EXHIBIT 10.1
------------
PalWeb Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxx, Xxxxxxxx 00000
August 1, 0000
Xxxxxxxx X. Xxxxx
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Xx. Xxxxx:
This letter of agreement (this "Letter of Agreement") sets forth the
agreement of Xxxxxxxx X. Xxxxx ("Xxxxx") and PalWeb Corporation (the "Company"),
a corporation organized under the laws of the State of Oklahoma, with respect to
the contemplated business relationship between the Company and Xxxxx.
The Company and Xxxxx hereby agree as follows:
1. Xxxxx shall serve as the Non-Executive Chairman of the Company's
board of directors (the "Board") and shall perform such other services as the
Company may from time to time request which Xxxxx agrees to undertake. It is
contemplated that such services include but are not limited to assisting the
Company in seeking financing opportunities, developing relationships with
banking and other commercial/financial institutions developing marketing
opportunities for the Company's product and the development of potential
acquisition candidates for the Company. Xxxxx shall perform these services on
behalf of the company and shall coordinate his efforts with those of Xx. Xxxxxx
("Xxxxxx"), President and CEO of the Company. The Company has provided an office
for Xxxxx at its headquarters in Tulsa, Oklahoma; however, Xxxxx shall at his
option and expense office primarily in the New York metropolitan area, but will
travel as required in connection with the services to be provided by him
hereunder.
2. The term of the this Letter of Agreement (the "Term") shall begin on
the date hereof (the "Effective Date") and end on July 13, 2007 (the "Expiration
Date"), unless sooner terminated as provided herein; provided, however, that
this Letter of Agreement shall continue for a minimum of three (3) years and
thereafter from year to year following the Expiration Date unless the Board or
Xxxxx elects otherwise, by giving notice of termination of this Letter of
Agreement at least six months prior to the Expiration Date (as such date may be
extended from time to time). Notwithstanding anything in this Letter of
Agreement to the contrary, the term of this Letter of Agreement shall expire
immediately and the Letter of Agreement and Warrant Agreement ("Annex B") shall
become null and void in the event that either the Private Placement investments
by Xxxxx totaling $500,000 as set forth in paragraph 8 fails to occur regardless
of reason or if Xxxxx is terminated for any of the following reasons:
(i) A refusal or material failure (as determined by the
Company) of Xxxxx to perform the duties required of him
in his position or gross negligence in the performance
of those duties;
(ii) Theft, embezzlement, willful misconduct on the part of
Xxxxx or any act by Xxxxx which could materially injure
the reputation or business of the Company (as determined
by the Company) or of another employee of the Company;
or
(iii) Material violation of the provisions of this Agreement.
The termination of the Warrant Agreement and the Letter of Agreement
shall be the only consequence of Xxxxx not investing his $500,000 in the Private
Placement.
3. The Company shall pay to Xxxxx a base salary of $10,000 per month
through September 2004 and beginning October 1, 2004 such base salary shall be
$15,000 per month.
4. Xxxxx shall be eligible to receive an annual bonus payment to be
determined by the Board (excluding Xxxxx) with respect to any fiscal year
completed during the Term, based on an evaluation by the Board of Xxxxx'x
performance of his duties hereunder; provided, however, that in no event shall
such bonus payment be less than fifty percent (50%) of the bonus paid to Kruger
for the relevant year.
5. The Company shall allow Xxxxx and his spouse to participate in an
employee health and insurance benefit plan on the same terms and conditions as
Kruger.
6. The Company shall provide Xxxxx with (a) a PalWeb American Express
or Visa credit card and (b) an allowance thereunder of $3000 per month to cover
all entertainment expenses incurred by him on behalf of the Company Travel,
hotel and logistics expenses are separate from the entertainment allowance and
shall be reimbursed by the Company upon receipt of documentation for all such
reasonable expenses.
7. Xxxxx covenants and agrees that he does not and will not seek
control of the Company, whether directly or indirectly, for a period of ten (10)
years from the date hereof and acknowledges and agrees that the President and
CEO shall manage the Company and nominate members to the Company's Board of
Directors. As further consideration for Xxxxx'x covenant and agreement "not to
seek control of the Company" the Company shall take all actions necessary to (a)
cause the election of Xxxxx as of the date hereof to the position of
Non-Executive Chairman of the Board, (b) cause Xxxxx'x re-election as
Non-Executive Chairman of the Board at each subsequent annual meeting of the
Company's shareholders (including, without limitation, obtaining any requisite
shareholder approvals) and (c) obtain any requisite consents of the Board and
the holders of any of the Company's debt or equity securities to the
transactions contemplated by this Letter of Agreement. The Company represents
that as of the date hereof it has procured such consents verbally from Xx. Xxxx
X. Xxxxxx and that this Letter of Agreement will not (x) violate the Company's
Certificate of Incorporation, Certificate of the Designation, Preferences,
Rights and Limitations of the Company's Series 2003 Cumulative Convertible
Senior Preferred Stock or bylaws or (y) cause a breach or default under (with or
without the giving of notice, the lapse of time, or both) any agreement or
instrument to which the Company is a party or by which it or any of its assets
is bound.
