EMPLOYMENT AGREEMENT
Exhibit
10.3
THIS
EMPLOYMENT AGREEMENT (the "Agreement"), dated September 18, 2006 by and between
Xxxxx X. Xxxxxxxx, Ph.D.(the "Executive") and Pacific Magtron International
Corporation, Inc., a Nevada corporation (the "Company").
WITNESSETH:
WHEREAS,
Executive and the Company wish to enter into this agreement to provide for
Executive's employment by the Company on the terms and subject to the conditions
set forth herein.
NOW,
THEREFORE, in consideration of the mutual promises, representations and
warranties set forth herein, and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. Offices
and Duties.
The
Company hereby employs Executive during the Term (as hereinafter defined) to
serve as the Company’s Co-President and Chief Operating Officer and to perform
such executive and supervisory duties on behalf of the Company as the Company’s
Board of Directors may from time to time reasonably direct. During such period
as Xxxxx X. Xxxxxxxxx, Ph.D. is a consultant to or employed by the Company,
Executive agrees to serve as Co-President with Xxxxx X. Xxxxxxxxx. Executive
hereby accepts such employment and agrees that throughout the Term he shall
faithfully, diligently and to the best of his ability, in furtherance of the
business of the Company, perform the duties assigned to his or incidental to
the
offices assumed by him pursuant to this Section. Executive shall devote
substantially all of his business time and attention to the business and affairs
of the Company, but Executive shall not be required to devote any minimum amount
of time or report or perform his duties hereunder on a fixed or periodic basis,
and Executive may engage or participate in such other activities incidental
to
any other employment, occupation or business venture or enterprise as do not
materially interfere with or compromise his ability to perform his duties
hereunder. Notwithstanding the foregoing, however, the commencement date of
the
Term (the “Commencement Date”) shall be deferred until the date that is not more
than six (6) months following the date on which the Company has received debt
or
equity financing aggregating not less than $2,500,000.00, and until such date
Executive shall serve as a consultant to the Company at an hourly rate of
$120.00 per hour and shall be permitted to continue his full time employment
with Unigene Laboratories Inc. As a consultant to the Company, Executive shall
not be required to devote any minimum number of hours to the business of the
Company, and he shall coordinate his schedule and responsibilities with Xx.
Xxxxxxxxx, the President of the Company. The Company shall give notice to
Executive of the date on which it has received such financing aggregating not
less than $2,500,000.00, and Executive shall advise the Company of the date
on
which he intends to commence his full-time employment under this Agreement,
which date shall be not less than six (6) months after the date of the Company’s
notice to him.
2. Term.
The
employment of Executive hereunder shall commence on the Commencement Date and
end on September 30, 2010, provided, that Executive shall have the right in
his
sole discretion to extend the term for an additional 12 months ending on
September 30, 2011, by notifying the Company in writing as such no later than
January 1, 2010, subject in all respects to earlier termination upon the terms
and conditions provided elsewhere herein. The term during which Executive is
employed hereunder as a full time employee (and not as a consultant) shall
be
referred to herein as the “Term”. As used herein, “Termination Date” means the
last day of the Term.
3. Compensation.
(a) As
compensation for his services hereunder, the Company shall pay to Executive
during the Term:
(i) a
base
salary at the rate of $200,000.00 per annum (the “Base Salary”), subject to the
provisions of Section 1 above, such Base Salary to be paid in substantially
equal installments no less often than twice monthly;
(ii) a
bonus
(the “5% Bonus”) in respect of each Bonus Period (as hereinafter defined),
payable within ninety (90) days after the end of such Bonus Period, in an amount
equal to five percent (5%) of (A) for the first three (3) years of this
Agreement, EBITDA and (B) thereafter Net Income before bonus (as hereinafter
defined);
(iii) a
bonus
(the “Additional Bonus”) in respect of each Bonus Period, payable within ninety
(90) days after the end of such Bonus Period, as follows: (A) $75,000.00, if
Pre-Tax Income for the Bonus Period is between 150% and 200% of the prior fiscal
year’s Pre-Tax Income; or (B) $100,000.00, if Pre-Tax Income for the Bonus
Period is between 200% and 250% of the prior fiscal year’s Pre-Tax Income; or
(C) $200,000.00, if Pre-Tax Income for the Bonus Period is two hundred fifty
(250%) percent or greater than the prior fiscal year’s Pre-Tax Income; but in no
event shall the Additional Bonus payable to Executive with respect to any Bonus
Period exceed five (5%) percent of Pre-Tax Income for such Bonus Period;
and
(iv) such
additional incentive or bonus compensation as the Company’s Board of Directors
may from time to time determine.
(b) For
the
purposes of paragraph 3(a)“Bonus
Period” is a fiscal year of the Company ending during the Term.
