EMPLOYMENT AGREEMENT
EXHIBIT
10.24
THIS
AGREEMENT (“Agreement”) is effective as of the 16th day of April, 2007, by and
between XXXXX
X. XXXXXX, an
individual resident of the State of Georgia (“Employee”), and INNOTRAC
CORPORATION,
a
Georgia corporation (the “Employer”).
W
I T
N E S S E T H:
WHEREAS,
Employee previously entered into an Employment Agreement with the Employer,
which has expired by its terms; and
WHEREAS,
the parties hereto desire to enter into an agreement for the Employer’s
continued employment of Employee on the terms and conditions contained herein;
and
WHEREAS,
this Employment Agreement supersedes any prior employment agreement or promises
between Employer and Employee regarding the terms of Employee’s employment;
and
NOW,
THEREFORE, in consideration of the premises and the mutual promises and
agreements contained herein, the parties hereto, intending to be legally
bound,
hereby agree as follows:
Section
1. Employment.
Subject
to the terms hereof, the Employer hereby employs Employee, and Employee hereby
accepts such employment. Employee will serve as Senior Vice President or
in such
other executive capacity as the Board of Directors of Employer (the “Board of
Directors”) may hereafter from time to time determine. Employee agrees to devote
his full business time and best efforts to the performance of the duties
that
Employer may assign Employee from time to time.
Section
2. Term
of Employment.
The
term
of Employee's employment (the “Term”) shall continue from the date hereof until
the earlier of (a) December 31, 2009, provided that this date shall
automatically extend until December 31, 2010 and until each December 31
thereafter, unless either the Employer or the Employee provides written notice
of non-renewal to the other party no later than the September 30th
prior to
the upcoming December 31st
expiration date, or (b) the occurrence of any of the following
events:
(i) The
death
or total disability of Employee (total disability meaning the failure to
fully
perform his normal required services hereunder for a period of three (3)
months during any consecutive twelve (12) month period during the term hereof,
as determined by the Board of Directors, by reason of mental or physical
disability);
(ii) The
termination by Employer of Employee's employment hereunder, upon prior written
notice to Employee, for “good cause”, as determined by the Board of Directors.
For purposes of this Agreement, “good cause” for termination of Employee's
employment shall exist (A) if Employee is convicted of, pleads guilty to,
or
confesses to any felony or any act of fraud, misappropriation, theft or
embezzlement, (B) if Employee fails to comply with the terms of this Agreement,
and, within thirty (30) days after written notice from Employer of such failure,
Employee has not corrected such failure or, having once received such notice
of
failure and having so corrected such failure, Employee at any time thereafter
again so fails, (C) if Employee violates any of the provisions contained
in
Section 4 of this Agreement, (D) if Employee tests positive for illegal
drugs, or (E) if Employee’s conduct is deemed unprofessional, unethical or
detrimental to the Employer; or
(iii) The
termination of Employee’s employment by either party upon at least ninety (90)
days prior written notice.
Section
3. Compensation.
3.1 Term
of Employment.
Employer
will provide Employee with the following salary, expense reimbursement and
additional employee benefits during the term of employment
hereunder:
(a) Salary.
Employee will be paid a salary (the “Salary”) of no less than Two Hundred
Thousand Dollars ($200,000) per annum, less deductions and withholdings required
by applicable law. The Salary shall be paid to Employee in equal monthly
installments (or on such more frequent basis as other executives of Employer
are
compensated). The Salary shall be reviewed by the Board of Directors of Employer
on at least an annual basis.
(b) Bonus.
Employee will be entitled to an annual bonus, based on personal and company
performance, as awarded by the Board of Directors. The Bonus for each calendar
year, if any, shall be paid promptly upon the availability of annual financial
results and no later than March 15 of the following calendar year.
(c) Vacation.
Employee shall receive four (4) weeks vacation time per calendar year during
the
term of this Agreement. Any unused vacation days in any calendar year may
not be
carried over to subsequent years.
(d) Expenses.
Employer shall reimburse Employee for all reasonable and necessary expenses
incurred by Employee at the request of and on behalf of Employer.
(e) Benefit
Plans.
Employee may participate in such medical, dental, disability, hospitalization,
life insurance and other benefit plans (such as pension and profit sharing
plans) as Employer maintains from time to time for the benefit of other senior
executives of Employer, on the terms and subject to the conditions set forth
in
such plans. Employer shall contribute to the premiums for reasonable
supplemental life and disability insurance coverage.
