EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement ("Agreement") is made effective as of January 1, 2000
between OnLine Power Supply, Inc. (the "Company"), and Xxxxxxx Xxx Xxxxxxxxxx
(the "Execu-tive"), presently residing at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000. The Executive has been employed and is continuing to
serve the Company as Chief Financial Officer.
In consideration of the mutual benefits and obligations in this
Agreement, and intending to be legally bound hereby, the Company and the
Executive agree as follows:
1. OFFICE AND DUTIES
The Executive shall be employed as the Chief Financial Officer of the
Company and shall be responsible for performing and/or supervising others in the
Company to perform those tasks attendant to such position. The Board of
Directors may assign other duties to the Executive, if the other duties do not
materially impact his ability to serve as the Chief Xxxxx-cial Officer. The
Company reserves the right to designate his place of work.
The Executive agrees to devote substantially all of his normal workday
time and energy to the performance of the duties of his position.
Notwithstanding the above, the Executive shall be permitted to have interests in
other businesses that do not compete with the Company or its subsidiaries, or
otherwise are not in violation of this Agreement, and he may render services for
such other business interests, provided such service does not prevent Executive
from performing his duties under this Agreement. The Executive agrees with the
Company that any and all inventions or designs or improvements to electronic or
electrical devices or systems which he creates alone or with others, during the
term of this Agreement (hereafter, the "OTHER INVENTIONS"), shall be presented
and disclosed first to the Company, for its decision to take up and exploit the
Other Inventions even if it is or they are outside of the line of products then
being worked on by any employees or consultants to the Company. The Executive
agrees with the Company that any and all intellectual rights to such Other
Inventions shall belong exclusively to the Company, until it is or they are
presented and disclosed to the Company by the Executive. If the Company decides
to take up and exploit such Other Inventions, the Company shall thereafter own
any and all intellectual rights to it or them forever, provided that the Company
proceeds in good faith and uses its best efforts to exploit it or them. The
Company shall make its decision in a commercially reasonable period of time, not
to exceed six months after full presentation and disclosure to the Company by
the Executive. If after a reasonable period of time, the Company and the
Executive agree that the Company cannot proceed further with such exploitation,
then the Company shall assign the rights to the Other Inventions back to the
Executive.
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2. TERM OF EMPLOYMENT
The Company shall employ the Executive and he accepts such employment
for a term beginning as of January 1, 2000 and ending December 31, 2004, upon
the terms and conditions set forth in this Agreement. Notwithstanding the
foregoing, if this Agreement has not been terminated in accordance with the
provisions herein on or before December 31, 2004, then this Agreement shall be
renewed one time only for an additional term of five years, unless between the
dates of January 31, 2004 and June 30, 2004, the Board of Directors has notified
the Executive in writing of its decision to have this Agreement expire when the
original term expires (i.e., a "notice of no renewal"). If that notice is given,
and if this Agreement has not been terminated for other reasons, then this
Agreement shall expire on the expiration of its original term, and shall not be
renewed
3. DEFINITIONS.
For the purposes of this Agreement, these terms shall have the
meaning set forth in this paragraph:
"BASE COMPENSATION" shall mean an amount per annum equal to the
sum of:
(a) The annual Base Salary in effect for Executive immediately
preceding the termination of employment. The Base Salary for the
Executive as of the date of this Agreement is stated in Section 4
below.
(b) Continued participation in all basic and supplemental life,
accident, disability, and other Company-sponsored insurance
benefits provided to the Executive immediately preceding the date
of this Agreement (assuming the Executive is insurable). Life
insurance, if available for the Executive, will provide for a
split of benefits in the event of death equally between his estate
and the Company. If this Agreement is terminated other than for
cause, then the Company will continue to provide the same
insurance benefits for so long as Base Salary is paid to him or
his estate; if continued participation in one or more of these
benefits is not possible, the Company will continue him in
benefits which are substantially similar to those which Executive
would have been entitled to if he had continued as an employee of
the Company at the same compensation level which was in effect
immediately prior to his termination.
