination, with such accelerated options and all other
vested and unexercised options granted by the Corporation as of the date of
termination to be exercisable for a period of one year from the date of
termination of employment in accordance with the terms of the Plan and
applicable stock option agreements; provided, however, that any stock option
grant that constitutes an “Incentive Stock Option” that is not exercised within
three (3) months of the date of termination shall cease to be treated as an
Incentive Stock Option and shall be treated as a Non-Qualified Stock Option
on
the date that is three (3) months and one (1) day following such date of
termination; and
(iv) the
continuation of all medical and dental benefits at the Corporation’s sole
expense for a period of one year after termination.
For
the
avoidance of doubt, XXXXX shall be entitled to the foregoing benefits once
notice of termination is given by the Corporation or by XXXXX pursuant to this
Section 6(e) and his employment has terminated, regardless of his subsequent
Death or Disability.
(f)
Vesting
of Stock Options in event of Change of Control. Notwithstanding
any other provisions of this Section 6, in the event of any Change of Control,
all stock options granted to XXXXX prior to such Change of Control shall vest
and remain exercisable until their respective expiration dates; provided,
however, that any stock option grant that constitutes an “Incentive Stock
Option” that is not exercised within three (3) months of the date of termination
shall cease to be treated as an Incentive Stock Option and shall be treated
as a
Non-Qualified Stock Option on the date that is three (3) months and one (1)
day
following such date of termination.
5
(g) Excess
Parachute Payments. If
the
amounts payable by the Corporation pursuant to Section 6(d) or Section 6(e)
in
connection with a termination of employment of XXXXX would constitute to any
extent an “excess parachute payment” as defined in Section 280G(b) of the
Internal Revenue Code of 1986, as amended (the “Code”), then the amount payable
by the Corporation to XXXXX under those provisions of this Agreement shall
be an
amount equal to the lesser of: (A) the amounts payable pursuant to Section
6(d)
or Section 6(e), as applicable; or (B) the amounts described in clause (A)
as
reduced to the extent necessary to cause the aggregate of all amounts paid
to
XXXXX in connection with (x) a change in ownership or effective control of
the
Corporation or (y) a change in the ownership of a substantial portion of the
assets of the Corporation (if any of the foregoing constitutes an event
described in clause (b)(2)(A)(i) of Code Section 280G) not to exceed two hundred
ninety-nine percent (299%) of the “base amount” paid to XXXXX as such term is
defined in Section 280G(b)(3) (or any successor provision). The reduction
described in clause (B) of the preceding sentence shall not be made, however,
if
the effect of the reduction would be to cause XXXXX to retain, from the sum
of
all "parachute payments" as defined in Code Section 280G(b) payable to him
or
for his benefit, on an after-tax basis (that is, after payment of all applicable
income taxes and of any tax imposed by Section 4999 of the Code by reason of
the
receipt of such payments) and taking into account such reduction, an aggregate
amount that is less than what XXXXX would retain, on an after-tax basis, if
the
reduction described in clause (B) of the preceding sentence were not
made. For
the
avoidance of doubt, this Section 6(g) shall be applied by taking into account
any “parachute payment” (as defined in Code Section 280G(b)) payable to XXXXX in
connection with the change in ownership or effective control of the Corporation
or change in the ownership of a substantial portion of its assets, including,
without limitation, any parachute payment attributable to stock options granted
to XXXXX by the Corporation.
(h) Release.
The
obligation of the Corporation to make any payments or provide any benefits
to
XXXXX under this Section 6 shall be subject to XXXXX signing and not revoking
a
release of all claims in reasonable form provided to XXXXX by the
Corporation.
7.
Definitions.
(a)
"Cause"
Defined.“Cause”
means (i) the failure by XXXXX to perform his duties hereunder after written
notice thereof and time to cure; (ii) his failure to follow the written legal
directions of the Board after written notice thereof; (iii) his conviction
of,
or pleading guilty or nolo contendere, to a felony or a crime involving moral
turpitude, fraud or embezzlement; (iv) willful misconduct with regard to the
Corporation (including violations of securities laws) having a material adverse
impact on the Corporation; or (v) an uncured material breach by XXXXX of this
Agreement or material breach by XXXXX of his fiduciary duties; in each case,
unless cured within twenty (20) calendar days’ of XXXXX’x receipt of written
notice by the Board of its determination to terminate XXXXX with Cause, to
the
extent curable.