-2-
3.2 Effect
of Termination.
(a) Accrued
Benefits.
Except
as hereinafter provided, upon the termination of the employment of Employee
hereunder for any reason, Employee shall be entitled to all compensation
and
benefits earned or accrued under Section 3.1 as of the effective date of
termination (the “Termination Date”), but from and after the Termination Date,
no additional compensation or benefits shall be earned by Employee hereunder.
If
Employee’s termination of employment is for any reason other than by Employer
pursuant to Section 2(b)(ii) above, Employee shall be deemed to have earned
any
Bonus payable with respect to the calendar year in which the Termination
Date
occurs on a prorated basis (based on the number of days in such calendar
year
through and including the Termination Date divided by 365) based upon the
year
to date financials and performance of the Employer and assuming performance
at
the target level for any individual performance criteria. Any such prorated
Bonus shall be payable as soon as administratively practicable and no later
than
30 days following the Employee’s Termination Date.
(b) Severance.
If
Employee's employment hereunder is terminated by Employer pursuant to
Section 2(b)(iii) hereof, then, in addition to any other amount payable
hereunder, Employer shall continue to pay Employee his normal Salary pursuant
to
Section 3.1(a) for a three-month period (on the same basis as if Employee
continued to serve as an employee hereunder for such applicable period);
provided, however, that all such continued Salary payments shall be paid
to the
Employee not later than the 15th
day of
the third month following the end of the year in which the Termination Date
occurs, and any such continued Salary payment that would be payable after
such
date will be payable with the last payment that would occur prior to such
date.
(c) Stock
Options.
If
Employee's employment is terminated pursuant to Section 2(b)(i) hereof or
if Employee's employment is terminated by Employer pursuant to
Section 2(b)(iii), all options to purchase stock of the Employer or an
affiliate of the Employer granted to Employee shall immediately become fully
vested and exercisable upon such termination. In the case of a termination
pursuant to Section 2(b)(i) hereof, the options will expire in accordance
with their respective scheduled expiration dates. In the case of a termination
by Employer pursuant to Section 2(b)(iii) hereof, the options will expire
on the earliest of (i) the first anniversary of the Employee’s Termination Date,
(ii) the later of the 15th
day of
the third month following the date at which, or December 31 of the calendar
year
in which, the options would otherwise have expired in accordance with their
scheduled post-employment exercise term, and (iii) the expiration of the
maximum term provided in the options. Upon the death of Employee, any options
that Employee would otherwise be entitled to exercise hereunder may be exercised
by his personal representatives or heirs, as applicable. If Employee's
employment is terminated by Employer pursuant to Section 2(b)(ii), all options
not then exercisable shall be forfeited as of the Termination Date and those
options which are exercisable as of the Employee’s Termination Date shall be
exercisable for the period provided in the options, or if longer, for a period
of 60 days after the Termination Date, but in no event beyond the maximum
option
term provided in the options, and after such 60-day period, all unexercised
options will expire. To the extent necessary, this provision shall be deemed
an
amendment of any option agreement between the Employee and the Employer or
an
affiliate of the Employer.
-3-
3.3 Officer
Retention Plan and Effect of Change in Control.
Employee shall be eligible to participate in the Innotrac Corporation Officer
Retention Plan (the “Retention Plan”), attached hereto and incorporated herein
as Exhibit A to this Agreement, as such Retention Plan may be modified from
time
to time. Pursuant to the Retention Plan, Employee may be entitled to a retention
bonus payment if a Change in Control (as defined in the Retention Plan) occurs
while the Employee is employed by the Employer or if the Employer terminates
the
Employee’s employment other than for good cause pursuant to Section 2(b)(ii)
within 6 months prior to the date of a Change in Control. If Employee becomes
entitled to any payment under the Retention Plan, the Employee will not be
entitled to any payment under Section 3.2(b) above upon the Employee’s
termination of employment. If any amount was paid pursuant to Section 3.2(b)
above prior to the date of any payment under the Retention Plan, the amount
payable under the Retention Plan will be reduced by the amount previously
paid
the Employee pursuant to Section 3.2(b).
Section
4. Partial
Restraint on Post-termination Competition and Non-Solicitation.