(i) “EBITDA”
means the Company’s Net Income plus any taxes, amortization and depreciation
deducted in determining Net Income in accordance with generally accepted
accounting principals (“GAAP”); Net Income means the Company’s Net Income as
determined in accordance with GAAP.
(ii) The
determination of EBITDA and Net Income and the 5% Bonus and Additional Bonus
for
any Bonus Period shall be determined by the Company’s Board of Directors or the
Compensation Committee of the Board of Directors in accordance with the
Company’s audited financial statements, which shall be conclusive and binding
upon the Company and Executive.
(c) The
Company shall provide major medical, hospitalization, dental and disability
insurance for the benefit of Executive and his spouse consistent with benefits
made available to other of the Company’s senior executives, and the Company
shall pay all premiums and any other costs or expenses incurred to maintain
such
policies in effect during the Term. Such coverage shall be provided in any
event
not later than the date the Executive becomes a full-time employee of the
Company in amounts and with coverage reasonably acceptable to
Executive.
(d) In
addition to his Base Salary and other compensation provided herein, Executive
shall be entitled to participate, to the extent he is eligible under the terms
and conditions thereof, in any stock, stock option or other equity participation
plan and any profit-sharing, pension, retirement, insurance, medical service
or
other employee benefit plan generally available to the executive officers of
the
Company, and to receive any other benefits or perquisites generally available
to
the executive officers of the Company pursuant to any employment policy or
practice, which may be in effect from time to time during the
Term.
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(e) During
the Term, Executive shall not be entitled to additional compensation for serving
in any office of the Company (or any subsidiary thereof) to which he is elected
or appointed, except that, throughout any period or periods during which he
shall serve as a director of the Company (or such subsidiary), Executive shall
be entitled to directors’ fees in accordance with the policies and practices of
the Company (or such subsidiary) then in effect.
4. Stock
Options.
(a)
Executive
shall be an eligible participant under one or more stock option plans adopted
by
the Company. .
5. Expenses.
(a) The
Company shall pay directly, or advance funds to Executive or reimburse Executive
for, all expenses reasonably incurred by him in connection with the performance
of his duties as an employee or consultant hereunder, upon the submission to
the
Company of itemized expense reports, receipts or vouchers in accordance with
its
then customary policies and practices.
(b) Upon
and
after the Company having achieved Net Income in a fiscal quarter, The Company
shall provide to Executive a suitable automobile or other vehicle for his
exclusive use while a full-time employee of (and not as a consultant to) the
Company, and the Company shall pay the entire cost thereof, including without
limitation purchase price or lease payments, insurance premiums, repair charges,
and maintenance and operating expenses, or if, in lieu thereof, Executive uses
his own automobile or other vehicle, the Company shall grant him a monthly
allowance in an amount sufficient to pay all such costs therefor.
6. Location;
Office.
Except
for routine travel and temporary accommodation reasonably required to perform
his services hereunder, Executive shall not be required to perform his services
hereunder at any location other than the principal executive office of the
Company, which office shall be located throughout the Term, at a location within
a distance of 30 miles from 0 Xxx Xxxxxx, Xxxxxxx, Xxx Xxxxxx on the date
hereof, or at such other office or site to which Executive may, in his sole
discretion, consent; nor shall he be required to relocate his principal
residence to, or otherwise to reside at, any location specified by the Company.
The Company shall provide Executive with suitable office space, furnishings
and
equipment, secretarial and clerical services and such other facilities and
office support as Executive may reasonably request.
7. Vacation.
Executive shall be entitled to four (4) weeks paid vacation during each year
of
his full time employment hereunder, such vacation to be taken at such time
or
times as shall be agreed upon by Executive and the Company. Vacation time shall
be cumulative from year to year, except that Executive shall not be entitled
to
take more than eight weeks vacation during any consecutive 12-month period
during the Term.
8. Key-Person
Insurance.
The
Company shall have the right from time to time to purchase, increase, modify
or
terminate insurance policies on the life of Executive for the benefit of the
Company in such amounts as the Company may determine in its sole discretion.
In
connection therewith, Executive shall, at such time or times and at such place
or places as the Company may reasonably direct, submit himself to such physical
examinations and execute and deliver such documents as the Company may deem
necessary or appropriate.
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9. Trade
Secrets.
(a) Executive
shall hold in a fiduciary capacity for the benefit of the Company all
confidential or proprietary information relating to or concerned with the
Company or its Affiliates (as defined below) or its products or services,
prospective products or services, operations, business and affairs
(“Confidential Information”), and shall not, at any time hereafter, use or
disclose any Confidential Information to any person other than to the Company
or
its designees or except as may otherwise be required in connection with the
business and affairs of the Company, and in furtherance of the foregoing
Executive agrees that:
(i) Executive
will receive, maintain and hold Confidential Information in strict confidence
and will use the same level of care in safeguarding it that he uses with his
own
confidential material of a similar nature;
(ii)
Executive
will take all such steps as may be reasonably necessary to prevent the
disclosure of Confidential Information; and
(iii)
Executive
will not utilize Confidential Information without first having obtained the
Company’s consent to such utilization.
