EXHIBIT 10.5
XXXXX XXXXXXXXX INCORPORATED
XXXXXX X. XXXXX
SEVERANCE AND CORRESPONDENT CLEARING
AGREEMENT
This Agreement is entered into by and between Xxxxxx X. Xxxxx ("Xx. Xxxxx")
and Xxxxx XxxXxxxxx Incorporated (the "Company").
RECITALS
A. Xx. Xxxxx was a founder, chairman and chief executive officer of the
Company and its predecessor entity, is the Company's largest shareholder, and is
the senior employee of the Company.
B. Both Xx. Xxxxx and the Company desire to establish a new relationship
between them in the anticipation of an initial public offering of equity
securities of the Company's parent corporation, Xxxxx XxxXxxxxx Group
Incorporated (the "Holding Company").
AGREEMENT
Now, therefore, in consideration of the foregoing recitals and mutual
covenants contained below, the parties agree as follows:
1. ESTABLISHMENT OF INDEPENDENT CORPORATION
1.1 CREATION OF NEWCO
Xx. Xxxxx intends to and, subject to the May 15 election set forth below,
will promptly take all commercially reasonable steps to form a new corporation
or other entity ("NewCo") which will, beginning on a date (the "NewCo Employment
Date") no earlier than immediately following the IPO Closing Date (as defined
below) and no later than January 1, 1999, employ Xx. Xxxxx and certain members
of Xx. Xxxxx'x working team at Xxxxx XxxXxxxxx, as more precisely described
below.
1.2 EMPLOYEE DURING INTERIM
Through December 31, 1998, or such earlier date as permitted by Section 1.2
below, Xx. Xxxxx will continue to be an employee of the Company; provided,
however, that although Xx. Xxxxx intends to form NewCo as provided in this
Section 1.2, nothing herein either requires him to terminate his employment with
the Company should he choose to stay (although Xx. Xxxxx acknowledges that he,
like other employees, is employed at will by the Company and subject to
termination as an "at will employee") or prevent him from retiring (subject to
the provisions of Section 10). Xx. Xxxxx will continue to be a positive and
constructive employee of the Company until the NewCo Employment Date. On or
before May 15, 1998, Xx. Xxxxx will give to the Company a binding, written
election, subject to regulatory and third party approval, as to which Xx.
Xxxxx'x obligations shall be best efforts only, to form NewCo (and, subject to
regulatory approval, whether as a clearing customer or an independent
contractor) or to remain as an employee. Xx. Xxxxx and the Company will
amicably cooperate to find appropriate (high, west-side view) office space for
NewCo. Unless the parties agree otherwise, this space shall be located closely
to, but not, unless the parties agree, within, the 000 Xxxxx Xxxxxx Building.
The parties shall work professionally and amicably toward a budget for the
build-out of this new space, which shall include a contribution toward a tenant
improvement budget by the Company of $40,000. Xx. Xxxxx currently intends, and
the parties shall work amicably to seek a NewCo opening in its new space on
October 1, 1998, which shall in no event open later than January 1, 1999. The
Company will make available to Xx. Xxxxx its resources for the formation of a
new branch, clearing customer or independent contractor, including personnel, in
order to facilitate Xx. Xxxxx'x efforts to make his election with respect to
NewCo.
1.3 STATUS OF NEWCO
It is Xx. Xxxxx'x intent that NewCo will register as an independent broker-
dealer and/or investment advisor with the appropriate state, federal and self-
regulatory entities, including the Securities and Exchange Commission (the
"SEC"), the National Association of Securities Dealers (the "NASD"), and related
entities. NewCo will file Focus reports, have its own operations staff, conduct
annual audits, and comply with other applicable regulatory requirements.
However, at Xx. Xxxxx'x option, NewCo may be structured as an independent
contractor relationship with the Company which would not involve such
requirements.
1.4 NEWCO BUSINESS DURING TERM
For a 36 month period (the "Term") which beings on the date of the closing
(the "IPO Closing Date") of the Holding Company IPO (as defined below), and
except as set forth at Section 1.5 below, all categories of NewCo's and Xx.
Xxxxx'x SEC and NASD regulated business will be conducted by means of a
clearing agreement (or, as specifically set forth herein, an independent
contractor agreement) with the Company, except as set forth in the following
sentence. As an exception to the foregoing sentence, NewCo may:
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(a) conduct business with Xxxxxxxx Brothers (subject to payment of
investment advisory fees as described below);
(b) engage in merger and acquisition advisory and private placement
services ("Corporate Finance"), beginning at the Commencement Date (as defined
below); and
(c) effect trades of municipal bonds solely as permitted at Section
1.5 below.