4.1 Definitions.
For the
purposes of this Section 4, the following definitions shall apply:
(a) “Company
Activities” means the business of providing
fulfillment services, order processing, call center and customer care services,
technology solutions, e-commerce services including e-commerce fulfillment
and
e-commerce return services as well as other similar services that Innotrac
or
its subsidiaries is involved in at the date of this agreement.
(b) “Competitor”
means any business, individual, partnership, joint venture, association,
firm,
corporation or other entity, other than the Employer or its affiliates or
subsidiaries, engaged, wholly or partly, in Company Activities.
(c) “Competitive
Position” means (i) the direct or indirect ownership or control of all or any
portion of a Competitor; or (ii) any employment or independent contractor
arrangement with any Competitor whereby Employee will serve such Competitor
in
any managerial capacity.
(d) “Confidential
Information” means any confidential, proprietary business information or data
belonging to or pertaining to Employer that does not constitute a “Trade Secret”
(as hereinafter defined) and that is not generally known by or available
through
legal means to the public, including, but not limited to, information regarding
Employer’s customers or actively sought prospective customers, suppliers,
manufacturers and distributors gained by Employee as a result of his employment
with Employer.
-4-
(e) “Customer”
means actual customers or actively sought prospective customers of Employer
during the Term.
(f) “Noncompete
Period” or “Nonsolicitation Period” means the period beginning the date hereof
and ending on (i) the first anniversary of the termination of Employee's
employment with Employer if Employee is not entitled to any payment under
the
Retention Plan and (ii) the third anniversary of the termination of
Employee’s employment with Employer if Employee receives any payment under the
Retention Plan.
(g) “Territory”
means the area within a fifty (100) mile radius of any corporate office of
Employer or any of its subsidiaries, affiliates or divisions.
(h) “Trade
Secrets” means information or data of or about Employer, including but not
limited to technical or non-technical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, products plans, or lists of actual or potential customers,
clients, distributees or licensees, information concerning Employer’s finances,
services, staff, contemplated acquisitions, marketing investigations and
surveys, that (i) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use;
and
(ii) are the subject of efforts that are reasonable under the circumstances
to
maintain their secrecy.
(i) “Work
Product” means any and all work product, property, data documentation or
information of any kind, prepared, conceived, discovered, developed or created
by Employee for Employer or its affiliates, or any of Employer’s or its
affiliates’ clients or customers.
4.2 Trade
Name and Confidential Information.
(a) Employee
hereby agrees that (i) with regard to each item constituting all or any portion
of the Trade Secrets, at all times during the Term and all times during which
such item continues to constitute a Trade Secret under applicable law; and
(ii)
with regard to any Confidential Information, during the Term and the Noncompete
Period:
(i) Employee
shall not, directly or by assisting others, own, manage, operate, join, control
or participate in the ownership, management, operation or control of, or
be
connected in any manner with, any business conducted under any corporate
or
trade name of Employer or name similar thereto, without the prior written
consent of Employer;
(ii) Employee
shall hold in confidence all Trade Secrets and all Confidential Information
and
will not, either directly or indirectly, use, sell, lend, lease, distribute,
license, give, transfer, assign, show, disclose, disseminate, reproduce,
copy,
appropriate or otherwise communicate any Trade Secrets or Confidential
Information, without the prior written consent of Employer; and
-5-
(iii) Employee
shall immediately notify Employer of any unauthorized disclosure or use of
any
Trade Secrets or Confidential Information of which Employee becomes aware.
Employee shall assist Employer, to the extent necessary, in the procurement
or
any protection of Employer’s rights to or in any of the Trade Secrets or
Confidential Information.
4.3 Noncompetition.
(a) The
parties hereto acknowledge that Employee is conducting Company Activities
throughout the Territory. Employee acknowledges that to protect adequately
the
interest of Employer in the business of Employer it is essential that any
noncompete covenant with respect thereto cover all Company Activities and
the
entire Territory.
(b) Employee
hereby agrees that, during the Term and the Noncompete Period, Employee will
not, in the Territory, either directly or indirectly, alone or in conjunction
with any other party, accept, enter into or take any action in conjunction
with
or in furtherance of a Competitive Position. Employee shall notify Employer
promptly in writing if Employee receives an offer of a Competitive Position
during the Noncompete Term, and such notice shall describe all material terms
of
such offer.