(c) Continuance of vesting and benefit accrual under any
Company-sponsored retirement programs in effect for Executive
immediately prior to termination (or, if continued participation
in such programs is not possible, benefits substantially similar
to those which Executive would have been entitled to if he had
continued as an employee of the Company at the same compensation
level immediately prior to termination). However, the terms of any
stock options granted to the Executive pursuant to this Agreement
or otherwise shall be controlling with respect to the vesting and
benefit accrual provisions of such options.
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"BOARD " means the Board of Directors of the Company.
"CAUSE " shall mean (i) willful refusal by the Executive to follow
a lawful written demand signed by the Board; (ii) the Executive's
willful and continued failure to perform his duties under this
Agreement (but not his failure to perform due to physical or
mental illness) after a written demand is delivered to the
Executive by the Board specifically identifying the manner in
which the Board believes the Executive has failed to perform his
duties; (iii) the Executive's willful engagement in conduct
materially injurious to the Company; (iv) the Executive's
conviction of any felony; or (v) the Executive's breach of any
provisions of this Agreement. For purposes of clauses (i), (ii) or
(iii) of this definition, no act, or failure to act on the
Executive's part shall be deemed 'willful' unless done, or omitted
to be done, by Executive not in good faith and without reasonable
belief that Executive's act or failure to act was in the best
interests of the Company.
"CONSTRUCTIVE TERMINATION " shall mean the Executive's voluntary
termination of employment within ninety (90) days following the
occurrence of one or more of the following events, unless such
event is approved by the Executive in advance of such event.
A failure by the Company to perform any part of this Agreement
that is not reme-died within ten (10) business days of
notification by Executive of such failure, including any violation
of Executive's rights as described in this Agreement unless such
rights are replaced by alternative rights of approximately equal
value;
A reduction of Executive's title or responsibilities below
positions specified in or pursuant to this Agreement; or
A relocation of Executive's primary place of business more than
fifty (50) miles from its location as of the date of this
Agreement.
"DISABILITY" shall be deemed to have occurred if the Executive is
unable to substantially perform the normal duties of his position
with the Company, or if the Executive makes application for
disability benefits under any Company-sponsored long-term
disability program covering the Executive and he qualifies for
such benefits.
"RETIREMENT " shall mean the Executive's voluntary termination of
service with the Company at any time after he reaches age 60,
where the Executive retires from substantially full time
employment generally.
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4. COMPENSATION
For all services rendered by the Executive during the term of this
Agreement, the Executive shall be compensated with the Base Compensation as
defined in this Agreement (including the Base Salary, options, performance cash
compensation bonus, and automobile allowance as they are specified below):
BASE SALARY. The minimum Base Salary payable to the Executive starting
with the date of this Agreement shall be $84,000. The Board or its Compensation
Committee (if one is designated) will review the Executive's Base Salary at
least annually to determine the amount of any increase. Upon any increase in the
Executive's Base Salary, such increased rate shall thereafter constitute the
Executive's annual Base Salary for all purposes of this Agreement, except that
the Company may reduce the Executive's Base Salary during any year by not more
than 10% below the Base Salary in effect at the beginning of the year as part of
any general salary reduction which applies to all officers of the Company and
its subsidiaries. Such a reduction shall not constitute a termination of this
Agreement.
INCENTIVE STOCK OPTIONS. As an incentive for continued contributions to
the Company, the Company shall issue to the Executive options to purchase
100,000 shares of the Company's common stock (the "PERFORMANCE OPTIONS"). The
exercise price per share shall be $5.625, which is the fair value of the shares
taking into account the Company's sales of restricted shares of common stock to
investors in December 1999, the average of the OTCBB bid and ask prices of the
common stock in December 1999, and the low trading volume (as a percentage of
outstanding shares and of "free trading float shares"). The Performance Options
shall not be issued as "qualified incentive stock options" under the 1999
Incentive Stock Option Plan, but the Performance Options otherwise shall be
subject to all of the terms of the 1999 Incentive Stock Option Plan. All of
these options shall expire on January 1, 2005. The vesting of these options
shall be 20% (20,000 shares) on each anni-versary of this Agreement. Each vested
portion of the options shall have a term of five (5) years, but such term shall
be shortened in the event of termination of employment, for any reason, and in
that event the Performance Options all shall expire when the covenant not to
compete (elsewhere stated in this Agreement) expires. The Performance Options
are in addition to other options issued to the Executive in September and
December 1999 to purchase 25,000 shares and 3,203 shares, respectively, and such
other options shall not be affected by the issuance of the Performance Options.