From the IPO Closing Date through the NewCo Employment Date, all activities
described in this Section 1.4 will be conducted by Xx. Xxxxx as an employee of
the Company. Beginning on the NewCo Employment Date through the balance of the
Term, these activities will be conducted with Xx. Xxxxx as an employee of NewCo.
1.5. MUNICIPAL BOND TRADING
Xx. Xxxxx and NewCo shall have and shall follow a policy that during the
Term all trades of municipal bonds will be conducted through the Company's
municipal bond trading desk so long as the Company provides reasonably
competitive market prices, and fulfills all applicable regulatory obligations.
1.6 NO COMPETITION EXCEPT WITHIN NEWCO
Xx. Xxxxx agrees that except as permitted in his employment by NewCo or as
permitted under this Agreement, he will not, directly or indirectly, during
the Term, be employed by, consult with or otherwise perform services for, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected with, in any manner, any organization
which, by reason of its activities as a broker, dealer, investment advisor,
investment company or related business (other than with the Xxxxxxxx Brothers as
provided herein), is subject to regulation by the SEC and which conducts
business in any state or province in which the Company conducts business (a
"Competitor"). Xx. Xxxxx shall be deemed to be related to or connected with a
competitor if such Competitor is (a) a partnership in which Xx. Xxxxx is a
general or limited partner or employee, (b) a corporation or association of
which Xx. Xxxxx is a shareholder, officer, employee or director, or (c) a
partnership, corporation or association of which Xx. Xxxxx is a member,
consultant or agent; provided, however, that nothing herein shall prevent the
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purchase or ownership by Xx. Xxxxx of shares which constitute less than ten
percent of the outstanding equity securities of a publicly or privately held
corporation, if Xx. Xxxxx has no other relationship with such corporation;
provided, further, that serving as an independent outside director of an entity
that is or owns a Competitor, shall be permitted and not in violation of this
Agreement.
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2. RECRUITMENT OF TEAM; NONSOLICITATION, NONDISPARAGEMENT AND NONDISCLOSURE
2.1 TEAM
The Company and Xx. Xxxxx will jointly notify Company employees Xxxxxxx
Xxxxx, Xxxxxxx Xxxxxx, Xxxxx Xxxx, Xxxxx Xxxxxx and Xxxxx Xxxxxxxx (together the
"Team") that each of them is free to either remain as an employee of the
Company, or to join NewCo as an employee commencing January 1, 1999 (or any
earlier NewCo Employment Date). Neither the Company nor Xx. Xxxxx will exert
pressure on these individuals to make a choice, but shall permit each to freely
make a decision with respect to his or her employment relationship.
2.2 TEAM NONCOMPETITION OBLIGATIONS
The Company will amend any employment or noncompetition agreement entered
into by any of the Team to provide for that individual's ability to compete with
the Company solely as an employee of NewCo and subject to limitation, and
benefits substantially equivalent to those of Xx. Xxxxx under this Agreement.
2.3 XXXXX XXXXXXX
The Company agrees that Xxxxx XxXxxxx may work in the following manner as
an employee of NewCo. First, he may act strictly in an administrative capacity
to oversee the formation, regulatory compliance, capitalization and otherwise
administratively assist in the creation and establishment of NewCo until the
NewCo Employment Date. Second, beginning October 1, 1998, (or the NewCo
Employment Date, if earlier) Xx. XxXxxxx may begin to prepare for the
commencement of his research operations at NewCo, including preparing research
reports to be issued following the NewCo Employment Date; in no event, however,
shall NewCo, through Xx. XxXxxxx, or otherwise, publish research reports, or
otherwise engage in acts of trade or business until the NewCo Employment Date.
Except as otherwise provided pursuant to Sections 4.1, 4.2 or 4.4 hereof, Xx.
XxXxxxx will refrain from contacting the Company's customers, from making public
announcements, being publicly interviewed, or otherwise publicly associated with
NewCo prior to the NewCo Employment Date.
The Company will amend its severance agreement with Xx. XxXxxxx to provide
an amendment to and waiver of Xx. XxXxxxx' obligations so as to provide for Xx.
XxXxxxx' ability to compete with the Company to the extent that he does so
consistent with this Section 2.3.
