EXHIBIT 10.27
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 21st day of May, 1997, by and
between Top Source Technologies, Inc., a Delaware corporation (the "Company"),
and Xxxxxxx Xxxxxx, Jr. (the "Executive").
W I T N E S S E T H T H A T
WHEREAS, the Company wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the Company, in
the capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive,
and the Executive shall serve the Company, on the terms and conditions set forth
in this Agreement. The term of this Agreement shall commence on the date of this
Agreement and, unless earlier terminated in accordance with Section 5 hereof,
shall continue through the third anniversary of such date (such three-year term
shall be referred to herein as the "Employment Period").
2. POSITION AND DUTIES. (a) During the Employment Period, the
Executive shall serve as President and Chief Executive Officer of the Company
with such duties and responsibilities as are customarily assigned to such
positions, and such other duties and responsibilities not inconsistent therewith
as may from time to time be assigned to him by the Board of Directors of the
Company (the "Board"). The Executive shall be a member of the Board on the first
day of the Employment Period, and the Board shall propose the Executive for
re-election and shall use all reasonable efforts to have the Executive
re-elected to the Board and for positions specified above throughout the
Employment Period.
(b) During the Employment Period, the Executive shall report
directly to the Board. All other executive officers of the Company shall report
to the Executive.
(c) During the Employment Period, the Executive shall devote
substantially all of his time and attention to the business and affairs of the
Company and shall perform, faithfully and diligently his duties and
responsibilities hereunder. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic, social or
charitable boards or committees, so long as such activities do not interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. COMPENSATION. (a) BASE SALARY. The Executive's compensation
during the Employment Period shall be determined by the Board upon the
recommendation of the committee of the Board having responsibility for approving
the compensation of senior executives (the "Compensation Committee"), subject to
the next sentence and the other provisions of this Section 3. During the
Employment Period, the Executive shall receive an annual base salary ("Annual
Base Salary") of $300,000. The Annual Base Salary shall be payable on the first
and fifteenth day of each calendar month (or, if any such date is not a business
day, on the next business day following such date) during the Employment Period.
(b) PERFORMANCE BONUS. Executive also shall be eligible to
receive a cash bonus ("Performance Bonus") for each successive period of four
fiscal quarters (prorated for any partial period) during the Employment Period
in an amount of between zero and 100% of the Annual Base Salary, to be
determined on an annual basis in accordance with the provisions of this Section
3(b). The Performance Bonus, if any, for each successive four-quarter period
shall be paid within 60 days after the end of such period.
The Performance Bonus shall consist of the following two
components:
(A) The first component of the Performance Bonus shall be an
amount of between zero and 50% of the Annual Base Salary based on the Company
achieving certain earnings per share targets. For the first four fiscal quarters
immediately following the date of this Agreement (i.e., the four fiscal quarters
commencing on July 1, 1997), Executive shall receive an amount equal to 5% of
Annual Base Salary if the Company achieves $.01 Earnings Per Share (as defined
below) for such four quarters, 10% of Annual Base Salary if the Company achieves
$.02 Earnings Per Share, 15% of Annual Base Salary if the Company achieves $.03
Earnings Per Share, 20% of Annual Base Salary if the Company achieves $.04
Earnings Per Share and 25% of Annual Base Salary if the Company achieves $.05
Earnings Per Share; for each additional full $.01 of Earnings Per Share above
$.05, the Executive shall receive an additional 1% of the Annual Base Salary;
provided, however, that in no event shall this component of the Performance
Bonus for any year exceed 50% of the Annual Base Salary for such year.
The Earning Per Share targets for each succeeding four quarter
period during the Employment Period shall be reset and established annually by
the Compensation Committee in its sole and absolute discretion. The Compensation
Committee shall notify the Executive promptly upon its determination of such
subsequent targets.
For purposes of the foregoing, "Earnings Per Share" shall mean
the Company's net income from continuing operations, inclusive of the
Performance Bonus to be paid for such period, after income taxes but without
giving effect to results of discontinued operations and any extraordinary tax
accounting adjustments, divided by fully-diluted shares of the Company's common
stock, determined in accordance with generally accepted accounting principles
and as reported in the Company's financial statements included in its periodic
filings with the Securities and Exchange Commission.
