EXHIBIT 10.5
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), effective as of May 25,
2000, by and between Xxxxxxxxx X. Xxxxx (the "Executive"), and XxxxxxxxXxxx.xxx,
Inc., a Delaware corporation ("HVDC").
HVDC desires to employ the Executive as Senior Vice President and Chief
Financial Officer of HVDC for the period and upon the terms and conditions
hereinafter set forth.
Executive desires to serve in such capacities for such period and upon
such terms.
Accordingly, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF EXECUTIVE
1.1 Employment. Subject to the terms and conditions of this Agreement,
HVDC agrees to employ Executive as Senior Vice President and Chief Financial
Officer of HVDC on a full time basis for a period of two years, subject to
termination pursuant to Section 4. Executive shall report directly to the
President and Chief Executive Officer of HVDC. Executive shall perform such
specific duties as are commensurate with such positions, and as may reasonably
be assigned to the Executive from time to time by the President and Chief
Executive Officer of HVDC, for the period commencing on the date hereof and
continuing until terminated as provided in Section 4.1 hereof. Executive hereby
accepts such employment on a full time basis for a two-year period, subject to
termination pursuant to Section 4. HVDC shall maintain a suitable executive
office located in New York, New York or such other location mutually acceptable
to HVDC and Executive and such shall be Executive's place of employment.
Executive shall not accept any consulting engagements or Board memberships
without the consent of HVDC, not to be unreasonably withheld.
SECTION 2. COMPENSATION
For all services to be rendered by Executive to HVDC during the term of
this Agreement, HVDC shall pay to, and provide the Executive with, the following
compensation and benefits:
2.1 Base Salary and Bonus. For the period from the date hereof until the
first anniversary of the date hereof, HVDC shall pay to Executive (i) a base
salary of not less than $150,000 per annum, payable in substantially equal
installments in accordance with HVDC practice as in effect from time to time,
and (ii) discretionary incentive and compensatory bonuses, based on the
achievement of milestones to be agreed upon by HVDC and the Executive, as may be
awarded by HVDC's Compensation Committee, provided such bonus shall not be less
than $25,000 annually, $6,250 of which shall be paid with the first payment of
base salary hereunder, with an equal amount to be paid with Executive's base
salary payment every three months thereafter until paid in full. Commencing with
the first anniversary of this Agreement and continuing during the term, HVDC
will review Executive's base salary and
bonus annually and may make adjustments to such base salary and determine such
bonus based upon, among other factors: (a) Executive's performance, (b) HVDC's
performance, (c) changes in costs of living, (d) changes in Executive's
responsibilities, and (e) the benefit to HVDC of Executive's efforts on its
behalf; provided that during the term of this Agreement Executive's base annual
salary shall not be less than $150,000 per annum, and his minimum annual bonus
for each of the two years during the term hereof shall be $25,000, $6,250 of
which shall be paid with the first payment of base salary hereunder, with an
equal amount to be paid with the Executive's base salary payment every three
months thereafter during the term of this Agreement.
2.2 Participation in Benefit Plans. Executive shall be entitled to
participate in all employee benefit plans or programs of HVDC. For the purpose
of determining Executive's eligibility for such plans and programs, Executive's
tenure shall be calculated from the date hereof. In addition to the stock
options granted pursuant to Section 2.3 hereof, HVDC may, from time to time,
grant Executive stock options under HVDC's stock option plans. HVDC does not
guarantee the adoption or continuance of any particular employee benefit or
stock plan or other program during the term of this Agreement, and Executive's
participation in any such plan or program shall be subject to the provisions,
rules and regulations applicable thereto. Executive shall be entitled to not
less than three weeks paid vacation each year in accordance with applicable HVDC
policy. Health, life, disability and dental insurance plans shall cover
Executive and his dependents as they do for other senior level HVDC executives;
provided that until HVDC obtains health and disability insurance covering
employees located in New York, HVDC will pay for the Executive's current health
and disability insurance coverage. Such health and dental plans comply with
ERISA and COBRA to the extent applicable. Under current health insurance
policies, such COBRA rights will commence on termination of the period over
which severance payments are made under Section 4.2. Executive agrees to submit
to appropriate and reasonable medical examinations.