“Affiliate”
of
a
Person means another Person directly or indirectly controlling, controlled
by,
or under common control with, such Person; for this purpose, “control” of a
Person means the power (whether or not exercised) to direct the policies,
operations or activities of such Person by virtue of the ownership of, or right
to vote or direct the manner of voting of, securities of such Person, or
pursuant to agreement or law or otherwise. The
term
“Person” includes without limitation a natural person, corporation, joint stock
company, limited liability company, partnership, joint venture, association,
trust, governmental authority, or any group of the foregoing acting in
concert.
(b) The
commitments set forth in paragraph 9(a) shall not extend to any portion of
Confidential Information:
(i) that
is
generally available to the public;
(ii) that
was
not acquired, directly or indirectly and/or in any manner, from the Company
and
which Executive lawfully had in his possession prior to the date of this
Agreement; or
(iii) that,
hereafter, through no act or omission on the part of the Executive, becomes
information generally available to the public.
(c)
At
any
time upon written request by the Company (i) the Confidential Information,
including any copies, shall be returned to the Company, and (ii) all documents,
drawings, specifications, computer software, and any other material whatsoever
in the possession of the Executive that relates to such Confidential
Information, including all copies and/or any other form of reproduction and/or
description thereof made by Executive shall, at the Company’s option, be
returned to the Company or destroyed.
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(d)
In
the
event that Executive
becomes
legally compelled (by deposition, interrogatory, request of documents, subpoena,
civil investigative demand or similar process) to disclose any of the
Confidential Information, the Executive
shall
provide the Company with prompt prior written notice of such requirement so
that
it (or its designees) may seek a protective order or other appropriate remedy
and/or waive compliance with the terms of this Agreement. In the event that
such
protective order or other remedy is not obtained, or the Company waives
compliance with the provisions hereof, the Executive
agrees
to furnish only such portion of the Confidential Information which is legally
required to be furnished.
10. Intellectual
Property.
Any
idea, invention, design, process, system, procedure, improvement, development
or
discovery conceived, developed, created or made by Executive, alone or with
others, during the Term and related to the business of the Company, whether
or
not patentable or registrable, shall become the sole and exclusive property
of
the Company. Executive shall disclose the same promptly and completely to the
Company and shall, during the Term or thereafter, (i) execute all documents
requested by the Company for vesting in the Company the entire right, title
and
interest in and to the same, (ii) execute all documents requested by the Company
for filing and procuring such applications for patents, trademarks, service
marks or copyrights as the Company, in its sole discretion, may desire to
prosecute, and (iii) give the Company all assistance it may reasonably require,
including the giving of testimony in any Proceeding (as hereinafter defined
in
Section 34), in other to obtain, maintain and protect the Company’s right
therein and thereto.
11. No
Competition.
(a) During
the Restricted Period (as defined below), Executive shall not, directly or
indirectly:
(i) own,
control, manage, operate, participate or invest in, or otherwise be connected
with, in any manner, any business activity, venture or enterprise which is
engaged in any business in the United States in which the Company (or any
subsidiary thereof) is currently engaged or is engaged at the time of
termination of Executive’s employment hereunder, or
(ii) for
himself or on behalf of any other person, employ or engage any person who at
the
time shall have been within the preceding 12-month period an employee of the
Company (or such subsidiary) or contact any supplier, customer or employee
of
the Company (or such subsidiary) for the purpose of soliciting or diverting
any
supplier, customer or employee from the Company (or such
subsidiary).x
(b) The
provisions of Section 11(a) notwithstanding, Executive may invest his funds
in
securities of an issuer if the securities of such issuer are listed for trading
on a registered securities exchange or actively traded in an over-the-counter
market and Executive’s holdings therein represent less than 5% of the total
number of shares or principal amount of the securities of such issuer
outstanding.
(c) Executive
acknowledges that the provisions of this Section, and the period of time,
geographic area and scope and type of restrictions on his activities set forth
herein, are reasonable and necessary for the protection of the
Company.
(d) “Restricted
Period” shall mean the period commencing on the date hereof and ending September
30, 2010; provided, however, that if Executive has exercised his option to
extend the Term to September 30, 2011 in accordance with Section 2 hereof,
the
Restricted Period shall end September 30, 2012.
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12. Termination
Upon Disability.
In the
event that the Board of Directors determines that the Executive is unable to
perform his duties hereunder by reason of any disability or incapacity (due
to
any physical or mental injury, illness or defect) for an aggregate of 180 days
in any consecutive 12-month period, the Company shall have the right to
terminate Executive’s employment hereunder within 60 days after the 180th day of
his disability or incapacity by giving Executive notice to such effect at least
30 days prior to the date of termination set forth in such notice, and on such
date such employment shall terminate. The Board of Directors’ determination
shall be made after due inquiry, on the basis of convincing evidence presented
in at least two medical opinions rendered by reputable physicians with
experience in diagnosing and treating the condition described in the
opinion.