Provided that the Company's common stock is registered with the
Securities and Exchange Commission under section 12(g) of the Securities Act of
1934, then, as soon as practicable after such registration is effective, the
Company will use its best efforts to file with and have declared effective by
the Securities and Exchange Commission a registration statement on Form S-8 (or
comparable form for the registration of employee compensation plans), under
section 5 of the Securities Act of 1933, so as to allow the resale into the
public markets by the Executive of the shares of common stock acquired on
exercise of the Perfor-xxxxx Options.
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If there shall be a combination of the Company with another company
where the Company is not the surviving entity, and as a result thereof the
Executive does not continue his employment under this Agreement, or this
Agreement is not accepted and continued by the surviving entity, then the
Executive shall be immediately fully vested in all Performance Options.
VACATION. Executive shall receive paid vacation per year in accordance
with the regular policies of the Company in effect for all employees, or classes
of employees, as established from time to time.
VEHICLE ALLOWANCE. The Executive shall be paid a nonaccountable vehicle
expense allowance of $500.00 per month, to be used at his discretion for
operating expenses, vehicle purchase or lease, or insurance, or any combination
thereof.
EXPENSE REIMBURSEMENT. The Company shall reimburse the Executive for
all reasonable expenses incurred by Executive in connection with performance of
his duties upon submission of itemized expense vouchers, subject to such
guidelines and policies as may be promulgated by the Company for senior
executives or employees from time to time.
LIFE INSURANCE. In addition to any coverage required by the Company,
the Executive shall be provided with a life insurance policy in the amount of
$250,000 (provided he is insurable and can meet the medical conditions for such
coverage), with the policy proceeds payable one-half to the Company and one-half
to such beneficiaries as he shall designate.
TAX MATTERS. If any payments due to the Executive under this Agreement
result in the Executive's liability for an excise tax ("parachute tax") under
the Internal Revenue Code, the Company will pay to Executive, after deducting
any Federal, state, or local income tax imposed on the payment, an amount
sufficient to fully satisfy the "parachute tax" liability. Such payment shall be
made to the Executive not later than 30 days prior to the due date of that tax.
To the extent required by law, the Company shall withhold from any pay-ments
under this Agreement any applicable federal, state, or local income withholding,
FICA or unemployment taxes payable by the Executive.
5. TERMINATION. If this Agreement is terminated:
(a) By the Company without cause, or if the Executive is terminated
through Constructive Termination (provided in any event that the Executive does
not breach the other provisions of this Agreement concerning covenants not to
compete and observing the Trade Secrets of the Company), or if the Executive
dies or becomes disabled, then the Company will continue to pay the Executive
(or his estate) his Base Salary under this Agreement until the expiration of the
term of this Agreement. Except as provided in the next sentence, termination
without cause under this Section 5(a) shall not affect the vested Performance
Options, and the remaining unvested Performance Options shall continue to vest
as provided in this Agreement. However, all of the Performance Options which are
vested on the third anniversary of the termination of this Agreement then shall
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expire and thereafter be unexer-cisable. Upon termination under this Section
5(a), all payments of the other compensation and benefits shall terminate unless
otherwise provided by law with respect to health insurance coverage.
(b) By the Company for cause, all payments of all Base Compensation and
all of the other compensation and benefits shall cease (except for those health
insurance benefits which the Company is required to pay by law). There shall be
no further vesting of Perfor-xxxxx Options, and all of the vested unexercised
Performance Options shall expire on the third anniversary of termination of this
Agreement and thereafter be unexercisable.