Nothing
contained in this Section 4 shall prohibit Employee from acquiring not more
than
five percent (5%) of any company whose common stock is publicly traded on
a
national securities exchange or in the over-the-counter market.
4.4 Nonsolicitation
of Customers
(a) During
Employment Term.
Employee hereby agrees that Employee will not, during the Term, either directly
or indirectly, alone or in conjunction with any other party solicit, divert
or
appropriate or attempt to solicit, divert or appropriate, any Customer for
the
purpose of providing the Customer with services or products competitive with
those offered by Employer during the Term.
(b) During
Nonsolicitation Period.
Employee hereby agrees that Employee will not, during the Nonsolicitation
Period, either directly or indirectly, alone or in conjunction with any other
party solicit, divert or appropriate or attempt to solicit, divert or
appropriate, any Customer for the purpose of providing the Customer with
services or products competitive with those offered by Employer during the
Term;
provided, however, that the covenant in this clause shall limit Employee’s
conduct only with respect to those Customers with whom Employee had substantial
contact (through direct, managerial or supervisory interaction with the Customer
or the Customer’s account) during a period of time up to but no greater than two
(2) years prior to the last day of the Term.
4.5 Nonsolicitation
of Employees.
Employee hereby agrees that Employee will not, during the Term and
Nonsolicitation Periods, directly or indirectly (i) hire any employees of
the
Employer, or
(ii)
solicit or encourage any personnel employed by the Employer to terminate
his or
her relationship with the Employer.
-6-
Section
5. Miscellaneous.
5.1 Severability.
The
covenants in this Agreement shall be construed as covenants independent of
one
another and as obligations distinct from any other contract between Employee
and
Employer. Any claim that Employee may have against Employer shall not constitute
a defense to enforcement by Employer of this Agreement.
5.2 Survival
of Obligations.
The
covenants in Section 4 of this Agreement shall survive termination of Employee's
employment, regardless of who causes the termination and under what
circumstances.
5.3 Notices.
Any
notice or other document to be given hereunder by any party hereto to any
other
party hereto shall be in writing and delivered in person or by courier, by
telecopy transmission or sent by any express mail service, postage or fees
prepaid at the following addresses:
Employer
Innotrac
Corporation
0000
Xxxxxxxxx Xxxxxxx
Xxxxxx,
XX 00000
Attention:
Xx. Xxxxx Xxxxxxx
Chief
Executive Officer
Employee
Xxxxx
X.
Xxxxxx
0000
Xxxxxxxxxx Xxxxxxx
Xxxxxxx,
XX. 00000
or
at
such other address or number for a party as shall be specified by like notice.
Any notice which is delivered in the manner provided herein shall be deemed
to
have been duly given to the party to whom it is directed upon actual receipt
by
such party or its agent.
5.4 Section
409A.
To the
extent applicable, this Agreement shall at all times be operated in accordance
with the requirements of Section 409A of the Internal Revenue Code of 1986,
as
amended, including the regulations promulgated thereunder. The Employer shall
have authority to take action, or refrain from taking any action, with respect
to the payments and benefits under this Agreement that is reasonably necessary
to comply with Section 409A. Specifically, the Employer shall have the authority
to delay the commencement of payments to “specified employees” of the Employer
to the extent such delay is mandated by the provisions of Section
409A.
-7-
5.5 Binding
Effect.
This
Agreement inures to the benefit of, and is binding upon, Employer and their
respective successors and assigns, and Employee, together with Employee's
executor, administrator, personal representative, heirs, and
legatees.
5.6 Entire
Agreement.
This
Agreement is intended by the parties hereto to be the final expression of
their
agreement with respect to the subject matter hereof and is the complete and
exclusive statement of the terms thereof, notwithstanding any representations,
statements or agreements to the contrary heretofore made. This Agreement
may be
modified only by a written instrument signed by all of the parties hereto.
5.7 Governing
Law.
This
Agreement shall be deemed to be made in, and in all respects shall be
interpreted, construed, and governed by and in accordance with, the laws
of the
State of Georgia. No provision of this Agreement shall be construed against
or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority or by any board of arbitrators by reason
of
such party or its counsel having or being deemed to have structured or drafted
such provision.
5.8 Headings.
The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
5.9 Specific
Performance.