13. Termination
for Cause.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
the Company may terminate Executive’s employment under this Agreement
if:
(i) Executive
is convicted of, or enters a plea of guilty or nolo
contendere
(which
plea is not withdrawn prior to its approval by the court) to, a felony offense
and either Executive fails to perfect an appeal of such conviction prior to
the
expiration of the maximum period of time within which, under applicable law
or
rules of court, such appeal may be perfected or, if Executive does perfect
such
an appeal, his conviction of a felony offense is sustained on appeal;
or
(ii) the
Company’s Board of Directors determines, after due inquiry, based on convincing
evidence, that Executive has:
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(A)
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committed
fraud against, or embezzled or misappropriated funds or other assets
of,
the Company (or any subsidiary
thereof);
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(B)
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violated,
or caused the Company (or any subsidiary thereof) or any officer,
employee
or other agent thereof, or any other person to violate, any material
law,
regulation or ordinance or any material rule, regulation, policy
or
practice established by the Company’s Board of
Directors;
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(C)
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willfully,
or because of gross or persistent negligence failed properly to perform
his material duties hereunder.
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and
that,
in the case of any violation or failure referred to in clause (B) or (C) of
this
paragraph (ii) of Section 13(a), such violation or failure has caused, or is
reasonably likely to cause, the Company to suffer or incur a substantial
casualty, loss, penalty, expense or other liability or cost.
(b) The
Company may effect such termination for cause by giving Executive notice to
such
effect, setting forth in reasonable detail the factual basis for such
termination, at least ten (10) days prior to the date of termination set forth
therein; provided
however
that
Executive may avoid such termination if Executive, prior to the date of
termination set forth in such notice, explains to the reasonable satisfaction
of
the Company’s Board of Directors why the facts relied upon by the Company in
terminating Executive’s employment do not constitute a For Cause Event (as
defined below).
(c) In
making
any determination pursuant to Section 13(a) as to the occurrence of any act
or
event described in clauses (A) to (C) of paragraph (ii) thereof (each, a “For
Cause Event”), each of the following shall constitute convincing evidence of
such occurrence:
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(i) if
Executive is made a party to, or target of, any Proceeding arising under or
relating to any For Cause Event, Executive’s failure to defend against such
Proceeding or to answer any complaint filed against him therein, or to deny
any
claim, charge, averment, or allegation thereof asserting or based upon the
occurrence of a For Cause Event;
(ii) any
judgment, award, order, decree or other adjudication or ruling in any such
Proceeding finding or based upon the occurrence of a For Cause Event;
or
(iii) any
settlement or compromise of, or consent decree issued in, any such Proceeding
in
which Executive expressly admits the occurrence of a For Cause
Event;
provided
that
none of the foregoing shall be dispositive or create an irrebuttable presumption
of the occurrence of such For Cause Event; and provided
further
that the
Company’s Board of Directors may rely on any other factor or event as convincing
evidence of the occurrence of a For Cause Event.
(d) In
determining and assessing the detrimental effect of any For Cause Event on
the
Company and whether such For Cause Event warrants the termination of Executive’s
employment hereunder, the Company’s Board of Directors shall take the following
factors, to the extent applicable and material, into account:
(i) whether
the Company’s Board of Directors directed or authorized Executive to take, or to
omit to take, any action involved in such For Cause Event, or approved,
consented to or acquiesced in his taking or omitting to take such
action;
(ii) any
award
of damages, penalty or other sanction, remedy or relief granted or imposed
in
any Proceeding based upon or relating to such For Cause Event, and whether
such
sanction, remedy or relief is sufficient to recompense the Company or any other
injured person, or to prevent or to deter the recurrence of such For Cause
Event;
(iii) whether
any lesser sanction would be appropriate and effective; and
(iv) any
adverse effect that the loss of Executive’s services would have, or be
reasonably likely to have, upon the Company.
14. Termination
by Executive for Good Reason.
In
addition to any other rights or remedies provided by law or in this Agreement,
Executive may terminate his employment hereunder:
(i) if
(A)
the Company violates, or fails to perform or satisfy any material covenant,
condition or obligation required to be performed or satisfied by it hereunder
or, (B) as a result of any action or failure to act by the Company, there is
a
material change in the nature or scope of the duties, obligations, rights or
powers of Executive’s employment, by giving the Company notice to such effect,
setting forth in reasonable detail the factual basis for such termination,
at
least ten (10) days prior to the date of termination set forth therein;
provided
however
that the
Company may avoid such termination if it, prior to the date of termination
set
forth in such notice, cures or explains to the reasonable satisfaction of
Executive the factual basis for termination set forth therein; or
(ii) if
a
Change of Control (as hereinafter defined) occurs, by giving the Company notice
to such effect within ninety (90) days after the occurrence of such Change
of
Control, setting forth the event or circumstance constituting such Change of
Control, such termination to be effective upon the date of termination, not
more
than thirty (30) days after the date of such notice, set forth therein or,
if no
such date is set forth therein, immediately upon delivery of such notice to
the
Company.