(B) The second component of the Performance Bonus shall be an
amount of between zero and 50% of the Annual Base Salary based on the Company
achieving approximately five targets for each period of four fiscal quarters
during the Employment Period. The targets for the first four fiscal quarters
immediately following the date of this Agreement shall be established within 60
days after the date of this Agreement based on the mutual written agreement of
the Executive and the Compensation Committee (and with respect to which
Executive and the Company agree to negotiate in good faith and as expeditiously
as possible) and the targets for each succeeding four quarter period during the
Employment Period shall be reset and established annually by the Compensation
Committee in its sole and absolute discretion. Each target shall be given equal
weight (so that, by way of illustration, if the Executive and the Compensation
Committee agree upon five targets, the Executive shall be eligible to receive an
amount of up to 10% of the Annual Base Salary upon meeting each such target),
and the Executive's success in achieving each target shall be graded on a scale
of 1-10 (so that, by way of illustration, if the Executive achieves a score of 5
for a target representing a maximum award of 10% of the Annual Base Salary, the
Executive would receive an amount equal to 5% of the Annual Base Salary with
respect to such target). The Compensation Committee, acting in its sole
discretion, shall evaluate and determine the degree and/or quality of the
Executive's achievement of the targets, and shall report its determinations to
the Executive promptly in writing.
(c) STOCK OPTIONS. In addition to the payments provided above,
on May 21, 1997, the Compensation Committee granted to the Executive, subject to
the execution of this Agreement, options to purchase 500,000 shares of the
Company's Common Stock pursuant to the Company's 1993 Stock Option Plan (the
"Stock Option Plan"), with the purchase price upon exercise of such options
equal to $2.00 per share (i.e., the closing price of the Common Stock on the
American Stock Exchange on the date of such grant). The options shall vest as
follows: (A) 100,000 options will become exercisable on the first anniversary of
the date of this Agreement; (B) 100,000 options will become exercisable on the
second anniversary of the date of this Agreement; (C) 100,000 options will
become exercisable on the third anniversary of the date of this Agreement; (D)
100,000 options will become exercisable when the closing price for the Company's
common stock on the American Stock Exchange (or such other exchange or trading
system that constitutes the primary trading market for the Company's common
stock) is $7.00 per share or higher for 30 consecutive trading days; and (E)
100,000 options will become exercisable when the closing price for the Company's
common stock on the American Stock Exchange (or such other exchange or trading
system that constitutes the primary trading market for the Company's common
stock) is $9.00 per share or higher for 30 consecutive trading days; provided,
however, that the vesting of such options shall be accelerated in the event of a
Change in Control (as defined herein). Such options shall be incentive stock
options to fullest extent permitted by applicable law and the Stock Option Plan.
The grant of the options has been made by the Compensation Committee pursuant to
the grant agreements attached hereto as Annexes A (with respect to incentive
stock options) and B (with respect to non-qualified stock options),
respectively.
The Compensation Committee shall consider making further
grants of options to the Executive on an annual basis during the Employment
Period, although the Committee shall be under no obligation to make any such
additional grants.
(d) AUTOMOBILE ALLOWANCE. During the Employment Period, the
Company shall either (x) make available to the Executive a Company-owned car, or
(y) pay the Executive $600 per month as an automobile allowance, and also shall
reimburse the Executive for up to $400 per month for expenses such as insurance
premiums, parking, fuel and similar expenses relating to the maintenance of an
automobile.
(e) REIMBURSEMENT OF EXPENSES AND ADMINISTRATIVE SUPPORT. The
Company shall reimburse the Executive, upon the presentation of appropriate
documentation, for 50% of the Executive's out-of-pocket expenses incurred in
relocating in connection with his acceptance of employment with the Company,
including, without limitation, real estate commission and related brokerage and
legal expenses, moving expenses and similar items, up to a maximum of the sum of
(i) $45,000, plus (ii) the amount, if any, of any federal income taxes payable
by the Executive with respect to such reimbursement. The Company also shall pay
or reimburse the Executive, upon the presentation of appropriate documentation
of such expenses, for all reasonable travel and other expenses incurred by the
Executive in accordance with the Company's expense policies in performing his
obligations under this Agreement. The Company further agrees to furnish the
Executive with office space and administrative support in existing Company
facilities whenever possible, and any other assistance and accommodations as
shall be reasonably required by the Executive in the performance of his duties
under this Agreement. The Executive shall review the foregoing expenses and
other matters with the Compensation Committee on a quarterly basis.