Each
party hereto hereby agrees that any remedy at law for any breach of the
provisions contained in this Agreement shall be inadequate and that the other
parties hereto shall be entitled to specific performance and any other
appropriate injunctive relief in addition to any other remedy such party
might
have under this Agreement or at law or in equity.
5.10 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
5.11 Public
Announcement.
Neither
party shall disclose that this Agreement has been executed until such time
as
both parties mutually agree to such disclosure.
[Signatures
continued on next page]
-8-
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
INNOTRAC
CORPORATION
By:
/s/
Xxxxx X.
Xxxxxxx
Xxxxx
X.
Xxxxxxx
Chief
Executive Officer
EMPLOYEE
/s/
Xxxxx X.
Xxxxxx
Xxxxx
X.
Xxxxxx
-9-
Exhibit
A
INNOTRAC
CORPORATION
OFFICER
RETENTION PLAN
INTRODUCTION
Purpose.
The Board of Directors of Innotrac Corporation (the “Company”) has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of its executives,
notwithstanding the possibility or occurrence of a significant restructuring
or
change in control of the Company or of a parent company of the Company. The
Board of Directors (the “Board”) believes it is imperative to diminish the
inevitable distraction of such executives by virtue of the personal
uncertainties and risks created by such possibilities and to encourage the
executives’ full attention and dedication to the Company and its affiliates.
Therefore, in order to accomplish these objectives, the Board has approved
and
adopted this Innotrac Corporation Officer Retention Plan (the “Plan”) to induce
certain executives of the Company and its affiliates to remain in their current
employment and to devote their time and energies to the successful performance
of their employment duties by providing such persons a measure of security.
Effective
Date. The Plan was approved by the Board of Directors of the Company on March
28, 2005 and shall be effective on that date (“Effective Date”).
ELIGIBILITY
Executives
Eligible to Participate Plan. Initial Participants in the Plan have been
selected by the Board or the Committee and are reflected on Exhibit A hereto.
Exhibit A shall be adjusted from time to time as necessary to reflect the
addition or subtraction of Participants or the reallocation of Participation
Interests as determined by the Committee.
DEFINITIONS
Definitions.
The following capitalized terms used in the Plan shall have the meanings
assigned to them below:
"Board"
means the Board of Directors of the Company.
"Cause"
for termination of employment of a Participant has the meaning assigned such
term or the term “good cause” in the Participant’s Employment Agreement with the
Company.
-10-
A
"Change
in Control" as used herein means any change in the ownership of the Company
or
effective control of the Company or any change in the ownership of a substantial
portion of the assets of the Company, as defined in Code Section
409A(a)(2)(A)(v) and the regulations promulgated thereunder.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Committee”
means the committee responsible for the administration of the Plan, which
shall
be the Compensation Committee of the Board, or such other committee as may
be
designated by the Board.
"Company"
means Innotrac Corporation, a Georgia corporation.
"Disability"
of a Participant has the meaning assigned such term or the term “total
disability” in the Participant’s Employment Agreement with the Company. If the
Participant has no Employment Agreement, Disability shall have the meaning
ascribed to the term “Disabled” under Code Section 409A(a)(2)(C) and the
regulations promulgated thereunder.
“Employment
Agreement” means the employment agreement entered into between the Participant
and the Company or an affiliate of the Company, which is in effect as of
the
date of determination.
“Participant"
means an executive of the Company or its affiliates who has been selected
by the
Committee or the Board to participate in the Plan.
"Participation
Interest" of a Participant means such Participant’s designated percentage
interest in the Retention Bonus Pool, reallocated from time to time in
accordance with Article Four of the Plan. Each Participant’s initial
Participation Interest is indicated opposite his or her name on Exhibit A
hereto.
"Payment
Date" means the date on which a Participant becomes entitled to payment of
his
or her Retention Bonus in accordance with Article Four of the Plan.
"Plan"
means this Innotrac Corporation Officer Retention Plan, as it may be
amended.
"Restrictive
Covenants" means the restrictive covenants contained in the Participant’s
Employment Agreement with the Company, including without limitation, the
covenants not to disclose confidential information, not to compete with the
Company, not to recruit the Company’s employees, and not to solicit the
Company’s clients or customers.
“Retention
Bonus Pool” means an amount calculated in accordance with Article Five which
will be allocated in accordance with the terms of the Plan for the payment
of
Retention Bonuses to Participants under the Plan.