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15. Voluntary
Termination.
(a) In
addition to any other rights or remedies provided by law or in this Agreement,
from and after the date hereof, Executive may terminate his employment hereunder
by giving the Company written notice to such effect at least one hundred and
eighty (180) days prior to the date of termination set forth
therein.
16. Compensation
and Benefits upon Termination.
(a) Upon
termination of Executive’s employment hereunder, he shall be entitled to
receive, in any case, any Base Salary pursuant to Section 3(a)(i) accrued but
unpaid to the Termination Date. Any amount payable to Executive under this
subparagraph shall be paid promptly, and in any event within thirty (30) days
after the Termination Date.
(b) If
Executive’s employment is terminated as a result of a “For Cause Event” pursuant
to Section 13, except for the payment of any amount required to be made by
Section 16(a), from and after the Termination Date, the Company shall have
no
further obligation to Executive hereunder, including without limitation any
obligation pursuant to Section 18.
(c) If
(i)
this Agreement terminates upon its scheduled expiration date (i.e. September
30,
2010 or, or, if the Executive has exercised his option to extend the Term in
accordance with Section 2 hereof, September 30, 2011); or (ii) the Executive
voluntarily terminates his employment pursuant to Section 15(a), Executive
shall, at the option of either the Company or Executive in the case of clause
(i) or at the Company’s option in the case of clause (ii), for a period of up to
one (1) year thereafter act as a consultant to the Company pursuant to which
he
shall make himself reasonably available to assist the Company for no more than
20 hours per month, including being available via telephone to consult with
respect to the day-to-day operations of the Company, its finances and financial
condition, mergers and acquisitions, short-term and long-range business
strategies, industry trends and other business issues. In consideration for
performing these services, Executive shall be paid at a per annum rate equal
to
fifty percent (50%) of the Base Salary, such per annum amount to be paid in
substantially equal installments no less often than twice monthly.
(d) If
the
Executive’s employment (but not consultancy) is terminated (i) by him pursuant
to Section 14(i); or (ii) by the Company other than as a result of a “For Cause
Event” pursuant to Section 13; or (iii) as a result of the death of the
Executive, he shall be entitled to receive an amount equal to the product of
the
Base Salary multiplied by 3 (or $600,000). Notwithstanding the foregoing, if
the
Executive’s employment (but not consultancy) is terminated by the Company after
a Change of Control has occurred for any reason other than as a result of a
“For
Cause Event” pursuant to Section 13, he shall be entitled to receive, upon the
terms and subject to the conditions set forth in Section 17, the Parachute
Amount (as hereinafter defined in Section 17). Any amount payable to Executive
under this subparagraph shall be paid promptly, and in any event within thirty
(30) days after the Termination Date.
(e) If
the
Executive’s employment (but not consultancy) terminates as a result of a Change
of Control pursuant to Section 14(ii), he shall be entitled to receive, upon
the
terms and subject to the conditions set forth in Section 17, the Parachute
Amount. Any amount payable to Executive under this subparagraph shall be paid
promptly, and in any event within thirty (30) days after the Termination Date.
(f) If
the
Executive’s employment is terminated by him pursuant to Section 14(i) or 14(ii)
of this Agreement, or by the Company other than as a result of a “For Cause
Event” pursuant to Section 13, the Executive shall be entitled for the two (2)
year period following the Termination Date, or if the Executive voluntarily
terminates his employment pursuant to Section 15(a) of this Agreement, the
Executive shall be entitled for the one (1) year period following the
Termination Date, to maintain an office either at the Company’s premises
comparable in size and location to the office maintained by Executive prior
to
the Termination Date and receive secretarial and clerical services, all at
the
Company’s expense, or, at Executive’s option, if the Company is not maintaining
such offices at its place of business at which Executive performed his services
at the Termination Date, then the Company shall reimburse the Executive for
the
cost of his maintaining a comparable office, secretarial and clerical services
at such other location selected by Executive. If the Executive’s employment is
terminated by him pursuant to Section 14(i) or 14(ii) of this Agreement, or
by
the Company other than as a result of a “For Cause Event” pursuant to Section
13, or if the Executive voluntarily terminates his employment pursuant to
Section 15(a) of this Agreement, the Company shall for the two (2) year period
following the Termination Date maintain and pay for Executive and his family,
or
reimburse Executive for the cost of medical, dental, and hospitalization
benefits comparable to such benefits maintained by the Company during the twelve
(12) months prior to the Termination Date.