8. Xxxxx shall invest in the Company's contemplated private placement
transaction (the "Private Placement") on the same terms and conditions as the
other investors in the Private Placement pursuant to a Subscription Agreement in
the form attached hereto as Annex A. Such investment shall be made as follows: a
total of $500,000 by October 2004. It is further agreed that Xxxxx will purchase
shares in the private placement at the same price terms and conditions as the
other investors.
9. The Company shall grant to Xxxxx warrants to acquire 5% of the
issued and outstanding shares of the Company's common stock (the "Common
Stock"), calculated on a fully-diluted basis after giving effect to (a) the
exercise, conversion and exchange into Common Stock of all exercisable,
-2-
convertible and exchangeable securities and (b) the Private Placement, the
principal terms and conditions of which shall be as follows:
(i) the Warrants for 1,250,000 PalWeb Shares shall vest
twenty-five percent (25%) on the date hereof,
twenty-five percent (25%) on September 30, 2005,
twenty-five percent (25%) on September 30, 2006 and
twenty-five percent (25%) on September 30, 2007 and upon
vesting shall be immediately exercisable and shall have
a term which expires on September 30, 2013;
(ii) the exercise price of the Warrants (which may be paid in
the form of cash or pursuant to a "cashless" exercise)
shall be as follows: $0.50 per Share until expiration on
September 30, 2013.
(iii) the shares of Common Stock underlying the Warrants shall
be entitled to the benefit of customary registration
rights and indemnification and contribution in
connection therewith.
The Company shall execute the Form of Warrant to be
attached hereto as Annex B.
10. This Letter of Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, written or oral, with respect thereto. Any term
of this Letter of Agreement may be amended and the observance of any term of
this Agreement may be waived, only by an instrument in writing and signed by the
party against whom such amendment or waiver is sought to be enforced. This
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, heirs, legal representatives and
permitted assigns. If an ambiguity or question of intent or interpretation
arises with respect to the terms hereof, this Agreement will be construed as if
drafted jointly by the parties and no presumption or burden of proof will arise
favoring or disfavoring any party because of the authorship of any provision of
this Agreement.
11. This Letter of Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Oklahoma, without regard
to the conflicts of laws principles thereof. Any action to enforce the terms of
this Letter of Agreement may be brought in Oklahoma or United States Federal
District Court of the Northern District of Oklahoma located in the County of
Tulsa, and each of the parties to this Letter of Agreement hereby irrevocably
consents to the jurisdiction of any such court over its person, and waives any
defenses based upon improper venue, inconvenient forum or lack of personal
jurisdiction. Each of the parties to this Letter of Agreement hereby irrevocably
consents to service of process in any such action by delivery to such party by
any of the methods set forth in paragraph 13 hereof.
12. All notices, requests and other communications provided for or
permitted to be given under this agreement must be in writing and shall be given
by personal delivery, by certified or registered U.S. mail (postage prepaid,
return receipt requested), by a nationally recognized overnight delivery service
for next day delivery, or by facsimile transmission, as follows (or to such
other address as any party may give in a notice given in accordance with the
provisions hereof): if to the Company, to PalWeb Corporation, 0000 Xxxx 00xx
Xxxxxx, Xxxxx, Xxxxxxxx 00000, Fax: 000-000-0000, Attn: Xxxxxx Xxxxxx; with a
copy to Xxxxxxx X. Xxxxxxxxx, 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxx 00000 (when copy does not constitute notice)
-3-
if to Xxxxx, to Xxxxxxxx X. Xxxxx, 000 Xxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Fax: (000) 000-0000 (with a copy (which copy does not constitute
notice) to Xxxxxx X. Xxxxxxxxx, Esq., Akin Gump Xxxxxxx Xxxxx & Xxxx LLP, 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Fax: (000) 000-0000.
13. The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof; provided that if any provision of
this Agreement, as applied to any party or to any circumstance, is judicially
determined not to be enforceable in accordance with its terms, the parties agree
that the court judicially making such determination may modify the provision in
a manner consistent with its objectives such that it is enforceable, and/or to
delete specific words or phrases, and in its modified form, such provision will
then be enforceable and will be enforced.
14. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you are in agreement with the foregoing, please so indicate by
signing a copy of this Letter of Agreement in the space set forth below and
returning such signed copy to the Company, whereupon this Letter of Agreement
shall constitute a binding agreement as of the date hereof.
Very truly yours,
PALWEB CORPORATION
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ Xxxxxxxx X. Xxxxx
---------------------------------
Xxxxxxxx X. Xxxxx
-4-