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2.4 EMPLOYMENT OF 24-MONTH SENIOR PRODUCERS
Certain senior employees of the Company have executed employment and
noncompetition agreements (the "Producer Agreements"). These individual
signators are set forth at Exhibit A to this Agreement. During the Term,
neither Xx. Xxxxx nor the Company may solicit, any of the Producers as
employees or consultants without the prior written consent of the Company;
provided, however, that on or after January 1, 2001, Xx. Xxxxx and NewCo may
accept any of the Producers as employees.
2.5 NONSOLICITATION
During the Term, except as set forth in Sections 2.1 through 2.4 or
Sections 4.1 or 4.2, hereof, neither Xx. Xxxxx nor NewCo shall directly or
indirectly hire, retain, engage, accept as employees or consultants, solicit,
influence or entice, or attempt to hire, retain, engage, solicit, influence or
entice, any employee or consultant of the Company to cease his or her
relationship with the Company or solicit, influence, entice or in any way divert
any customer, distributor, partner, joint venturer or supplier of the Company to
do business or in any way become associated with any Competitor except (with
respect to distributors or suppliers) NewCo which may do business with such
distributor or supplier on a nonexclusive basis. Both NewCo and the Company may
accept and service (without solicitation) customers who are also customers of
the other. This subsection 2.5 shall apply during the Term and with respect to
any state or province in which the Company current conducts business.
2.6 NONDISPARAGEMENT
Neither Xx. Xxxxx (on his own behalf and on behalf of NewCo) nor the
Company (on its behalf and on behalf of its officers and directors and the
Holding Company and its officers and directors), will, during the Term, make any
statements that disparage or damage the reputation of the other, the other's
directors, officers, employees and representatives. For purposes of Section
2.4 and Section 2.5 hereof, "the Company" shall include any subsidiaries of the
Company (whether existing currently or in the future), any parent corporation of
the Company and any business ventures in which the Company, its subsidiaries or
its parent corporation may participate.
2.7 NONDISCLOSURE; RETURN OF MATERIALS
During the term of Xx. Xxxxx'x employment by the Company and following
termination of such employment, Xx. Xxxxx will not disclose (except as required
by Xx. Xxxxx'x duties to the Company), any confidential or proprietary concept,
design, process, technology, trade secret, customer list, plan, embodiment, or
invention, any other confidential or proprietary intellectual property or any
other confidential information, whether patentable or not, of the Company or its
affiliates of which
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Xx. Xxxxx becomes informed or aware during Xx. Xxxxx'x employment, whether or
not developed by Xx. Xxxxx; provided, however, that Xx. Xxxxx and NewCo shall
have access to and, as appropriate, copies or originals of Xx. Xxxxx'x and the
Team's present accounts and information as the parties shall amicably and
equitably agree to be reasonable and appropriate to permit the full servicing of
the Team's accounts, by NewCo. Except as otherwise provided herein, or with the
prior written consent of the Company, Xx. Xxxxx will return all documents, data
and other materials of whatever nature, including, without limitation research,
reports, embodiments, software and manuals to the Company provided by or
appurtenant to Xx. Xxxxx'x position with the Company or to any intellectual
property and shall not retain or cause or allow any third party to retain
photocopies or other reproductions of the foregoing.
2.8 EQUITABLE RELIEF
Each of Xx. Xxxxx, NewCo, the Company and the Holding Company acknowledge
that their material covenants are essential to the other and to the other's
willingness to enter into this Agreement, that no party would enter into this
Agreement if it did not include Sections 1.2, 1.5, 1.6, 2, 3, 4, 5, 6, 7, 8, 9,
10 and 11 and that damages sustained by the Company or Xx. Xxxxx as a result of
a breach of this Agreement cannot be adequately remedied by monetary damages,
and each agrees that the others, notwithstanding any other provision of this
Agreement, including, without limitation, Section 17 (Arbitration) hereof, and
in addition to any other remedy it may have under this Agreement or at law,
shall be entitled to injunctive and other equitable relief to prevent or curtail
any breach of any provision of this Agreement, including, without limitation,
Sections 1.2, 1.5, 1.6, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11. Each party agrees
that it will not claim or argue that monetary damages are an adequate substitute
for actual performance.