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(g) Executive
shall have no obligation hereunder to seek or to accept any other employment
after the Termination Date or otherwise to mitigate the payments required to
be
made by this Section. No compensation or other amount received or receivable
by
Executive on account of any employment or engagement after the Termination
Date
shall be offset against or deducted from any payment required to be made by
this
Section 16 or Section 17.
(h) In
the
event the Company terminates the Executive other than as a result of a “For
Cause Event” pursuant to Section 13, or if the Executive’s employment is
terminated by him pursuant to Section 14(i) or 14(ii) of this Agreement,
Executive shall receive as his sole and exclusive remedy and damages the
payments he would otherwise be entitled to receive under the applicable
provisions of this Section 16 (and, if applicable, the other benefits provided
under clause (g) of this Section 16).
(i) In
the
event Executive continues as a consultant to the Company pursuant to
subparagraphs (c), (f)(i) or (f)(ii) of this Section16 and the consulting
relationship is subsequently terminated (i) by the Company for any reason other
than a For Cause Event; or (ii) by the Executive pursuant to Section 14(i);
or
(iii) as a result of the death of the Executive, the Company shall pay Executive
(or his estate) any remaining amounts that would have otherwise been paid to
him
had he remained as a consultant to the end of the applicable consultancy term.
Any amount payable to Executive (or his estate) under this subparagraph shall
be
paid promptly, and in any event within thirty (30) days after the date the
Executive’s position as a consultant is terminated.
17. Change
of Control.
(a) For
the
purposes of this Section 17:
(i) The
“Act”
is the Securities Exchange Act of 1934, as amended.
(ii) A
“person” includes a “group” within the meaning of Section 13(d)(3) of the
Act.
(iii) “Control”
is used herein as defined in Rule 12b-2 under the Act.
(iv) “Beneficially
owns” and “acquisition” are used herein as defined in Rules 13d-3 and 13d-5,
respectively, under the Act.
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(v) “Non-Affiliated
Person” means any person, other than Executive, an employee stock ownership
trust of the Company (or any trustee thereof for the benefit of such trust),
or
any person controlled by Executive, the Company or such a trust.
(vi) “Voting
Securities” includes Common Stock and any other securities of the Company that
ordinarily entitle the holders thereof to vote, together with the holders of
Common Stock or as a separate class, with respect to matters submitted to a
vote
of the holders of Common Stock, but securities of the Company as to which the
consent of the holders thereof is required by applicable law or the terms of
such securities only with respect to certain specified transactions or other
matters, or the holders of which are entitled to vote only upon the occurrence
of certain specified events (such as default in the payment of a mandatory
dividend on preferred stock or a scheduled installment of principal or interest
of any debt security), shall not be Voting Securities.
(vii) “Right”
means any option, warrant or other right to acquire any Voting Security (other
than such a right of conversion or exchange included in a Voting
Security).
(viii) The
“Code” is the Internal Revenue Code of 1986, as amended.
(ix) “Base
amount,” “present value” and “parachute payment” are used herein as defined in
Section 280G of the Code.
(b) A
“Change
of Control” occurs when, without the consent of Executive:
(i) a
Non-Affiliated Person acquires control of the Company;
(ii) upon
an
acquisition of Voting Securities or Rights by a Non-Affiliated Person from
persons other than the Executive (or persons controlled by the Executive) or
any
change in the number or voting power of outstanding Voting Securities, such
Non-Affiliated Person beneficially owns Voting Securities or Rights entitling
such person to cast a number of votes (determined in accordance with Section
16(g)) equal to or greater than 25% of the sum of (A) the number of votes that
may be cast by all other holders of outstanding Voting Securities and (B) the
number of votes that may be cast by such Non-Affiliated Person (determined
in
accordance with Section 16(g)); or
(iii) upon
any
change in the membership of the Company’s Board of Directors, a majority of the
directors are persons who are not nominated or appointed by the Company’s Board
of Directors as constituted prior to such change.
(c) The
“Parachute Amount” to which Executive shall be entitled pursuant to Section
16(d) shall equal 2.99 multiplied by the Executive’s base amount.
(d) It
is
intended that the present value of any payments or benefits to Executive,
whether hereunder or otherwise, that are includible in the computation of the
Parachute Amount shall not exceed 2.99 times the Executive’s base amount.
Accordingly, if Executive receives any payment or benefit from the Company
prior
to payment of the Parachute Amount which, when added to the Parachute Amount,
would subject any of the payments or benefits to Executive to the excise tax
imposed by Section 4999 of the Code, the Parachute Amount shall be reduced
by
the least amount necessary to avoid such tax. The Company shall have no
obligation hereunder to make any payment or provide any benefit to Executive
after the payment of the Parachute Amount which would subject any of such
payments or benefits to the excise tax imposed by Section 4999 of the
Code.