(b)
“Disability”
Defined.“Disability”
shall
mean XXXXX’x incapacity due to physical or mental illness, as
determined by a qualified independent physician, that results in his being
unable to substantially perform his duties hereunder for three consecutive
months (or for three months out of any six-month period) (in either event,
the
“Disability Period”). During the Disability Period, XXXXX shall continue to
receive his base salary hereunder, provided that if the Corporation provides
XXXXX with disability insurance coverage, payments of XXXXX’x base salary shall
be reduced by the amount of any disability insurance payments received by XXXXX
due to such coverage. Upon termination of employment, after the end of the
Disability Period, all compensation due XXXXX under this Agreement shall
cease.
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(c)
“Change
of Control” Defined. “Change
of Control” shall mean the occurrence of any one or more of the following
events:
(i) An
acquisition (whether directly from the Corporation or otherwise) of any voting
securities of the Corporation (the “Voting Securities”) by any “Person” (as the
term person is used for purposes of Section 13(d) or 14(d) of the Securities
and
Exchange Act of 1934, as amended (the “1934 Act”)), immediately after which such
Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated
under the 0000 Xxx) of more than fifty percent (50%) of the combined voting
power of the Corporation’s then outstanding Voting Securities;
(ii) A
majority of the members of the Board of Directors of the Corporation is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Corporation’s Board of Directors
before the date of the appointment or election;
or
(iii)
An
acquisition by any Person, at any time during the 12-month period ending on
the
date of the most recent acquisition by such Person or Persons, of assets from
the Corporation that have a total Gross Fair Market Value equal to or more
than
eighty percent (80%) of the total Gross Fair Market Value of all of the assets
of the Corporation immediately before such acquisition; provided, however,
that
the Gross Fair Market Value of any assets of the Corporation acquired by a
Person that is controlling, controlled by or under common control with the
Corporation or any of its stockholders shall not be taken into account in
determining whether a Change of Control has occurred.
(d)
“Good
Reason” Defined. “Good
Reason” shall mean the occurrence of any of the conditions described below,
provided that such condition arises without the consent of XXXXX:
(i) a
material diminution in XXXXX’x authority, duties, or
responsibilities;
(ii) a
material diminution in the authority, duties, or responsibilities of the
supervisor or corporate body to whom Xxxxx is required to report, including
a
requirement that Xxxxx report to a corporate officer or employee instead of
reporting directly to the board of directors of a corporation (or similar
governing body with respect to an entity other than a corporation).
(iii) a
material diminution in Xxxxx’x base compensation;
(iv) any
material breach by the Corporation of any provision of this Agreement;
or
(v) a
material change in the geographic location at which XXXXX must perform his
services.
Notwithstanding
the above, a termination of employment shall not be considered to have occurred
for “Good Reason” unless: XXXXX provides notice of the condition within 90 days
after the initial existence of the condition; the Corporation fails to cure
such
condition within 30 days after such notice; and the termination of employment
occurs within two years following the initial existence of the
condition.
(e) “Gross
Fair Market Value” Defined. “Gross
Fair Market Value” shall mean the fair market value without regard to
liabilities associated with the assets valued.
7
8. Payment
Terms.
Payment
of any amounts to which XXXXX shall be entitled pursuant to the provisions
of
Section 6 shall be made in 12 equal installments commencing no later than thirty
(30) days following the six month anniversary of the date of termination of
employment. Payment of any amounts to which XXXXX shall be entitled pursuant
to
the provisions of Section 11(c) shall be made in equal monthly installments
commencing in the month after the completion of the Initial Non-Competition
Term
(as defined in Section 11(a)), through calendar year-end, and continuing for
the
months of January and February of the following calendar year. Any amounts
payable pursuant to Sections 6 and 11 which are not made within the period
specified in this Section 8 shall bear interest at a rate equal to the lesser
of
(i) the maximum interest rate allowable pursuant to applicable law or (ii)
five
points above the “prime rate” of interest as published from time-to-time in the
Eastern Edition of the Wall Street Journal.