(f) VACATION. Executive shall be entitled to four (4) weeks
paid vacation in each calendar year.
(g) DEDUCTIONS. All payments made under this Agreement shall
be subject to such deductions at the source as from time to time may be required
to be made pursuant to any law, rule, regulation or order.
(h) CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" of the Company shall be deemed to have occurred upon any of
the following events:
(A) A person or entity or group of persons or
entities, acting in concert, shall become the direct or
indirect beneficial owner (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended), of
securities of the Company representing more than fifty percent
(50%) of the combined voting power of the issued and
outstanding common stock of the Company; or
(B) The majority of the Board is no longer comprised
of the incumbent directors who constitute such board on the
date of this Agreement and any other individual(s) who becomes
a director subsequent to the date of this Agreement whose
initial election or nomination for election as a director, as
the case may be, was approved by at least a majority of the
directors who comprised the incumbent directors as of the date
of such election or nomination; or
(C) The Board shall approve a sale of all or
substantially all of the assets of the Company; or
(D) The Board shall approve any merger,
consolidation, or like business combination or reorganization
of the Company the consummation of which would result in the
occurrence of any event described in clause (A) or (B) above,
and such transaction shall have been consummated.
4. PARTICIPATION IN BENEFIT PLANS. The Executive shall be
entitled to participate, during the term of this Agreement, in the Company's
benefit programs, including but not limited to the Company's 401K plan (for
which the Executive shall be eligible to participate commencing 30 days after
the date of this Agreement and with respect to which the Company, shall make the
maximum matching contribution (presently $2,500 annually) permitted under the
term of such plan and applicable law) and any other qualified or non-qualified
pension plans, supplemental pension plans, group hospitalization, health, dental
care, death benefit, post-retirement welfare plans, or other present or future
group employee benefit plans or programs of the Company for which key executives
are or shall become eligible (collectively, the "Benefit Plans"), on the same
terms as other key executives of the Company. In addition to and without
limiting the generality of the foregoing, during the Employment Period, (x) the
Company shall reimburse the Executive for all medical expenses incurred by him
and the members of his immediate family in connection with reasonable medical
care (not including cosmetic surgery or procedures) to the extent not covered by
the foregoing insurance up to a maximum of $10,000 per year, and (y) the Company
shall obtain and maintain a term life insurance policy in the amount of
$1,000,000, which policy shall be owned by the Executive, from a
nationally-recognized insurance carrier reasonably acceptable to the Executive.
5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the
Employment Period. The Company shall be entitled to terminate the
Executive's employment because of the Executive's Disability during the
Employment Period. "Disability" means that the Executive has been
unable, for a period of not less than (x) 90 consecutive business days,
or (y) 180 days within any 12 month period, to perform the Executive's
duties under this Agreement, as a result of physical or mental illness
or injury. A termination of the Executive's employment by the Company
for Disability shall be communicated to the Executive by written
notice, and shall be effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless the
Executive returns to full-time performance of the Executive's duties
before the Disability Effective Date.
(b) BY THE COMPANY. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or
without Cause. "Cause" means (x) the conviction of the Executive for
the commission of a felony related to the Executive's performance of
his duties with the Company, (y) gross negligence or willful misconduct
by the Executive that results in material and demonstrable monetary
damage to the Company, or (z) continued failure or refusal by the
Executive to substantially perform his duties hereunder (other than by
reason of death or disability) after written notification and a 30-day
cure period.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
for Cause") of its intention to terminate the Executive's employment
for Cause, setting forth in reasonable detail the specific conduct of
the Executive that it considers to constitute Cause and the specific
provision(s) of this Agreement on which it relies, and stating the
date, time and place of the Special Board Meeting for Cause. The
"Special Board Meeting for Cause" means a meeting of the Board called
and held specifically for the purpose of considering the Executive's
termination for Cause, that takes place not less than ten and not more
than twenty business days after the Executive receives the Notice of
Termination for Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective when
and if a resolution is duly adopted at the Special Board Meeting for
Cause.
(iii) A termination of the Executive's employment without
Cause shall be effected by giving the Executive written notice of the
termination.