(c) In the event of termination of employment of the Executive for any
reason, the Company shall immediately release the Executive, and obtain the
release of Executive by third parties, from any and all personal guarantees and
other credit obligations the Executive has incurred or undertaken on behalf of
the Company, and shall cause the immediate repayment of indebtedness owed to the
Executive or members of his family or trusts set up by him or by members of his
family.
6. COVENANT NOT TO DISCLOSE TRADE SECRETS; COVENANT NOT TO COMPETE, OR
INTERFERE.
The parties recognize that the Company must preserve its specialized
knowledge, Trade Secrets, and other confidential information concerning its
business. The disclosure of this information to any competitors would be cause
the Company irreparable harm. By reason of his position with the Company, the
Executive has or will have access to, and has obtained or will obtain,
specialized knowledge, Trade Secrets and confidential information about the
Company's operations. Therefore, the Executive hereby agrees as follows,
recog-nizing that the Company is relying on these agreements in entering into
this Agreement with him:
(a) DEFINITIONS. As of the date of this Agreement, the COMPANY'S
BUSINESS is the following: The design and marketing of power supply systems and
devices, and the de-sign and marketing of products related to improved power
supply performance and continuity through power surges and interruptions
(hereafter, the "GOODS"). As of the date of this Agreement, the Company's
Business is being conducted predominantly in the United States, and may also be
conducted in Europe and Asia. Therefore, for purposes of this Agreement, AREAS
shall be defined to be the United States (and its Territories), the European
Union, and Taiwan and Thailand.
The TRADE SECRETS of the Company include: Recipes and techniques for
power supply systems and devices and power supply performance and supply
protection devices, and all of the data, know-how, formulae, compositions,
processes, samples, inventions and ideas; the data and results of all past,
current and planned (as well as unplanned as of the date of this Agreement)
research and development work; all current and planned marketing and
distribution strategies; all past, current and future customer lists; all
write-ups of current and anticipated customer (and prospective customer)
requirements; all price lists, market studies, and business plans of the
Company; and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole or in
part, on any information included in the
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foregoing. Trade Secrets shall further include any and all intellectual property
associated with the preceding, including without limitation state and federal
and common law copy rights, and all patent rights. In addition, Trade Secrets
shall include any Trade Secrets which are developed after the date of this
Agreement and during its term.
(b) COVENANT NOT TO DISCLOSE TRADE SECRETS. The Executive acknowledges
and agrees that all Trade Secrets known or obtained by the Executive, whether
before or after the date hereof, are the property of the Company. Therefore, in
consideration of entering into this Agreement, the Executive agrees that he will
not, at any time, disclose to any unauthorized persons or use for his own
account or for the benefit of any third party any Trade Secret, whether the
Executive has such information in his memory or embodied in writing or other
physical form, without the Company's written consent, unless and to the extent
that the information which constitutes the Trade Secret becomes generally known
and available for use by the public other than as a result of Executive's breach
of this Agreement. The Ex- ecutive agrees to deliver to the Company at any time
the Company may request while this Agreement is in effect, all of the documents,
memoranda, notes, plans, records, reports, and other documentation relating to
the Trade Secrets that the Executive may then possess or have under his control.
In the event of termination of this Agreement, the Executive agrees to deliver
immediately to the Company all of the documents, memoranda, notes, plans,
records, reports, and other documentation relating to the Trade Secrets that he
may then possess or have under his control.
(c) COVENANT NOT TO COMPETE, OR INTERFERE.