9. Post-Termination
Benefits. Upon
termination of XXXXX’x employment hereunder for any reason, in addition to any
payments to which XXXXX may be entitled upon termination of his employment
pursuant to any provision of this Agreement, XXXXX shall be entitled to any
benefits under any pension, supplemental pension, savings, or other employee
benefit plan (other than life or disability insurance and automobile allowance)
in which XXXXX was participating on the date of any such
termination.
10.
Confidentiality.
(a)
“Corporation
Information” Defined.“Corporation
Information” means all information, knowledge or data of or
pertaining to (i) the Corporation, its employees and all work undertaken on
behalf of the Corporation, and (ii) any other person, firm, corporation or
business organization with which the Corporation may do business during the
Term, that is not in the public domain (and whether relating to methods,
processes, techniques, discoveries, pricing, marketing or any other matters).
(b) Confidentiality.
XXXXX
hereby recognizes that the value of all trade secrets and other proprietary
data
and all other information of the Corporation not in the public domain disclosed
by the Corporation in the course of his employment with the Corporation is
attributable substantially to the fact that such confidential information is
maintained by the Corporation in strict confidentiality and secrecy and would
be
unavailable to others without the expenditure of substantial time, effort or
money. XXXXX therefore, except as otherwise provided in this Section 10(b),
covenants and agrees that all Corporation Information shall be kept secret
and
confidential at all times during and after the end of the Term and shall not
be
used or divulged by him outside the scope of his employment as contemplated
by
this Agreement, except as the Corporation may otherwise expressly authorize
by
action of the Board. In the event that XXXXX is requested in a judicial,
administrative or governmental proceeding to disclose any of the Corporation
Information, XXXXX will promptly so notify the Corporation so that the
Corporation may seek a protective order or other appropriate remedy and/or
waive
compliance with this Agreement. If disclosure of any of the Corporation
Information is required, XXXXX may furnish the material so required to be
furnished, but XXXXX will furnish only that portion of the Corporation
Information that legally is required. Notwithstanding anything to the contrary
contained in the foregoing, XXXXX shall not be prevented from disclosing
Corporation Information that (i)
was
or becomes generally available to the public through no fault of XXXXX; (ii)
was
available to XXXXX on a non-confidential basis prior his employment with the
Corporation; or (iii) was
developed independent of the information derived from the Corporation
Information.
8
11. Non-Competition
and Non-Solicitation Covenants.
(a) Non-Competition.
The
Corporation and XXXXX acknowledge that: (i) the Corporation has a special
interest in and derives significant benefit from the unique skills and
experience of XXXXX; (ii) XXXXX will use and have access to proprietary and
valuable Corporation Information (as defined in Section 10 hereof) during the
course of his employment; and (iii) the agreements and covenants contained
herein are essential to protect the business and goodwill of the Corporation
or
any of its subsidiaries, affiliates or licensees. Accordingly, except as
hereinafter noted, XXXXX covenants and agrees that during the Term, and for
a
period of one year following the termination of XXXXX’x employment (two years if
such termination was either by the Corporation or by XXXXX in connection with
a
Change of Control pursuant to Section 6(d)) (in either event, the “Initial
Non-Competition Term”), XXXXX shall not provide any labor, work, services or
assistance (whether as an officer, director, employee, partner, agent, owner,
independent contractor, stockholder or otherwise) to a “Competing Business.” For
purposes hereof, “Competing Business” shall mean any business engaged in the
business engaged in by the Corporation during the Term.
In
consideration of all of the compensation provisions in this Agreement, XXXXX
agrees to the provisions of this Section 11 and also agrees that the
non-competition obligations imposed herein are fair and reasonable under all
the
circumstances.