(c) GOOD REASON. (i) The Executive may terminate
employment for Good Reason or without Good Reason. "Good Reason" means:
A. failure by the Company to re-elect the Executive
as a director and Chief Executive Officer, or the assignment
to the Executive of any duties or responsibilities materially
inconsistent with those customarily associated with the
positions to be held by the Executive pursuant to this
Agreement, or any other action by the Company that results in
a material diminution in the Executive's position, authority,
duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an
isolated, insubstantial and inadvertent failure that is not
taken in bad faith and is remedied by the Company promptly
after receipt of notice thereof from the Executive;
C. any requirement by the Company not agreed to by
the Executive that the Executive's services be rendered
primarily at a location or locations more than 50 miles
distant from the Company's present executive offices in Palm
Beach Gardens, Florida; or
D. any other material breach of this Agreement by the
Company that either is not taken in good faith or is not
remedied by the Company promptly after receipt of notice
thereof from the Executive.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
("Notice of Termination for Good Reason") of the termination, setting
forth in reasonable detail the specific conduct of the Company that
constitutes Good Reason and the specific provision(s) of this Agreement
on which the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth business day
following the date when the Notice of Termination for Good Reason is
given, unless the notice sets forth a later date (which date shall in
no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written
notice of the termination.
(d) NO WAIVER. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause or a Notice of Termination for
Good Reason shall not constitute a waiver of the right to assert, and shall not
preclude the party giving notice from asserting, such fact or circumstance in an
attempt to enforce any right under or provision of this Agreement.
(e) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the date on
which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, the Company shall
continue to pay to the Executive's designated beneficiaries (or, if there is no
such beneficiary, to the Executive's estate or legal representative), the Annual
Base Salary provided for in Section 3(a) as in effect on the Date of Termination
through the end of the month in which the Executive's death occurs. The Company
also shall pay to the Executive's designated beneficiaries (or, if there is no
such beneficiary, to the Executive's estate or legal representative), in a lump
sum in cash within 30 days of the Date of Termination (or, in the case of the
amount referred to in clause (i) below, as soon as practicable after the
calculation period in which the Date of Termination occurs), the sum of the
following amounts (the "Accrued Obligations"): (i) any accrued but unpaid
Performance Bonus, vacation pay or other monetary payments to which Executive
was entitled on the Date of Termination, and (ii) a pro rata portion of the
Performance Bonus for the year in which the Date of Termination occurs, based on
the number of days of such year prior to the Date of Termination. With respect
to medical insurance coverage, the Company shall continue to provide the spouse
and dependents of the Executive, at the expense of the Company, with the medical
insurance then provided generally to dependents of employees of the Company, for
a period of one year following the termination of the employment of the
Executive, which medical insurance coverage shall be included as part of any
required continuation of coverage under Part 6, Subtitle B of Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any
similar state or local law ("COBRA Coverage"); provided, however, that the COBRA
Coverage shall terminate with respect to such spouse and/or dependents as of the
date that the spouse and/or dependents receive equivalent coverage and benefits
under any plans, programs and/or arrangements of a subsequent employer. The
rights and benefits of the estate or other legal representative of the Executive
under the benefit plans and programs of the Company shall be determined in
accordance with the provisions of such plans and programs. The rights and
benefits of the estate or other legal representative of the Executive with
respect to the options referred to in Section 3(c) shall be determined in
accordance with the provisions of the plans and grant agreements governing such
options. Except as otherwise specified in this Agreement, neither the estate or
other legal representative of the Executive nor the Company shall have any
further rights or obligations under this Agreement.
(b) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, the Company
shall pay to the Executive, in a lump sum in cash within 30 days of the Date of
Termination (or, in the case of any Performance Bonus, as soon as practicable
after the end of the calculation period in which the Date of Termination
occurs), the Accrued Obligations. The Company shall continue to provide the
Executive and the spouse and dependents of the Executive, at the expense of the
Company, with the medical insurance then provided generally to dependents of
employees of the Company, for a period of one year following the termination of
the employment of the Executive, which medical insurance coverage shall be
included as part of any required COBRA Coverage; provided, however, that the
COBRA Coverage shall terminate with respect to the Executive, the spouse and/or
dependents of the Executive as of the date that any such individual receives
equivalent coverage and benefits under any plans, programs and/or arrangements
of a subsequent employer. The rights and benefits of the Executive under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. The rights and benefits of the
Executive with respect to the options referred to in Section 3(c) shall be
determined in accordance with the provisions of the plans and grant agreements
governing such options. Except as otherwise specified in this Agreement, neither
the Executive nor the Company shall have any further rights or obligations under
this Agreement.