“Retention
Bonus (or Retention Bonuses)” means the amount payable to a Participant under
Article Four.
-11-
“Special
Restricted Stock” means the restricted shares of the Company’s common stock,
which were or will be granted to the Participant under the Company’s 2000 Stock
Option and Incentive Award Plan as a special incentive to remain employed
with
the Company, and which had or will have a value (without discount for the
restrictions) of $250,000 at the time of grant.
RETENTION
BONUSES
Retention
Bonus Upon a Change in Control. Upon the occurrence of a Change in Control,
each
Participant who is an employee of the Company or its affiliates shall be
eligible to receive a Retention Bonus equal to the Participant’s Participation
Interest at the time of the Change in Control multiplied by the amount of
the
Retention Bonus Pool, less the value of any shares of Special Restricted
Stock
held by the Participant as of the time of the Change in Control. To be eligible
to receive the Retention Bonus, the Participant: (i) must not have violated
any
of the Restrictive Covenants, (ii) if requested by the Company, must, no
later
than the date of the Change in Control, execute an amendment to the Employment
Agreement or a separate agreement provided by the Company which updates the
Restrictive Covenants to properly reflect the business and customers of the
Company and the role and responsibilities of the Participant as of the time
of
the Change in Control and which provides that the Participant will be subject
to
the Restrictive Covenants for a period of two years following the Participant’s
termination of employment, and (iii) must be employed by the Company or one
of its affiliates on the date of the Change in Control or must have terminated
employment within 3 months prior to the date of the Change in Control other
than
for Cause, as provided in Section 4.2 below. If the Participant satisfies
the
above requirements, the Participant’s Retention Bonus shall become 100% vested
as of the date of the Change in Control and shall be payable in a lump sum
within fifteen (15) days of the Change in Control.
Termination
of Employment Prior to a Change in Control. Except as provided in the next
sentence below, if, prior to a Change in Control, a Participant’s employment is
terminated by the Company or any of its affiliates for any reason or the
Participant terminates employment for any reason, then the Participant shall
forfeit his or her Participation Interest and no Retention Bonus shall be
payable to such Participant. Notwithstanding the above, if, within 3 months
prior to a Change in Control, the Participant’s employment is terminated by the
Company without Cause (including by reason of death or Disability), then
the
Participant will be entitled to receive the Retention Bonus at the same time
and
in the same manner as if the Participant were employed on the date of the
Change
in Control provided that the Participant satisfies all the requirements in
Section 4.1 other than employment on the date of the Change in
Control.
Forfeitures
and Adjustments of Participation Interests. If a Participant becomes ineligible
to receive a Retention Bonus by reason of a disqualifying termination of
employment, the Participant shall immediately cease to be a Participant,
and he
or she shall forfeit all rights under the Plan to receive any Retention Bonus.
In such event, the Board may, but need not, (i) select one or more new
Participants to replace the terminated Participant and/or (ii) increase the
Participation Interest of one or more existing Participants in any manner,
including on other than a prorata basis; provided that the aggregate
Participation Interests of any such new Participants and/or the increase
in
Participation Interests for existing Participants shall not exceed the forfeited
Participation Interest of the terminated Participant. Any remaining portion
of
the Participation Interest of the terminated Participant not specifically
reassigned to one or more new or existing Participants may, but need not
be,
allocated prorata to all existing Participants, based on their relative
Participation Interests, or it may remain unallocated or subject to allocation
at a later date by the Committee in its discretion. At any time prior to
the
date of a Change in Control, the Committee may add or remove Participants
and
may revise the Participation Interests assigned to each
Participant.
-12-
RETENTION
BONUS POOL
General.
The Retention Bonus Pool shall be determined as of the date of the Change
in
Control. The Retention Bonus Pool shall be equal to $5.0 million if the Purchase
Price (as defined in Section 5.2) of the Company is at least $90 million but
less than $100 million. For each additional $10 million in Purchase Price
over
$100 million, the Retention Bonus Pool will be increased by $1 million, such
that a total Purchase Price of $200 million will result in a Retention Bonus
Pool of $16 million. The determination of the Purchase Price and the Retention
Bonus Pool shall be made by the Committee in good faith based upon the financial
and other information available to it. The Committee shall have the discretion
to change the formula for determining the Retention Bonus Pool from time
to
time. Any such change shall be communicated to Participants.
Definitions.