(b) Non-Solicitation
of Employees.
XXXXX
covenants and agrees that during the Term, and for a period of one year
following termination of employment hereunder for any reason whatsoever (two
years if such termination was either by the Corporation or by XXXXX in
connection with a Change of Control pursuant to Section 6(d)), XXXXX shall
not
directly or indirectly solicit any other employee of or consultant to the
Corporation, or any of its subsidiaries or affiliates to terminate such
employee’s employment or consultant’s relationship with the Corporation, or any
of its subsidiaries or affiliates, as the case may be, or to become employed
by
or a consultant to a Competing Business.
(c) Extension
of Covenants. The
Corporation, at its sole option, may elect to extend the non-solicitation and
non-competition covenants of this Section 11 for one (1) additional year, by
notice to XXXXX within 30 days before the expiration of such covenants. If
such
election is made, the Corporation shall pay to XXXXX in accordance with Section
8 an amount equal to the base salary at the time of XXXXX’x termination and the
previous year’s annual bonus (but if XXXXX’x termination occurs prior to
determination of his bonus for fiscal year 2008, the bonus amount will be the
target bonus of $200,000).
(d) Remedies.
XXXXX
acknowledges that any such breach of the provisions of Section 10 and this
Section 11 is likely to result in immediate and irreparable harm to the
Corporation for which money damages are likely to be inadequate. Accordingly,
XXXXX acknowledges that in the event of any such breach, the Corporation may
obtain injunctive and other appropriate equitable relief in any forum where
proper jurisdiction can be obtained upon the institution of proceedings therefor
by the Corporation in order to protect its rights hereunder. Such relief in
the
event of such breach may include, without limitation, an injunction to prevent:
(i) the breach or continuation of XXXXX’x breach of Section 10 or Section 11
hereof; (ii) XXXXX from disclosing any trade secrets or Corporation Information;
(iii) any Competing Business from receiving from XXXXX or using any such trade
secrets or Corporation Information; and/or (iv) any such Competing Business
from
retaining or seeking to retain any employees of the Corporation. The provisions
of this Section 11(d) shall survive the termination of this Agreement and the
Term.
(e) Early
Termination of Restrictive Covenants. Notwithstanding
the foregoing, the restrictive covenants set forth in Sections 11(a) and (b)
shall terminate if any payments required by Sections 6 and 11(c) hereof to
be
made by the Corporation to XXXXX are not made within the periods specified
in
Section 8.
12. Successors
and Assigns; Expenses.
(a) The
Employee.
This
Agreement is a personal contract, and the rights and interests that the
Agreement accords to XXXXX may not be sold, transferred, assigned, pledged,
encumbered, or hypothecated by him. All rights and benefits of XXXXX shall
be
for the sole personal benefit of XXXXX, and no other person shall acquire any
right, title or interest under this Agreement by reason of any sale, assignment,
transfer, claim or judgment or bankruptcy proceedings against XXXXX. Except
as
so provided, this Agreement shall inure to the benefit of and be binding upon
XXXXX and his personal representatives, distributees and legatees.
9
(b) The
Corporation. This
Agreement shall be binding upon the Corporation and inure to the benefit of
the
Corporation and its successors and assigns.
(c) Expenses.
The
Corporation shall either reimburse XXXXX or pay directly to his counsel, Reitler
Xxxxx & Xxxxxxxxxx LLC, an amount of up to $9,000 for its costs related to
the negotiation, preparation and review of this Agreement.
13. Entire
Agreement.
This
Agreement, together with the Stock Option Grant, represents the entire agreement
between the parties concerning XXXXX’x employment with the Corporation and
supersedes all prior negotiations, discussions, understandings and agreements,
whether written or oral, between XXXXX and the Corporation relating to the
subject matter of this Agreement.
14. Amendment
or Modification; Waiver.
No
provision of this Agreement may be amended or waived unless such amendment
or
waiver is agreed to in writing signed by XXXXX and by a duly authorized officer
of the Corporation. No waiver by any party to this Agreement of any breach
by
another party of any condition or provision of this Agreement to be performed
by
such other party shall be deemed a waiver of a similar or dissimilar condition
or provision at the same time, any prior time or any subsequent
time.