2.3 Initial Option Grant. Executive will receive a stock option to
purchase 325,000 shares of HVDC's Common Stock at an exercise price equal to the
closing price of HVDC's Common Stock as reported by the Nasdaq SmallCap Market
on the date hereof. Such option shall vest and become exercisable as to 25% of
such shares on the first anniversary of the date hereof and as to an additional
25% of such shares on each of the next three anniversaries of such date. The
option shall have a term of ten years and shall have such other terms and
conditions consistent with the form of stock option agreement most recently
approved by the Board for use under the 1998 Equity Incentive Plan. Such option
shall be an incentive stock option to the extent permitted under applicable law.
2.4 Expenses. HVDC shall promptly reimburse Executive for all ordinary and
necessary business expenses incurred in the performance of Executive's duties
under this Agreement, provided that Executive accounts properly for such
expenses to HVDC in accordance with the general corporate policies of HVDC and
in accordance with the requirements of the Internal Revenue Service regulations
relating to substantiation of expenses.
SECTION 3. CONFIDENTIAL INFORMATION AND
NON-COMPETITION AGREEMENTS
As a condition to HVDC's obligations hereunder, the Executive will execute
HVDC's standard confidentiality agreement pertaining to the intellectual
property and confidential information of HVDC and HVDC's standard form of
non-competition agreement for executive officers and key employees.
The obligations of Executive under this section and the agreements
referenced in the preceding paragraph shall survive termination of this
Agreement for any reason.
SECTION 4. TERMINATION AND SEVERANCE PAYMENT
4.1 Termination. The employment of the Executive by HVDC may be terminated
as follows:
(a) Executive's employment hereunder shall terminate upon
Executive's death or inability, by reason of physical or mental impairment, to
perform substantially all of Executive's duties as contemplated herein for a
continuous period of 60 days or more;
(b) Executive's employment hereunder may be terminated by HVDC or
Executive without Cause (as hereinafter defined in subparagraph (c) below);
(c) Executive's employment hereunder may be terminated by HVDC for
Cause. As used herein, "Cause" means the failure of Executive to substantially
perform his duties in accordance with this Agreement (other than any such
failure resulting from incapacity due to physical or mental illness) in a way
that materially and adversely affects HVDC, after a written demand for
substantial performance is delivered to Executive by the President, Chief
Executive Officer or Board of Directors of HVDC which specifically identifies
the manner in which the President, Chief Executive Officer or Board of Directors
believes that Executive has not substantially performed such duties and
Executive has had a reasonable opportunity to remedy the same; and
(d) Executive's employment hereunder may be terminated by Executive
by notice to HVDC within 60 days after a change in control (as hereinafter
defined) of HVDC. As used herein, the term "change in control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or
more of either (i) the then outstanding shares of the Common Stock of HVDC (the
"Outstanding HVDC Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of HVDC entitled to vote generally in the election
of directors (the "Outstanding HVDC Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall not
constitute a change in control of HVDC; (A) any acquisition directly from HVDC;
(B) any acquisition by HVDC; (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by HVDC or
any corporation controlled by HVDC; or (D) any acquisition by any corporation
pursuant to a transaction described in clause (A), (B) or (C) of subsection
(iii) below of this Section; or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of HVDC (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors; provided, however,
that any individual becoming a director subsequent to the date hereof whose
election, or nomination for election by HVDC's stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board of Directors; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of HVDC (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company HVDC Stock and Outstanding HVDC Voting Securities, immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
70% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns HVDC or all or
substantially all of HVDC's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding HVDC Common
Stock and Outstanding HVDC Voting Securities, as the case may be, (B) no person
(excluding any employee benefit plan (or related trust) of HVDC or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (C) at least a majority of the members of
the Board of Directors of the corporation resulting form such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board of Directors of HVDC,
providing for such Board of Directors; or
(iv) Approval by the stockholders of HVDC of a complete
liquidation or dissolution of HVDC.
(e) Any termination by HVDC for Cause or by Executive on a change in
control shall be communicated by a written notice (the "Termination Notice") to
the other party given in accordance with Section 5.4 of this Agreement, which
notice shall (i) indicate the specific termination provision of this Agreement
relied upon, (ii) set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated and (iii) if the "date of termination" (as defined
below) is other than the date of receipt of such notice, specify the termination
date (which date shall be not more than thirty (30) days after the giving of
such notice). The failure of HVDC or Executive to set forth in the Termination
Notice any factor or circumstance which contributes to a showing of Cause or
change in control shall not waive any right of HVDC or Executive, respectively,
hereunder or preclude HVDC or Executive from asserting such fact or circumstance
in enforcing HVDC's or Executive's rights hereunder.