10
(e) Any
other
provision hereof notwithstanding, Executive may (but only to the extent not
prohibited by the United States securities laws, as then amended), prior to
his
receipt of the Parachute Amount pursuant to Section 17(d), waive the payment
thereof, or, after his receipt of the Parachute Amount thereunder, treat some
or
all of such amount as a loan from the Company which Executive shall repay to
the
Company within 180 days after the receipt thereof, together with interest
thereon at the rate provided in Section 7872 of the Code, in either case, by
giving the Company notice to such effect.
(f) Any
determination of the Executive’s base amount, the Parachute Amount, any
liability for excise tax under Section 4999 of the Code or other matter required
to be made pursuant to this Section 17, shall be made by the Company’s
regularly-engaged independent certified public accountants, whose determination
shall be conclusive and binding upon the Company and Executive; provided
that
such accountants shall give to Executive, on or before the date on which payment
of the Parachute Amount or any later payment or benefit would be made, a notice
setting forth in reasonable detail such determination and the basis therefor,
and stating expressly that Executive is entitled to rely thereon.
(g)
The
number of votes that may be cast by holders of Voting Securities or Rights
upon
the issuance or grant thereof shall be deemed to be the largest number of votes
that may be cast by the holders of such securities or the holders of any other
Voting Securities into which such Voting Securities or Rights are convertible
or
for which they are exchangeable or exercisable, determined as though such Voting
Securities or Rights were immediately convertible, exchangeable or exercisable
and without regard to any anti-dilution or other adjustments provided for
therein.
(h) For
purposes of this Agreement, Executive shall be deemed to have consented to
a
Change of Control only if (i) Executive, Xxxxx Xxxxxxxxx and members of their
immediate families in the aggregate beneficially own in excess of 50% of the
Company’s Voting Securities and (ii) Executive votes in favor of the Change in
Control in his capacity as a shareholder of the Company.
18. Other
Termination Provisions.
(a) Throughout
the 10-year period following the Termination Date, the Company shall indemnify
Executive, and hold him harmless from, any loss, damages, liability, obligation
or expense that he may suffer or incur in connection with any claim made or
Proceeding commenced during such period relating to his service as a director,
officer, employee or agent of the Company (or any subsidiary thereof) to the
same extent and in same manner as the Company shall be obligated so to indemnify
Executive immediately prior to the Termination Date; provided
that, if
during such 10-year period the Company adopts or assumes any indemnification
policy or practice with respect to its directors, officers, employees or agents
that is more favorable than that in effect on the Termination Date, Executive
shall be entitled to such more favorable indemnification.
(b) Throughout
the 10-year period following the Termination Date, the Company shall maintain
for the benefit of Executive directors’ and officers’ liability insurance (on a
“claims made” basis) providing coverage at least as favorable to Executive
(including with respect to limits of liability, exclusions, and deductible
and
retention amounts) as that in effect on the Termination Date.
19. Limitation
of Authority.
Except
as expressly provided herein, no provision hereof shall be deemed to authorize
or empower either party hereto to act on behalf of, obligate or bind the other
party hereto.
20. Notices.
Any
notice or demand required or permitted to be given or made hereunder to or
upon
either party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or an overnight courier
service against receipt, or (ii) certified or registered mail, postage paid,
return receipt requested, or (b) sent by telegram, telecopy, telex or similar
electronic means, provided
that a
written copy thereof is sent on the same day by postage-paid first-class mail,
to such party at the following address:
11
| to the Company at: | its principal executive offices | |
| to Executive at: | ||
| with a copy to: | Feder, Kaszovitz, Isaacson, Weber, | |
| Xxxxx, Bass & Rhine LLP | ||
| 23rd Floor | ||
| 000 Xxxxxxxxx Xxxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000-0000 | ||
| Attn: Xxxxxxxx X. Xxxx, Esq. | ||
| Fax: (000) 000-0000 |
or
such
other address as either party hereto may at any time, or from time to time,
direct by notice given to the other party in accordance with this Section.
The
date of giving or making of any such notice or demand shall be, in the case
of
clause (a) (i), the date of the receipt; in the case of clause (a) (ii), five
business days after such notice or demand is sent; and, in the case of clause
(b), the business day next following the date such notice or demand is
sent.
21. Amendment.
Except
as otherwise provided herein, no amendment of this Agreement shall be valid
or
effective, unless in writing and signed by or on behalf of the parties
hereto.
22. Waiver.
No
course of dealing or omission or delay on the part of either party hereto in
asserting or exercising any right hereunder shall constitute or operate as
a
waiver of any such right. No waiver of any provision hereof shall be effective,
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver shall be deemed a continuing waiver or waiver in respect
of
any other or subsequent breach or default, unless expressly so stated in
writing.
