EX-10.2
THIRD AMENDED EMPLOYMENT AGREEMENT BETWEEN
SMARTPROS LTD.
AND
XXXXX X. XXXXXX
This amended employment agreement dated as of May 1, 2004 is by and between
SmartPros Ltd., a Delaware corporation (the "Company"), and Xxxxx X. Xxxxxx, an
individual residing at 000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000 (the
"Executive").
1. EMPLOYMENT. The Company shall employ the Executive, and the Executive
agrees to serve the Company, on the terms and conditions set forth
herein. The Executive shall serve as Vice Chairman & Chief Executive
Officer of the Company and shall be based at the Company's headquarters
in Hawthorne, New York, but Executive may work up to 2 days per week from
his home. The Executive hereby accepts such employment hereunder, except
for absences occasioned by illness and reasonable vacation periods, and
agrees to undertake the duties and responsibilities inherent in such
position and such other duties and responsibilities as the Company shall
from time to time reasonably assign to him. The Executive shall report to
and be supervised by the Board of Directors of the Company (the "Board").
The Executive shall use his best efforts, including the highest standards
of professional competence and integrity, and shall devote his full
business time and effort to the performance of his duties hereunder. The
Executive shall not engage in any other business activity except that the
Executive may engage from time to time in such personal investment
activities as do not interfere with his day to day responsibilities to
the Company. The Executive shall be allowed to serve as an independent
member of the boards of directors of other companies with the prior
approval of the Board.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. During the Term (as defined below) of this Agreement, the
Executive shall be paid a salary at the rate of $236,250 per annum
(the "Base Salary"), payable as customarily paid by the Company.
Such salary shall increase to $250,000 per annum upon the
completion of a public offering. During the Term of this
Agreement, executive's base salary shall be reviewed at least
annually by the Board. The first such review will be made no later
than April 30, 2005 and thereafter the Base Salary shall be
reviewed on or before April 30th of each succeeding year. The
Board, in its sole discretion, may increase, but not decrease the
Base Salary.
2.2 BONUS. In addition to his Base Salary, the Executive may be
entitled to bonuses at times and amounts determined in the
discretion of the Board. The
target bonus shall equal 50 % of Base Salary. The bonus will be
based 50% on Company performance and 50% on individual
performance.
2.3 BENEFITS. The Executive shall be entitled to participate in all
employee benefit programs or plans maintained by the Company from
time to time on the same basis as other similarly situated
executive employees of the Company. If the Executive elects not to
participate in the Company's health, dental or life insurance
plans the Company will pay or reimburse (based on the cost to the
Company for a family plan) the Executive for the direct premium
cost of Executive's participation in the Fleet Bancorp health and
life insurance plan. (Any increase in the Company's cost for their
plan will increase the amount of reimbursement.) The Company will
pay or reimburse the lease cost of the automobile currently leased
by the Executive and upon expiration or termination of the lease
will continue to provide the Executive with a similar suitable
automobile for his business and/or personal use. The Company will
pay or reimburse all maintenance, insurance, tolls, fuel, and
other operating expenses of the automobile currently leased by
Executive or any replacement provided by the Company hereunder
including any excess mileage charges. The Executive will be
entitled to 4 weeks paid vacation per year.
2.4 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive in accordance with its general reimbursement policies
for all ordinary and necessary expenses incurred by the Executive
on behalf of the Company upon the presentation of appropriate
supporting documentation.
2.5 STOCK OPTIONS. Pursuant to Stock Option Agreements in customary
form, the Company has previously granted to the Executive pursuant
and subject to its Stock Option Plan, stock options to purchase up
to 250,000 shares of the Company's common stock ("Common Stock").
The options have a term of 10 years, and are fully vested. In
addition, the options provide that upon termination of employment,
the executive may exercise all options vested at the time of such
termination until the later of (a) the 90th day after the
termination of such employment or (b) the 90th day after the day
on which both of the following events have occurred: (i) the
Common Stock is traded on the NY Stock Exchange, the American
Stock Exchange, the NASDAQ, National Market or the NASDAQ Small
Cap Market and (ii) the Executive may sell the shares which are
the subject of such option, free of any contractual restriction
imposed by the Company or any underwriter of the Company's Common
Stock or any restrictions imposed by the Securities Act of 1933 as
amended. All the options and their terms remain in full force and
effect.
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3. TERM; TERMINATION; RIGHTS UPON TERMINATION.
3.1 TERM. The Company agrees to employ the Executive, and the
Executive agrees to serve the Company for a period commencing May
1, 2004 and continuing for three years thereafter (such period,
including all extensions thereto, to be collectively referred to
as the "EMPLOYMENT PERIOD"), unless otherwise terminated pursuant
to the terms hereof. The Employment Period shall automatically
renew annually for a new three-year term unless prior to the end
of the first year of each three-year term, either the Company or
the Executive provides notice to the other party to this Agreement
of its intention not to extend the Employment Period beyond the
then current three-year term. Any notice given pursuant to this
Section shall be provided in accordance with the terms of Section
8.1 hereof and shall be provided not later than 30 days prior to
the end of such one-year period.