(e) The term "date of termination" shall mean (i) if Executive's
employment is terminated by HVDC for Cause or by Executive on a change in
control, the date of receipt of the Termination Notice or any later date
specified therein, as the case may be, (ii) if Executive's employment is
terminated by HVDC other than for Cause or the Employee's disability, the date
of termination shall be the date on which HVDC notifies Executive of such
termination; (iii) if Executive is terminated by reason of death or disability,
the date of termination shall be the date of death of Executive or the date
which is 60 days following the onset of the Executive's continuous inability to
perform under Section 4.1(a) above.
4.2 Severance Payment; Benefits.
(a) Termination Events Resulting in Severance Payments. In the event
of the termination of the Executive's employment by HVDC under Section 4.1(b) or
by Executive under 4.1(d), then HVDC shall make severance payments to Executive
equal to (A) one-half of the Executive's annual base salary pursuant to Section
2.1(i), plus (B) one-half of the annual amount of cash bonus most recently
awarded purusant to Section 2.1(ii) (collectively, the "Base Salary Payment").
The Base Salary Payment shall be payable in a lump sum immediately after
termination. No severance shall be payable in the event that Executive's
employment is terminated by HVDC pursuant to Section 4.1(a) or (c). Upon
termination of Executive's employment for any reason, Executive shall have no
obligation of mitigation. All options vested under Section 2.3 shall continue to
be exercisable until their expiration date, notwithstanding any termination
hereunder.
(b) Benefits. Executive's coverage under HVDC's life, health,
disability and dental insurance plans will remain in effect and Executive will
be entitled to continue to participate in HVDC's retirement plans, all at HVDC's
expense, for six months, unless Executive notifies HVDC in writing that such
coverage is no longer necessary. If, because of limitations required by third
parties or imposed by law, Executive cannot be provided such benefits through
HVDC's plans, then HVDC will provide Executive with substantially equivalent
benefits on an aggregate basis, at its expense.
(c) Accelerated Vesting of Options. If HVDC terminates the Executive
pursuant to Section 4.1(b) or if Executive terminates his employment under
Section 4.1(d), any unvested options then held by Executive to purchase shares
of the Common Stock of HVDC, shall, notwithstanding any contrary provision in
this Agreement or any plan pursuant to which such options had been granted, be
fully vested and exercisable on the date immediately preceding the effective
date of such termination for the shorter of five years or the duration of the
term of such options as if such termination of employment had not occurred.
Executive acknowledges that such acceleration and extension of the
exercisability of his options may cause incentive stock options to become
non-statutory stock options. No vesting of options shall be
accelerated in the event that Executive's employment is terminated by HVDC
pursuant to Section 4.1(a) or (c), or by Executive pursuant to Section 4.1(b).
(d) No Mitigation Obligation. In no event shall Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any provision of this Agreement, and
such amounts shall not be reduced whether or not Executive obtains other
employment.
SECTION 5. MISCELLANEOUS
5.1 Indemnification. HVDC shall, to the maximum extent permitted by
applicable law, indemnify, defend and hold harmless Executive from, against and
in respect of any and all payments, damages, claims, demands, losses, expenses,
costs, obligations and liabilities (including, but not limited to, reasonable
attorney's fees and costs and the costs of investigation and preparation) which,
directly or indirectly, arise or result from or are related to the fact that
Executive is or was an employee, officer, director or agent of HVDC. The terms
of this provision shall survive termination of this Agreement without regard to
the reason or basis for such termination.
5.2 "Market Stand-off" Agreement. The Executive agrees, if requested by
HVDC and an underwriter of Common Stock (or other securities) of HVDC, not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of HVDC held by him during the 12 month period following the effective date of a
registration statement filed under the Securities Act of 1933, as amended, or
such shorter period permitted by HVDC and the underwriter with respect to any
other director, officer or stockholder of HVDC beneficially owning 10% or more
of the issued and outstanding common stock of HVDC. Such agreement shall be in
writing in a form satisfactory to HVDC and such underwriter. HVDC may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of the 12-month period.
5.3 Assignment.
(a) This Agreement may not be assigned, in whole or in part, by any
party without the prior written consent of the other party, except that HVDC
may, without the consent of Executive, assign its rights and obligations under
this Agreement to any corporation, firm or other business entity with or into
which HVDC may merge or consolidate, or to which HVDC may sell or transfer all
or substantially all of its assets, or of which 50% or more of the equity
investment and of the voting control is owned, directly or indirectly, by, or is
under common ownership with, HVDC; provided that, after any such assignment by
HVDC, HVDC shall not be discharged from its liability hereunder.