2.9 CONSIDERATION
Xx. Xxxxx and the Company acknowledge and agree that additional
consideration has been given to the Company and Xx. Xxxxx entering into this
Section 2, as well as other provisions of this Agreement, such additional
consideration including, without limitation, (a) Xx. Xxxxx'x foregoing of that
redemption of his shares of common stock at book value which would have been
coupled with his ability to start NewCo without the restrictions as set forth
herein; (b) the Company receives the agreement of Xx. Xxxxx to do business as
set forth herein; and (c) the Company's proceeding with an initial public
offering..
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2.10 PERFORMANCE BY THE COMPANY
In consideration of the fees to be received by the Company from NewCo as
provided in Section 3, the Company shall provide services to NewCo consistent in
quality and timing as provided by the Company to its correspondents and
franchisees.
3. FEES
The following fee arrangements apply during the Term:
3.1 SEC-REGULATED BUSINESS GENERALLY
In regard to general SEC-regulated business, the Company will retain 25% of
revenue from all SEC-regulated business conducted by NewCo (subject to a $25.00
per ticket minimum). In the event that NewCo is restructured to serve as an
independent contractor-like relationship to the Company, the "25%" retainage
shall instead be "28%."
3.2 INVESTMENT ADVISORY RELATED BUSINESS
For investment advisory related business, the Company will (a) retain 23%
of all revenue derived from investment advisory fees; and (b) charge $.04 per
share on transactions, subject to a $25.00 per ticket minimum. This will apply
(by way of example, and not as a limitation) to management, profit-sharing and
other fees received from Xxxxxxxx Brothers. In the event that NewCo is
restructured to serve in an independent contractor-like relationship to the
Company, "23%" retainage shall instead be "26%."
3.3 FREE CREDIT BALANCES; MARGIN LOANS
The Company will pay 25 basis points as a rebate on free credit balance and
money market balance of NewCo. The Company will continue to provide favorable
lending rates on Xx. Xxxxx'x clients' margin loans, in accordance with past
practice. In the event that NewCo is restructured to serve in an independent
contractor-like relationship to the Company, the Company will not provide any
rebate on free credit balances and money market balances of NewCo.
3.4 CORPORATE FINANCE
Through March 31, 1999, fees for Corporate Finance activities shall be
negotiated between the Company and Xx. Xxxxx in a manner consistent with their
recent past practices. After March 31, 1999, there shall be no retainage or fee
sharing with regard to Corporate Finance activities except as the parties may
otherwise agree.
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3.5 TRANSFER OF ASSETS
No transfer of assets will be made out of NewCo to money managers,
investment advisors, etc. (other than with the Xxxxxxxx Brothers, the fees for
which are addressed in Section 3.2) for which Xx. Xxxxx, his team, or NewCo will
be paid, unless compensation arrangements satisfactory to the Company are
established and implemented.
3.6 MATERIAL CHANGE IN PAYOUT TO PRODUCERS
If, during the last 24 months of the 36-month Term, there is a material
change to the payout arrangements by the Company's largest retail brokers, then
the Company, Xx. Xxxxx and NewCo shall agree on an equitable adjustment of the
25% retainage for general SEC-regulated business. For example, if payout
arrangements to the Company's largest retail brokers were to be increased from
40% to 44% (a 10% increase) then the retainage for general SEC-regulated
business would be decreased from 25% to 22.5% (a 10% decrease) and the retainage
for revenue derived from investment advisory fees would be reduced from 23% to
20.7% (a 10% decrease).
4. COMMUNICATIONS
4.1 APRIL 1998 PRELIMINARY COMMUNICATIONS
The Company and Xx. Xxxxx shall, immediately following the filing by the
Holding Company of a registration statement for an initial public offering on
Form S-1, jointly communicate to Xx. Xxxxx'x customers with respect to Xx.
Xxxxx'x proposed new status with the Company, as described in this Agreement.
The parties shall jointly and amicably characterize this as arising from Xx.
Xxxxx'x desire to return to his long-time role as a chief executive officer of a
securities business, without the administrative and logistical demands of a
publicly-held entity.
4.2 FORMAL CLIENT COMMUNICATIONS
Since NewCo will continue to clear with the Company, the initial written
client communications notifying clients of the NewCo arrangements shall be made
cooperatively and, if possibly, jointly. The initial communications by both
parties shall clearly state that although clients are free to keep their
accounts at the Company or to move their accounts to NewCo, all transfers to
NewCo would be made expeditiously and amicably, but accounts would also be
serviced by the Company if they remained. Such communications shall name the
Team members joining NewCo; shall indicate what personnel will be available at
the Company to service accounts that remain at the Company; and shall be
businesslike, courteous and otherwise in compliance with this Agreement.