15. Notices.
Any
notice to be given under this Agreement shall be in writing and delivered
personally or sent by overnight courier or registered or certified mail, postage
prepaid, return receipt requested, addressed to the party concerned at the
address indicated below, or to such other address of which such party
subsequently may give notice in writing:
|
If
to XXXXX:
|
Xxxx
X. Xxxxx
|
|
000
Xxxxx Xxxx
|
|
|
Xxxxxxxxxx,
XX 00000
|
|
|
with
a copy to:
|
Reitler
Xxxxx & Rosenblatt LLC
|
|
000
Xxxxx Xxxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxxx X. Xxxxxxxxxx, Esq.
|
|
|
If
to the Corporation:
|
|
|
0
Xxxx Xxxxxxxx
|
|
|
Xxxxxxxxxx,
Xxxxxxxx 00000
|
|
|
Attention:
Chairman of the Compensation Committee
|
|
|
with
a copy to:
|
Xxxxxxxxx
Xxxxxx & Xxxx LLP
|
|
00
Xxxx 00xx
Xxxxxx
|
|
|
Xxx
Xxxx, XX 00000
|
|
|
Attention:
Xxxxxxx Xxxxxx , Esq.
|
Any
notice delivered personally or by overnight courier shall be deemed given on
the
date delivered and any notice sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed given on the date
mailed.
10
16. Severability.
If any
provision of this Agreement or the application of any such provision to any
party or circumstances shall be determined by any court of competent
jurisdiction to be invalid and unenforceable to any extent, the remainder of
this Agreement or the application of such provision to such person or
circumstances other than those to which it is so determined to be invalid and
unenforceable shall not be affected, and each provision of this Agreement shall
be validated and shall be enforced to the fullest extent permitted by law.
If
for any reason any provision of this Agreement containing restrictions is held
to cover an area or to be for a length of time that is unreasonable or in any
other way is construed to be too broad or to any extent invalid, such provision
shall not be determined to be entirely null, void and of no effect; instead,
it
is the intention and desire of both the Corporation and XXXXX that, to the
extent that the provision is or would be valid or enforceable under applicable
law, any court of competent jurisdiction shall construe and interpret or reform
this Agreement to provide for a restriction having the maximum enforceable
area,
time period and such other constraints or conditions (although not greater
than
those contained currently contained in this Agreement) as shall be valid and
enforceable under the applicable law.
17. 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.
18. Headings.
All
descriptive headings of sections and paragraphs in this Agreement are intended
solely for convenience of reference, and no provision of this Agreement is
to be
construed by reference to the heading of any section or paragraph.
19. Withholding
Taxes.
All
salary, benefits, reimbursements and any other payments to XXXXX under this
Agreement shall be subject to all applicable payroll and withholding taxes
and
deductions required by any law, rule or regulation of and federal, state or
local authority.
20.
Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to be an original but all of which together constitute one and same
instrument.
21. Applicable
Law; Jurisdiction.
The laws
of the State of Delaware shall govern the interpretation, validity and
performance of the terms of this Agreement, without reference to rules relating
to conflicts of law. Except as otherwise provided in Section 11(d), any suit,
action or proceeding against XXXXX with respect to this Agreement, or any
judgment entered by any court in respect thereof, may be brought in any court
of
competent jurisdiction in the State of Delaware, as the Corporation may elect
in
its sole discretion, and XXXXX hereby submits to the exclusive jurisdiction
of
such courts for the purpose of any such suit, action, proceeding or
judgment.
[THE
BALANCE OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
11
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first written above.
|
XXXX
X. XXXXX
|
||
|
By:
|
||
|
Name:
Xxxxxxx Xxxxxx
|
||
|
Title:
Secretary, General Counsel
|
||
|
By:
|
||
|
Name:
Xxxxxxx Xxxxxx
|
||
|
Title:
Director, on behalf of the Board of
Directors
|
||
12