(c) BY THE COMPANY OTHER THAN FOR CAUSE, DEATH OR DISABILITY,
OR BY THE EXECUTIVE FOR GOOD REASON. If, during the Employment Period, the
Company terminates the Executive's employment, other than for Cause, death or
Disability, or the Executive terminates employment for Good Reason, the Company
shall, continue to pay to the Executive, until the expiration of 12 months after
the Date of Termination, the Annual Base Salary provided for in Section 3(a).
The Company also shall pay to the Executive, in a lump sum in cash within 30
days of the Date of Termination (or, in the case of any Performance Bonus, as
soon as practicable after the end of the calculation period in which the Date of
Termination occurs), the Accrued Obligations. The Company shall continue to
provide the Executive and the spouse and dependents of the Executive, at the
expense of the Company with the medical insurance then provided generally to
dependents of employees of the Company, for a period of one year following the
termination of the employment of the Executive, which medical insurance coverage
shall be included as part of any required COBRA Coverage; provided, however,
that the COBRA Coverage shall terminate with respect to the Executive, the
spouse and/or dependents of the Executive as of the date that any such
individual receives equivalent coverage and benefits under any plans, programs
and/or arrangements of a subsequent employer. The rights and benefits of the
Executive under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. The
rights and benefits of the Executive with respect to the options referred to in
Section 3(c) shall be determined in accordance with the provisions of the plans
and grant agreements governing such options. Except as otherwise specified in
this Agreement, neither the Executive nor the Company shall have any further
rights or obligations under this Agreement. The payments and benefits provided
pursuant to this paragraph (c) of Section 6 are intended as liquidated damages
for a termination of the Executive's employment by the Company other than for
Cause or Disability or for the actions of the Company leading to a termination
of the Executive's employment by the Executive for Good Reason.
(d) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN FOR
GOOD REASON. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, or if the Executive voluntarily terminates
employment during the Employment Period, other than for Good Reason, the Company
shall pay to the Executive in a lump sum in cash within 30 days of the Date of
Termination any portion of the Executive's Annual Base Salary through the Date
of Termination that has not yet been paid plus any accrued but unpaid vacation
pay to which Executive was entitled on the Date of Termination, and the Company
shall have no further obligations under this Agreement, except as otherwise
specified in this Agreement. The rights and benefits of the Executive under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs. The rights and benefits of the
Executive with respect to the options referred to in Section 3(c) shall be
determined in accordance with the provisions of the plans and grant agreements
governing such options.
(e) The Company's obligation to deliver the liquidated damages
payments described in paragraph (c) of this Section 6 shall be contingent on the
Executive delivering to the Company, on or about the Date or Termination, a
legal release in a form acceptable to counsel to the Company, releasing the
Company, its affiliates, and the current and former directors, officers and
employees of the Company from any obligations relating to his employment
hereunder, subject to the Company's continuing obligations under this Agreement
and subject to the Executive's continuing rights under the terms and conditions
of the compensation and benefit plans in which the Executive is a participant,
as such plans may be amended from time to time.
(f) The respective obligations of the Company and the
Executive under Sections 9, 10, 11, 12 and 13 shall survive any termination of
Executive's employment.
(g) Notwithstanding any other provision of this Agreement, to
the extent the Company reasonably determines that the Executive would be subject
to the excise tax under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), on any payments under Section 6 of this Agreement and such
other amounts or benefits the Executive receives from the Company, any person
whose actions result in a change of ownership covered by Section 280G(b)(2) of
the Code or any person affiliated with the Company or such person, required to
be included in the calculation of parachute payments for purposes of Sections
280G and 4999 of the Code, the amounts provided under this Agreement shall be
automatically reduced to an amount one dollar less than that which, when
combined with such other amounts, would subject the Executive to such excise
tax.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to paragraph (f) of
Section 16, shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Vested benefits and other amounts
that the Executive is otherwise entitled to receive under the Stock Option Plan,
or any other plan, policy, practice or program of, or any contract of agreement
with, the Company or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms of each such plan,
policy, practice, program, contract or agreement, as the case may be.