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4.3 NAME OF NEWCO
The parties agree that, during the Term, the NewCo name may include Xx.
Xxxxx'x name and shall be one of: "Xxxxxx X. Xxxxx and Associates,
Incorporated" or a name consisting of three or more surnames that begin with
"XxXxxxx," is followed by one or more surnames other than XxXxxxx or Xxxxx,
which is or are then followed by "Xxxxx." In the use of the "Xxxxxx X. Xxxxx
and Associates" name, the names "Xxxxxx" shall be given equal prominence in all
commercial uses whether verbally (e.g., in advertising or by telephone), in
writing (e.g., letterhead or announcements) or electronically (e.g., web site),
with no shortening or over-emphasis of "Xxxxx." The parties recognize the
present value in the marketplace of the "Xxxxx XxxXxxxxx" name, and acknowledge
a continuing need, including after the Term, to avoid confusion in the
marketplace between NewCo's name and the "Xxxxx XxxXxxxxx" name. In no event
shall any name of NewCo be confusingly similar to "Xxxxx XxxXxxxxx." NewCo may,
without the Company's consent, change its name to a name not containing "Xxxxx;"
otherwise, any changes to this name must be approved by a majority vote of the
independent outside directors of Holding Company.
4.4 REGISTRATION STATEMENT; ROAD SHOW
Xx. Xxxxx and the Company shall amicably agree upon language that carries
through the spirit of the April 1998 preliminary communication (described above)
in the Holding Company's registration statements, as well as in public
presentations based upon those statements pursuant to the marketing of the
Holding Company's initial public offering.
5. RESEARCH
During the Term, each of the Company and NewCo shall provide to the other
copies of its research, on a timely basis, without additional charge. In
consideration for the fees in Section 3, NewCo may distribute the Company's
research to NewCo customers. In the event that the Company elects to distribute
NewCo's research to the Company's customers, the Company and NewCo will
establish a reasonable pricing and payment policy.
6. PUBLIC OFFERING AND HOLDING COMPANY REORGANIZATION
6.1 SELLING SHAREHOLDER
The Company will permit Xx. Xxxxx, shall he so select, to sell at least 40%
and as reasonably close to 50% as possible, of his shares of Holding Company in
its initial public offering. The parties acknowledge that a portion of those
shares may be sold in the primary offering, and a portion pursuant to the
underwriters' overallotment
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option, generally ratably allocated. Xx. Xxxxx'x rights in this Section 6.1 are
subject to his execution of selling shareholder documents in form to be
negotiated by and accepted to counsel to Xx. Xxxxx and Xxxxxxx Xxxxx &
Associates, Inc.
6.2 PRICING COMMITTEE
The Holding Company will name a four-person pricing committee, of which Xx.
Xxxxx shall be one member.
6.3 LOCK-UP
Xx. Xxxxx will be unable to sell any shares not sold in the initial public
offering for a period of 6 months. In the period beginning 6 months and ending
12 months after the initial public offering, he will be able to sell only 25% of
his remaining shares. After 12 months, there shall be no further restrictions.
Xx. Xxxxx acknowledges that he will be required, and agrees, to sign a lockup
agreement together with selling stockholder and other ancillary agreements
reasonably requested by, and with, Xxxxxxx Xxxxx & Associates, Inc. to this
effect.
6.4 Voting in Support of Holding Company Merger
Xx. Xxxxx shall vote his shares of the Company (or grant and not withdraw a
proxy) in favor of the Merger Agreement among the Company and two affiliated
corporations, the Holding Company and a transitory acquisition subsidiary of the
Holding Company, pursuant to which the Holding Company will become the sole
shareholder of the Company (as summarized herein and as described in the
Registration Statement on Form S-4, the "Holding Company Reorganization"). The
Holding Company Reorganization provides for, as described in the Registration
Statement on Form S-4, a merger pursuant to which the Company will merge with a
subsidiary of the Holding Company. Xx. Xxxxx and other shareholders of the
Company who are currently employees of the Company will receive "Class B common
stock", which is subject to restrictions intended to be substantively identical
to those to which they are currently bound. Non-employee shareholders will be
recipients of either "Class C common stock" (for owners of shares acquired
pursuant to the 1990 Stock Purchase Agreement) or "Class D common stock" (for
owners of shares acquired pursuant to 1995 Stock Purchase Agreements) pursuant
to which each holder will be subject to restrictions substantively identical to
the shareholder agreements to which they are currently bound. Xx. Xxxxx shall
support the Holding Company Reorganization and will not vote his Company shares
in favor of any action which would prevent the Holding Company Reorganization to
be realized, or otherwise impede, interfere with or attempt to discourage the
Holding Company Reorganization.