3.2 TERMINATION. The Company may at any time, terminate the employment
of the Executive under this Agreement for Cause (as defined
below), or without cause, immediately and without any requirement
of notice. The rights and obligations of the parties upon any
termination of the Executive's employment shall be as set forth in
Section 3.3. For purposes of this Agreement the term "Cause" shall
mean (i) any act of dishonesty or gross and willful misconduct
with respect to the Company, including without limitation, fraud
or theft, on the part of the Executive, (ii) conviction of the
Executive of a felony, or (iii) the Executive's failure to perform
his assigned duties hereunder after written notice and a 30 day
opportunity to cure.
3.3 RIGHTS UPON TERMINATION. In the event that:
(a) The employment of the Executive is terminated by the
Company without Cause or by the Executive upon any change
by the Company in Executives function, duties or
responsibilities, which change would cause Executive's
position with the Company to become one of lesser
responsibility, importance or scope from the position
described in Section 1, then, for the remainder of the then
current term of employment hereunder, (i) the Company shall
pay to the Executive, at the time otherwise due under
Section 2, all Base Salary at the rate in effect at the
time of termination, (ii) a bonus equal to the highest
annual bonus received by the Executive in the last five
years multiplied by the amount of whole and partial years
remaining on the contract and (iii) the Company shall
provide to the Executive all benefits described in Section
2.3. In addition the vesting of stock options described in
Section 2.5, and those granted previously, shall accelerate
such that 100% of such options shall automatically vest on
the date of such termination. The obligations of the
Company pursuant to this Section 3.3(a) shall be in lieu of
any
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other rights of the Executive hereunder to compensation or
benefits in respect of any period before or after the date
of such termination.
(b) The Executive's employment terminates by reason of
death or disability, then the Company shall pay and provide
to the Executive or Executive's estate or other successor
in interest at the time otherwise due under Section 2 all
Base Salary and benefits due to the Executive under Section
2 through the end of the sixth month after the month in
which the termination occurs, but reduced in the case of
disability by any payments received under any disability
plan, program or policy paid for by the Company. The
obligations of the Company pursuant to this Section 3.3(b)
shall be and in lieu of any other rights of the Executive
hereunder to compensation or benefits in respect of any
period before or after the date of such termination and in
lieu of any severance payment, and no other compensation of
any kind or any other amounts shall be due to the Executive
by the Company under this Agreement. For purposes of this
Agreement, the term "disability" shall mean the Executive's
failure to perform the services contemplated by this
Agreement as a result of his physical or mental illness or
incapacity for a period of 6 consecutive months, or a total
of 240 days in any 365 day period.
(c) The employment of the Executive is terminated by the
Company for Cause, or by the Executive other than under
circumstances described in Section 3.3(a) or (b) above, the
Executive shall not be entitled to compensation or benefits
granted hereunder beyond the date of the termination of the
Executive's employment.
(d) If, the Company fails to offer to continue the
employment of the Executive in the capacity of its Vice
Chairman and Chief Executive Officer for a period of three
years after the End Date at a Base Salary equal to the
higher (i) $280,000.00 or (ii) 105% of the Base Salary in
effect on April 30, 2007 (the "Final Base Salary"),
pursuant to a written Agreement (the "Renewal Agreement")
on terms and conditions substantially identical to this
Agreement then, in such event, the Company shall pay to the
Executive in one lump sum an amount equal to 50% of the
Final Base Salary. Such payment shall be made to the
Executive within 10 days after April 30 2007.
(e) If a Change in Control, as defined in Section 7,
shall occur at any time after March 31, 2004 then upon the
occurrence of such Change in Control the End Date shall be
amended to the date which is two years after the date of
such occurrence.
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4. PROPRIETARY INFORMATION.
4.1 The Executive agrees that all information and know how, whether or
not in writing, of a private, secret or confidential nature
concerning the business or financial affairs of the Company and
its subsidiaries (collectively, for purposes of this Section 4,
the "Company") and not within Executive's possession or knowledge
prior to his employment with the Company (collectively,
"Proprietary Information"), is and shall be the exclusive property
of the Company. By way of illustration, but not limitation,
Proprietary Information may include inventions, products,
processes, methods, techniques, projects, developments, plans,
research data, financial data, personnel data. The Executive will
not disclose any Proprietary Information to others outside the
Company or use the same for any unauthorized purposes without
written approval by the Company, either during or after his
employment, unless and until such Proprietary Information has
become public knowledge without fault of the Executive.
4.2 The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, or other written, photographic,
or other tangible material containing Proprietary Information,
whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive property
of the Company to be used by the Executive only in the performance
of his duties for the Company.
4.3 The Executive agrees that his obligation not to disclose or use
Proprietary Information and records of the type set forth herein
also extends to such types of Proprietary Information, records and
tangible property of other third parties who may have disclosed or
entrusted the same to the Company or to the Executive in the
course of the Company's' business.