(b) HVDC shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business or assets of HVDC to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that HVDC would be required
to perform it if no such succession had taken place. As used herein, HVDC shall
mean HVDC as hereinbefore defined and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.
5.4 Notices. All notices, requests, demands and other communications to be
given pursuant to this Agreement shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the addresses set forth at the end
of this Agreement or such other address as a party shall have designated by
notice in writing to the other party, provided that notice of any change in
address must actually have been received to be effective hereunder.
5.5 Integration. This Agreement is the entire agreement of the parties
with respect to the subject matter hereof and supersedes any prior written or
oral agreement or understanding relating to Executive's employment with or
compensation by HVDC. This Agreement may not be amended, supplemented or
otherwise modified except by a writing signed by Executive and HVDC.
5.6 Binding Effect. Subject to Section 5.2, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their successors,
assigns, heirs and personal representatives.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
5.8 Severability. If any provision hereof shall, for any reason, be held
to be invalid or unenforceable in any respect, such invalidity or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid or unenforceable provision had not been
included herein. If any provision hereof shall for any reason be held by a court
to be excessively broad as to duration, geographical scope, activity or subject
matter, it shall be construed by limiting and reducing it to make it enforceable
to the extent compatible with applicable law as then in effect.
5.9 Attorneys' Fees. In the event any party takes legal action to enforce
any of the terms of this Agreement, the unsuccessful party to such action shall
pay the successful party's expenses, including reasonable attorneys' fees and
expenses, incurred in such action.
5.10 Governing Law. This Agreement shall be governed by the laws of the
State of New York, without regard to its conflict of law provisions.
5.11 Arbitration. Any dispute arising under or relating to this Agreement
shall be determined by a single arbitrator under the commercial arbitration
rules of the American Arbitration Association. Any such arbitration shall be
held in New York, New York. The costs and expenses of such arbitration shall be
awarded as the arbitrator shall determine.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first written above.
EXECUTIVE
/s/ Xxxxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxxxx X. Xxxxx
XXXXXXXXXXXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxx
President, Chief Executive Officer
AMENDMENT NO. 1
TO
EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment No. 1 (this "Amendment") to the Executive Employment
Agreement (the "Agreement"), dated as of May 25, 2000, by and between Xxxxxxxxx
X. Xxxxx (the "Executive") and Paligent Inc. (formerly known as
"XxxxxxxxXxxx.xxx, Inc." or "HVDC"), a Delaware corporation (the "Company"), is
entered into as of this 9th day of February, 2001.
RECITALS:
WHEREAS, the Company and Executive desire to amend the Agreement as
set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Company and Executive hereby agree
as follows:
1. The Agreement is hereby amended as follows:
(a) by deleting the first three sentences of Section 1.1
Employment of Executive and replacing them as follows:
"Subject to the terms and conditions of this Agreement and commencing on
the date hereof, HVDC agrees to employ Executive as President and Chief
Executive Officer of HVDC on a full time basis for a period of two years,
subject to termination pursuant to Section 4. Executive shall report directly to
the Chairman and the other members of the Board of Directors of HVDC. Executive
shall perform such specific duties as are commensurate with such positions, and
as may reasonably be assigned to the Executive from time to time by the Chairman
of the Board of Directors of HVDC from time to time, for the period commencing
on the date hereof and continuing until terminated as provided in Section 4.1
hereof."
(b) by deleting Section 2.1 Base Salary and Bonus in its
entirety and replacing it as follows:
"For the period from January 1, 2001 until termination pursuant to Section
4, HVDC shall pay to Executive (i) a base salary of not less than $200,000 per
annum, payable in substantially equal installments in accordance with HVDC
practice as in effect from time to time and (ii) discretionary incentive and
compensatory bonuses, based on the achievement of milestones to be agreed upon
by HVDC and the Executive."
2. Concurrently with the execution of this Amendment, Executive
shall be paid a bonus of $25,000, less requisite withholding taxes.
3. Except as amended hereby, the Agreement shall remain in full
force and effect.
4. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original and all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first set forth above.
PALIGENT INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
Chairman
EXECUTIVE
/s/ Xxxxxxxxx X. Xxxxx
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Xxxxxxxxx X. Xxxxx