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7. MUTUAL RELEASE OF CLAIMS
Each of Xx. Xxxxx and the Company represents that he or it has not filed,
and agrees and warrants he or it will not file, any complaints, charges or
lawsuits against the other with any governmental agency or any court. Each of
Xx. Xxxxx and the Company expressly waives any claims against the other and each
releases the other (including its officers, directors, owners, control persons,
managers, agents and representatives) from any claims that he or it may have in
any way connected with Xx. Xxxxx'x employment and the termination thereof. It
is understood that Xx. Xxxxx'x release includes, but is not limited to, any
claims for wages, bonuses, employment benefits, or damages of any kind
whatsoever, arising out of any contracts, express or implied, any theory of
wrongful discharge or other legal restriction on the Company's right to
terminate employment, or any federal, state or other governmental statute or
ordinance, including, without limitation, Title VII of the Civil Rights Act of
1964, the federal Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Family Medical Leave Act, the Washington Law Against
Discrimination, or any other legal limitation on the employment relationship.
For purposes of this Section 18, the term the "Company" shall include all
of the officers, directors, owners, managers, agents, and representatives of the
Company.
This waiver and release shall not apply to claims that may arise from
actions or in actions that occur after the date hereof, nor preclude Xx. Xxxxx,
NewCo or the Company from filing a lawsuit for the exclusive purpose of
enforcing his or its rights under this Agreement.
8. CONDITIONS PRECEDENT
The obligations of Xx. Xxxxx (including Section 10) and the Company to
consummate the transactions contemplated by this Agreement shall be subject to
the closing of a firm commitment underwritten public offering of shares of
common stock of the Holding Company (the "Holding Company IPO") in which the
aggregate gross proceeds to the Holding Company and selling shareholders from
such offering shall be at least $15,000,000, and which shall have occurred on or
before December 31, 1998. In the event such a closing does not occur on or
before December 31, 1998, this Agreement shall be null and void, and shall have
no further force or effect; provided, however, that the failure of such a
closing to occur shall in no way invalidate any earlier closing of the Holding
Company Reorganization, rescind votes cast in favor of or actions taken in
furtherance of that Holding Company Reorganization, or negate Xx. Xxxxx'x
continuing obligations under the last sentence of Section 6.4.
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9. EXECUTION OF AGREEMENT BY NEWCO; COOPERATION
As soon as NewCo is formed, Xx. Xxxxx will cause NewCo to execute this
agreement as a co-obligor with Xx. Xxxxx. NewCo and Xx. Xxxxx will be jointly
responsible for the covenants of Xx. Xxxxx and NewCo set forth in this
agreement. The Holding Company and the Company shall be jointly responsible for
the covenants of the Company and the Holding Company set forth in this
Agreement. Each party (including NewCo and the Holding Company) will use
commercially reasonable efforts to cooperate with each other party in connection
with any steps required to be taken as part of its obligations under this
agreement. Each party will use all reasonable efforts to take promptly, or
cause to be taken promptly, all things necessary, proper or appropriate to
satisfy their respective obligations in this agreement. NewCo will enter into
the Company's customary form of clearing agreement and margin agreement,
modified, as necessary, to provide for the terms set forth herein.
10. 30-MONTH NONCOMPETITION/NONSOLICITATION COVENANTS
Xx. Xxxxx agrees that, in the event that he elects not to proceed with the
establishment of NewCo pursuant to the terms of this agreement, he shall be
bound by the Executive Employment Agreement between Xxxxx XxxXxxxxx Incorporated
and Xxxxxx X. Xxxxx set forth as Exhibit B (Section 10) hereto, as if it were
dated the date of this agreement, and as if it were fully executed by Xx. Xxxxx
as "Employee" and the Company and "Xxxxx XxxXxxxxx Incorporated". The terms of
that Executive Employment Agreement are expressly incorporated herein by this
reference, and become binding upon Xx. Xxxxx and the Company, in the event that
Xx. Xxxxx elects not to proceed with formation and consummation of the expected
commencement of business within NewCo on the Commencement Date. All provisions
of this Agreement shall remain in full force and effect except for those that
depend upon the existence of NewCo.