23. Governing
Law.
This
Agreement shall be governed by, and interpreted and enforced in accordance
with,
the laws of the State of New Jersey without regard to principles of choice
of
law or conflict of laws.
24. Remedies.
In the
event of any actual or prospective breach or default by either party hereto,
the
other party shall be entitled to equitable relief, including remedies in the
nature of rescission, injunction and specific performance. All remedies
hereunder are cumulative and not exclusive, and nothing herein shall be deemed
to prohibit or limit either party from pursuing any other remedy or relief
available at law or in equity for such actual or prospective breach or default,
including the recovery of damages.
25. Severability.
The
provisions hereof are severable and in the event that any provision of this
Agreement shall be determined to be invalid or unenforceable in any respect
by a
court of competent jurisdiction, the remaining provisions hereof shall not
be
affected, but shall, subject to the discretion of such court, remain in full
force and effect, and any invalid or unenforceable provision shall be deemed,
without further action on the part of the parties hereto, amended and limited
to
the extent necessary to render the same valid and enforceable.
12
26. Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original and which together shall constitute one and the same
agreement.
27. Assignment.
This
Agreement, and each right, interest and obligation hereunder, may not be
assigned by either party hereto without the prior written consent of the other
party hereto, and any purported assignment without such consent shall be void
and without effect, except that this Agreement shall be assigned to, and assumed
by, any person with or into which the Company merges or consolidates, or which
acquires all or substantially all of its assets, or which otherwise succeeds
to
and continues the Company’s business substantially as an entirety. Except as
otherwise expressly provided herein or required by law, Executive shall not
have
any power of anticipation, assignment or alienation of any payments required
to
be made to him hereunder, and no other person may acquire any right or interest
in any thereof by reason of any purported sale, assignment or other disposition
thereof, whether voluntary or involuntary, any claim in a bankruptcy or other
insolvency proceeding against Executive, or any other ruling, judgment, order,
writ or decree.
28. Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement is not
intended, and shall not be deemed, to create or confer any right or interest
for
the benefit of any person not a party hereto.
29. Titles
and Captions.
The
titles and captions of the Articles and Sections of this Agreement are for
convenience of reference only and do not in any way define or interpret the
intent of the parties or modify or otherwise affect any of the provisions
hereof.
30. Grammatical
Conventions.
Whenever the context so requires, each pronoun or verb used herein shall be
construed in the singular or the plural sense and each capitalized term defined
herein and each pronoun used herein shall be construed in the masculine,
feminine or neuter sense.
31. References.
The
terms "herein," "hereto," "hereof," "hereby," and "hereunder," and other terms
of similar import, refer to this Agreement as a whole, and not to any Article,
Section or other part hereof.
32. No
Presumptions.
Each
party hereto acknowledges that it has had an opportunity to consult with counsel
and has participated in the preparation of this Agreement. No party hereto
is
entitled to any presumption with respect to the interpretation of any provision
hereof or the resolution of any alleged ambiguity herein based on any claim
that
the other party hereto drafted or controlled the drafting of this
Agreement.
33. Certain
Definitions.
As used
herein:
(a) “Person”
includes without limitation a natural person, corporation, joint stock company,
limited liability company, partnership, joint venture, association, trust,
government or governmental authority, agency or instrumentality, or any group
of
the foregoing acting in concert.
(b) A
“Proceeding” is any suit, action, arbitration, audit, investigation or other
proceeding before or by any court, magistrate, arbitration panel or other
tribunal, or any governmental agency, authority or instrumentality of competent
jurisdiction.
34. Entire
Agreement.
This
Agreement embodies the entire agreement of the parties hereto with respect
to
the subject matter hereof and supersedes any prior agreement, commitment or
arrangement relating thereto, written or oral, if any, which shall terminate
immediately upon the commencement of the Term, except that each party thereto
shall (a) remain required to perform any act and to satisfy any obligation
or
condition that such party is required to perform or satisfy thereunder with
respect to any event occurring or circumstance existing prior to the
commencement of the Term hereof (including without limitation the payment or
delivery to Executive of any compensation, reimbursable expense or employee
benefit or perquisite to which he may be entitled, but which has not yet been
paid to him, on account of his employment under any such prior arrangement)
that
has not been so performed or satisfied, and (b) retain his or its right under
any such prior assignment to assert or to allege any claim or cause of action
relating to or based upon, or otherwise to enforce, any provision thereof with
respect to any event occurring or circumstance existing during the term
thereof.
13
IN
WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
day
and year first above written.
|
THE
COMPANY:
PACIFIC MAGTRON INTERNATIONAL CORPORATION,
INC.
|
||
| |
|
|
|
By:
Name:
|
/s/ Xxxxxxx
X. Xxx
|
|
| Title: | Chief Financial Officer | |
| EXECUTIVE: | ||
|
/s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx,
Ph.D. |
||
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