For purposes of this Article Five and the Plan, the following definitions
shall
apply:
“Dilution
Adjustment” means any increase in Third Party Interest Bearing Debt associated
with a recapitalization where the proceeds of the additional debt do not
remain
in the Company.
“Enterprise
Value” means the gross proceeds (cash and other consideration, including any
earn outs or deferred payments) of the sale of the stock of or disposition
of
assets of, the Company in connection with a Change in Control, provided that
if
less than 100% of the stock or assets is sold, the Enterprise Value shall
be
calculated as if 100% of the stock or assets were sold.
“Non-Operating
Cash Balances” means the cash in Company depository accounts on the date of the
Change in Control.
“Purchase
Price” shall equal the Enterprise Value of the Company, minus Third Party
Interest Bearing Debt, plus Non-Operating Cash Balance and any Dilution
Adjustment; provided, that the Committee may make adjustments to the calculation
of Purchase Price if it determines such adjustments are necessary or desirable
because of unusual or extraordinary charges or income items or other events
which are distortive of financial results or because of changes in the Code
or
tax laws.
“Third
Party Interest Bearing Debt” means debt of the Company owed to a third party
which shall exclude debt owed to any affiliate of the Company.
ADMINISTRATION
Plan
Administration. The Plan is administered and interpreted by the Committee.
The
Committee shall have complete discretion to determine eligible Participants,
to
determine and adjust from time to time each Participant’s Participation
Interest, and to interpret the Plan. Any decision by the Committee reached
in
accordance with the provisions contained herein shall be final and binding
on
all parties.
-13-
NO
FUNDING OBLIGATIONS
Funding.
The obligations of the Company are not required to be funded under the Plan.
Nothing contained in the Plan shall give a Participant any right, title or
interest in any property of the Company, its subsidiaries or affiliates.
The
Participant’s rights to a Retention Bonus shall be that of an unsecured creditor
of the Company.
LIMITATION
ON BENEFITS
Notwithstanding
anything in this Plan to the contrary, any benefits payable or to be provided
to
a Participant by the Company or its affiliates, whether pursuant to this
Plan or
otherwise, which are treated as Parachute Payments shall, but only to the
extent
necessary, be modified or reduced in the manner provided in Section 8.2 below
so
that the benefits payable or to be provided to the Participant under this
Plan
that are treated as Parachute Payments, as well as any payments or benefits
provided outside of this Plan that are so treated, shall not cause the Company
to have paid an Excess Parachute Payment. In computing such amount, the parties
shall take into account all provisions of Code Section 280G, and the regulations
thereunder, including making appropriate adjustments to such calculation
for
amounts established to be Reasonable Compensation.
If
a
reduction of benefits is required to avoid treatment of any payment as an
Excess
Parachute Payment, the Participant’s Retention Bonus under this Plan shall be
reduced to an amount which, when combined with all other payments or benefits
to
the Participant related to the Change in Control, does not result in payment
of
an Excess Parachute Payment.
This
Article Eight shall be interpreted so as to avoid the imposition of excise
taxes
on the Participant under Section 4999 of the Code and to avoid the disallowance
of a deduction to the Company pursuant to Section 280G(a) of the Code with
respect to amounts payable under this Plan or otherwise.
For
purposes of this Article Eight, the following definitions shall
apply:
“Excess
Parachute Payment” shall have the same meaning as provided in Section 280G(b)(1)
of the Code.
“Parachute
Payment” shall have the same meaning as provided in Section 280G(b)(2) of the
Code.
“Reasonable
Compensation” shall have the same meaning as provided in Section 280G(b)(4) of
the Code.
-14-
“Present
Value” shall have the same meaning as provided in Section 280G(d)(4) of the
Code.
MISCELLANEOUS
Rights
Not Exclusive. Except as expressly provided in the Plan, a Participant's
right
to receive a Retention Bonus under the Plan shall be in addition to and not
exclusive of his rights under any other agreement or plan of the Company
or its
affiliates, including without limitation, any short- or long-term bonus or
other
remuneration payable pursuant to the Participant’s Employment Agreement with the
Company.
No
Contract for Employment. Nothing in the Plan shall be deemed to give any
Participant the right to be retained in the service of the Company or to
deny
the Company any right it may have to discharge or demote any Participant
at any
time.
Withholding.