11. EARLY TERMINATION; RECIPROCAL CHANGE OF CONTROL EVENTS
If and to the extent that, after the IPO Closing Date and during the Term,
the Company and/or the Holding Company provides change of control agreements to
its key executives or senior producers (whether pursuant to the Producer
Agreements, comparable agreement for senior management or otherwise), it and Xx.
Xxxxx will amend this Agreement to provide for early termination of the Term
upon such a change of control, which change of control will be defined in a
manner substantively identical to the way in which it is defined in such change
of control agreement.
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12. REPRESENTATIONS AND WARRANTIES
In order to induce the other to enter into this Agreement, each of Xx.
Xxxxx and the Company represents and warrants to the other that neither the
execution nor the performance of this Agreement by the representing party will
violate or conflict in any way with any other agreement by which the
representing party may be bound, or with any other duties imposed upon the
representing party by corporate or other statutory or common law. Each of the
parties shall have the Agreement approved by its Board of Directors prior to the
IPO Closing Date.
13. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least 10 business days' prior
written notice of the existence and the nature of such breach before taking
further action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 10 business-day
period.
14. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall specifically
refer to this Agreement and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by registered or certified mail,
return receipt requested, at the address set forth below or at such other
address as may hereafter be designated by notice given in compliance with the
terms hereof:
If to Xx. Xxxxx: Xxxxxx X. Xxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
[This shall automatically become the
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NewCo address, without further action or notice]
------------------------------------------------
Copy to: C. Xxxx Xxxxxxx
Xxxxxxx Xxxxx & Xxxxx
000 Xxxxx Xxx., Xxxxx 0000
Xxxxxxx, XX 00000
If to the Company: Chief Executive Officer
Xxxxx XxxXxxxxx Incorporated
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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Copy to: Xxxxxxx X. Xxxxxxxxx
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
15. ASSIGNMENT
This Agreement is personal to Xx. Xxxxx and shall not be assignable by Xx.
Xxxxx. The Company may, subject to Section 11, assign its rights hereunder to
(a) any corporation resulting from any merger, consolidation or other
reorganization to which the Company is a party, (b) any parent corporation of
the Company whether existing currently or in the future, or (c) any corporation,
partnership, association or other person to which the Company may transfer all
or substantially all of the assets and business of the Company existing at such
time. All of the terms and provisions of this Agreement shall be binding on and
shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
16. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
17. ARBITRATION FOR MONETARY DAMAGES
Except as provided in Section 2.7 hereof, any controversies or claims for
monetary damages arising out of or relating to this Agreement (but not for
matters appropriate for equitable relief) shall be fully and finally settled by
arbitration in accordance with the rules, constitutions, or by-laws of the
National Association of Securities Dealers, Inc., as may be amended from time to
time. The prevailing party shall be entitled to costs, expenses and reasonable
attorneys' fees. Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
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18. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, termination or discharged and signed by the
Company and Xx. Xxxxx, and each such amendment, modification, waiver,
termination or discharge shall be effective only in the specific instance and
for the specific purpose for which given. No provision of this Agreement shall
be varied, contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and Xx. Xxxxx.
19. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
20. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
21. HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
22. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
this Agreement, may be executed in any number of counterparts, each of which
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counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute one and the same
instrument.
23. ENTIRE AGREEMENT
This Agreement on and as of the date hereof constitutes the entire
agreement between the Company and Xx. Xxxxx with respect to the subject matter
hereof and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and Xx. Xxxxx with respect to
such subject matter are hereby superseded and nullified in their entireties.
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IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above. NewCo/Xxxxxx X. Xxxxx & Associates, Inc.
shall be added as a subsequent signatory in accordance with the terms of this
Agreement.
XXXXX XXXXXXXXX INCORPORATED
By /s/ Xxxx X. Xxxxxx
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Its CEO
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XXXXX XXXXXXXXX GROUP, INCORPORATED
By /s/ Xxxxxx X. Xxxxxxx, Xx
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Its President
-----------------------------------
XXXXXX X. XXXXX
By /s/ Xxxxxx X. Xxxxx
---------------------------------------
XXXXXX X. XXXXX & ASSOCIATES, INC.
By /s/ V. Xxxxxxxx Xxxxxxxxx
---------------------------------------
Its Chief Financial Officer
-----------------------------------
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