(i) In further consideration of entering into this Agreement with the
Company, the Executive agrees that if this Agreement is terminated either by the
Executive or by the Company, then, for a period of three years after such
termination, the Executive will not, ei- ther directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or par-ticipate in the
ownership, management, operation, or control of, or be employed by, associated
with, or consult with, any business whose products or activities compete in
whole or in part with the Company's Business, anywhere in the Areas. The
Executive agrees that this covenant is reasonable with respect to its duration,
geographical area, and scope. Further, the Executive agrees not to (i) induce or
attempt to induce, directly or indirectly, either for himself or any other
person, any employee of the Company to leave the employ of the Company; (ii) in
any way interfere with the relationship between the Company and any employee of
or consultant to or independent contractor of the Company; (iii) employ, or
otherwise engage as an employee, independent contractor, consultant or
otherwise, any employee, consultant or independent contractor of the Company; or
(iv) induce or attempt to induce any customer, supplier, or business relation of
the Company to cease doing any business with the Company, or expand its business
in the Goods to include any similar goods dealt in or handled by another
company.
(ii) If this Agreement is terminated without cause under Section 5(a),
then the foregoing covenant not to compete, or interfere, shall continue to be
applied to the Executive, and the Executive shall be free to provide consulting
services to the Company, or to any other person or
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organization, but the Executive shall not be free to compete with the Company,
and he shall continue to observe the Trade Secrets of the Company and not use
the Company's Trade Secrets without its prior written consent.
The covenant under subsection (i) not to compete, or interfere, shall
not be construed to prevent the Executive from owning not more than 5% of any
entity which files reports with the Securities and Exchange Commission as a
"public company." Notwithstanding the provisions of this paragraph, the
Executive shall continue to be subject to, and agrees to comply with, the
provisions with respect to Trade Secrets of the Company.
In the event that a court finds any clause of this subsection (c) to be
overly broad, and therefore not enforceable, the court shall modify this
subsection (c) in order to reflect the maximum restraint allowable, and shall
then enforce such subsection as modified.
The Company and the Executive agree that except as otherwise expressly
provided therein, all provisions of Section 6 (and of Section 7 below) of this
Agreement shall survive termination of this Agreement, and such provisions shall
remain in effect until three years after termination of this Agreement.
7. INJUNCTIVE RELIEF. In the event of any violation of Section 6 (which
shall constitute a breach of this Agreement), the Company shall be entitled to
injunctive relief to the extent allowable, and shall then be entitled to
continue to enforce such relief ordered. The Company shall not be required to
post any bond in such injunctive proceedings.
In the event of any arbitration, litigation or other proceeding arising
as a result of the breach of this Agreement, including without limitation any
injunctive or other proceeding with respect to the rights of the Company under
Sections 6 or 7, the party or parties prevailing in such arbitration, litigation
or proceeding shall be entitled to collect the costs and expenses of bringing or
defending such arbitration, litigation or proceeding, including reasonable
attorney's fees, from the party or parties not prevailing. The preceding shall
be interpreted so as to entitle the party prevailing in any arbitration to
collect the costs and expenses of litigation or other proceeding incurred by
such party, which litigation or other proceeding occurred prior to the dispute
being heard in arbitration.
8. OTHER PROVISIONS. With respect to the matters specified herein, this
Agreement contains the entire agreement between the parties and supersedes all
prior oral of written agreements, understandings and commitments between the
parties. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Agreement. Any notice or
demand required or permitted to be given under this Agreement shall be made in
writing and shall be deemed effective upon the personal delivery thereof if
delivered or, if by express delivery service, 24 hours after placing in the
control of an express delivery service; or if mailed, 72 hours after having been
deposited in the United States mail, postage prepaid, and addressed in the case
of the Company to its, and in the case of the Executive to his address stated at
the beginning of this agreement. Either
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party may change the address to which such notices are to be addressed by giving
the other party notice in the manner herein set forth.
This Executive Employment Agreement has been signed by the parties
effective as of the date first stated above.
ONLINE POWER SUPPLY, INC.
/s/ Xxxxx X. Xxxxxx
-----------------------------
/s/ Xxxx X. Xxxxxxxx
-----------------------------
EXECUTIVE
/s/ Xxxxxxx Xxx Xxxxxxxxxx
-----------------------------
XXXXXXX XXX XXXXXXXXXX
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