5. OTHER AGREEMENTS. The Executive hereby represents that his performance of
all the terms of this Agreement and as an employee of the Company does
not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust
prior to his employment with the Company.
6. NON-COMPETITION, NON- SOLICITATION.
6.1 Non-solicitation of Employees and Customers. The Executive agrees
that during the term of the Executive's employment with the
Company and for a period of one year thereafter, the Executive
shall not directly or indirectly (i) recruit, solicit or otherwise
induce or attempt to induce any employees of the Company or any of
its subsidiaries to leave their employment or (ii) call upon,
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solicit, divert or take away, or attempt to divert or take away,
the business or patronage of any, customer licensee, vendor,
collaborator or corporate partner of the Company or any of its
subsidiaries that had a business relationship with the Company or
any of its subsidiaries at the time of termination of Executive's
employment with the Company and that did not have a business or
personal relationship or was known to Executive prior to his
employment with the Company.
6.2 Non-competition. The Executive agrees that during the term of the
Executive's employment with the Company, the Executive shall not
directly or indirectly, engage in competition with the Company or
any subsidiaries, or own or control any interest in, or act as
director, officer or employee of, or consultant to, any firm,
corporation or institution directly engaged in competition with
the Company or any of its subsidiaries: provided the Company or
one of its subsidiaries are actively engaged in such business at
the time the Executive's employment by the Company is terminated:
and provided that the foregoing shall not prevent the Executive
from holding shares as a passive investor in a publicly held
company which do not constitute more than 5% of the outstanding
shares of such company. In the event the Executive (i) voluntarily
terminates his employment, (including at any time on or after the
End Date) other than provided for in this agreement, or (ii) is
terminated by the Company for Cause, the Executive agrees to not
compete in the E-Learning marketplace until the earlier of April
30, 2007 or one year from the date of such termination.
7. CHANGE IN CONTROL PROTECTION. For purposes of this Agreement, a "Change
in Control" of the Company shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended, or any similar item, schedule or form, whether
or not the Company is then subject to such reporting requirement.
8. MISCELLANEOUS.
8.1 NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery
or upon deposit in the United States Post Office, by registered or
certified mail, postage prepaid, addressed if to the Executive, at the
address shown above and if to the Company at its principal place of
business at 00 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx, or at such other
address or addresses as either party shall designate to the other in
accordance with this Section 8.1.
8.2 PRONOUNS. Wherever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or
neuter forms,
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and the singular forms of nouns and pronouns shall include the plural,
and vice versa.
8.3 ENTIRE AGREEMENTS. This Agreement constitutes the entire agreement
between the parties and supercedes all prior agreements and
understandings, whether written or oral, relating to the subject matter
of this Agreement.
8.4 AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
8.5 GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of New York.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company
may be merged or which may succeed to its assets or business, provided,
however, that the obligations of the Executive are personal and shall not
be assigned by him.
8.7 WAIVERS. No delay or omission by the Company in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall
be effective only in this instance and shall not be construed as a bar or
waiver of any right on any other occasion.
8.8 CAPTIONS. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
8.9 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
8.10 SPECIFIC ENFORCEMENT. The parties acknowledge that the Executive's
breach of the provisions of Section 4 and 6 of this Agreement will cause
irreparable harm to the Company. It is agreed and acknowledged that the
remedy of damages will not be adequate for the enforcement of such
provisions and that such provisions may be enforced by equitable relief,
including injunctive relief, which relief shall be cumulative and in
addition to any other relief to which the Company may be entitled.
9. ARBITRATION. Any claims, controversies, demands, disputes or differences
between or among the parties hereto or any persons bound hereby arising out of,
or by virtue of, or in connection with, or otherwise relating to this Agreement
shall be
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submitted to and settled by arbitration conducted in New York, New York before
one or three arbitrators each of which shall be knowledgeable in employment law.
Such arbitration shall otherwise be conducted in accordance with the rules then
obtaining of the American Arbitration Association. The parties hereto agree to
share equally the responsibility for all fees of the arbitrators, abide by any
decision rendered as final and binding, and waive the right to appeal the
decision or otherwise submit the dispute to a court of law for a jury or
non-jury trial. The parties hereto specifically agree that neither party may
appeal or subject the award or decision of any such arbitrator(s) to appeal or
review in any court of law or in equity or by any other tribunal, arbitration
system or otherwise. Judgment upon any award granted by such an arbitrator(s)
may be enforced in any court having jurisdiction thereof. If the arbitration
decision holds that the Company is at fault the Executive shall be entitled to
reimbursement of fees and expenses from the Company in an amount not to exceed
$50,000. If the arbitration decision holds that the Company is not at fault, the
Company shall be entitled to reimbursement of fees and expenses from the
Executive in an amount not to exceed $25,000.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above
SmartPros Ltd.
By: /s/ XXXX XXXXX
---------------------------------
Name: XXXX XXXXX
Title: CHAIRMAN OF THE BOARD
/s/ XXXXX X. XXXXXX
---------------------------------
XXXXX X. XXXXXX