All amounts payable by the Company hereunder shall be subject to withholding
of
such amounts related to taxes as the Company may be legally obligated so
to
do.
Arbitration.
Any dispute or controversy arising under or in connection with the Plan shall
be
settled exclusively by arbitration in Atlanta, Georgia in accordance with
the
rules of the American Arbitration Association then in effect. Each party
agrees
to comply with any award made in any such proceeding, which shall be final,
and
to the entry of judgment in accordance with applicable law in any jurisdiction
upon any such award. The costs of the arbitration, including the costs of
the
facility, court reporter and arbitrator’s fee, shall be shared equally by each
party.
Notices.
Notices will be considered effective upon receipt and shall be sent by hand
delivery or certified mail addressed as follows:
If
to the
Company:
Innotrac
Corporation
0000
Xxxxxxxxx Xxxxxxx
Xxxxxx,
Xxxxxxx 00000-0000
Attention:
General Counsel
If
to a
Participant, at his or her last known address.
Severability.
The invalidity and unenforceability of any particular provision of the Plan
shall not affect any other provision of the Plan, and the Plan shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
No
Assignment or Alienation of Benefits by Participants. A Participant shall
not
have any power or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits payable
under the Plan, nor shall these benefits be subject to seizure for the payment
of debt, judgment, alimony or separate maintenance owed by the Participant,
or
any person claiming through the Participant, or be transferable by operation
of
law in the event of bankruptcy, insolvency or otherwise. Any attempted
assignment, anticipation, hypothecation, transfer, or other disposal of the
benefits hereunder, shall be void.
-15-
Governing
Law. The Plan shall be governed by and construed in accordance with the laws
of
the State of Georgia to the extent not preempted by federal law.
Successors
and Assigns. The Plan shall be binding upon the Company and its successors
(including any successor to the Company by reason of any dissolution, merger,
consolidation, sale of assets or other reorganization of the Company) and
assigns.
Amendment;
Termination. Subject to the provisions of Section 9.12, the Plan may be amended
or terminated at any time by the Board or the Committee; provided, however,
that
no such amendment or termination may be made after the date of a Change in
Control without the written consent of affected Participants if such amendment
or termination would negatively affect the rights of Participants who would
otherwise be entitled to a Retention Bonus hereunder. The Plan shall
automatically terminate following a Change in Control once all Retention
Bonuses
have been paid, and any portion of the Retention Bonus Pool not allocated
to
Participant’s shall not be payable.
Headings.
The headings of the Sections herein are for convenience only and shall have
no
significance in the interpretation of the Plan.
Compliance
with Section 409A. This Plan shall be operated in accordance with the
requirements of Section 409A. Any action that may be taken (and, to the extent
possible, any action actually taken) by the Company shall not be taken (or
shall
be void and without effect), if such action violates the requirements of
Section
409A and would result in an additional tax to the Participant. Any provision
in
this Plan document that is determined to violate the requirements of Section
409A shall be void and without effect. In addition, any provision that is
required to appear in this Plan document to satisfy the requirements of Section
409A, but that is not expressly set forth, shall be deemed to be set forth
herein, and the Plan shall be administered in all respects as if such provision
were expressly set forth. In all cases, the provisions of this Section shall
apply notwithstanding any contrary provision of the Plan that is not contained
in this Section.
INNOTRAC
CORPORATION
By:
/s/ Xxxxx X.
Xxxxxxx
-16-
EXHIBIT
A
Participants
And Participation Interests
|
Participant
|
Participation
Interest
In
Retention Bonus Pool
|
|
Xxxxx
X. Xxxxx
|
%
|
|
Xxxxx
X. Xxxxxx
|
%
|
|
Xxxxx
X. XxXxxxxx
|
%
|
|
Xxxxxx
X. Xxxxx
|
%
|
|
|
|
|
Total
|
%
*
|
|
* __%
is currently reserved for future Participants and/or
allocations.
|
|
EXHIBIT
A
(as
revised ________________, 2007)
Participants
And Participation Interests
|
Participant
|
Participation
Interest
In
Retention Bonus Pool
|
|
Xxxxx
X. Xxxxxx
|
%
|
|
Xxxxx
X. XxXxxxxx
|
%
|
|
Xxxxxx
X. Xxxxx
|
%
|
|
Total
|
%
*
|
|
* __%
is currently reserved for future Participants and/or
allocations.
|
|