8. NO OFFSET, ETC. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced, regardless of whether the Executive obtains other
employment.
9. INVENTIONS. Any and all inventions, innovations or
improvements ("inventions") made, developed or created by the Executive (whether
at the request or suggestion of the Company (which, as used in this Section 9,
shall be deemed to include the Company and each of its subsidiaries) or
otherwise, whether alone or in conjunction with others, and whether during
regular hours of work or otherwise) during the period of his employment with the
Company which may be directly or indirectly useful in, or relate to, the
business of the Company, shall be promptly and fully disclosed by the Executive
to the Board and shall be the Company's exclusive property as against the
Executive, and the Executive shall promptly deliver to an appropriate
representative of the Company as designated by the Board all papers, drawings,
models, data and other material relating to any inventions made, developed or
created by him as aforesaid. The Executive shall, at the request of the Company
and without any payment therefor, execute any documents necessary or advisable
in the opinion of the Company's counsel to direct issuance of patents or
copyrights to the Company with respect to such inventions as are to be the
Company's exclusive property as against the Executive or to vest in the Company
title to such inventions as against the Executive. The expense of securing any
such patent or copyright shall be borne by the Company.
10. CONFIDENTIAL INFORMATION. The Executive shall hold all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies and their respective businesses that the
Executive obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a result of
the Executive's violation of this Section 10) ("Confidential Information") in
strict confidence. The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or regulation or by legal process. If the Executive is
requested pursuant to, or required by, applicable law or regulation or by legal
process to disclose any Confidential Information, the Executive will provide the
Company, as promptly as the circumstances reasonably permit, with notice of such
request or requirement and, unless a protective order or other appropriate
relief is previously obtained, the Confidential Information, subject to such
request, may be disclosed pursuant to and in accordance with the terms of such
request or requirement, provided that the Executive shall use his best efforts
to limit any such disclosure to the precise terms of such request or
requirement.
11. NON-COMPETITION. The Executive acknowledges that the
services to be rendered by him to the Company (which, as used in this Section 11
shall be deemed to include the Company and each of its subsidiaries) are of a
special and unique character. In consideration of his employment hereunder, the
Executive agrees, for the benefit of the Company, that he will not, during the
term of this Agreement and thereafter until the earlier to occur of (x) the
expiration of a period of twelve (12) months commencing on the date of
termination of his employment with the Company or (y) a Change in Control, (a)
engage, directly or indirectly, whether as principal, agent, distributor,
representative, consultant, employee, partner, stockholder, limited partner or
other investor (other than an investment of not more than (i) two percent (2%)
of the stock or equity of any corporation the capital stock of which is publicly
traded or (ii) two percent (2%) of the ownership interest of any limited
partnership or other entity) or otherwise, within the United States of America,
in any business which is competitive with the business now, or at any time
during the term of this Agreement, conducted by the Company, (b) solicit or
entice to endeavor to solicit or entice away from the Company any person who was
an officer, employee or sales representative of the Company, either for his own
account or for any individual, firm or corporation, whether or not such person
would commit any breach of his contract of employment by reason of leaving the
service of the Company, and the Executive agrees not to employ, directly or
indirectly, any person who was an officer, employee or sales representative of
the Company or who by reason of such position at any time is or may be likely to
be in possession of any confidential information or trade secrets relating to
the businesses or products of the Company, or (c) solicit or entice or endeavor
to solicit or entice away from the Company any customer or prospective customer
of the Company, either for his own account or for any individual, firm or
corporation. In addition, the Executive shall not, at any time during the term
of this Agreement or at any time thereafter, engage in the business which uses
as its name, in whole or in part, "Top Source" or any other tradename or
trademark or corporate name used by the Company or any of its subsidiaries.
12. INDEMNIFICATION. (a) The Company shall indemnify the
Executive to the fullest extent permitted by Delaware law in effect as of the
date hereof against all costs, expenses, liabilities and losses (including,
without limitation, attorneys' fees, judgments, fines, penalties, ERISA excise
taxes, penalties and amounts paid in settlement) reasonably incurred by the
Executive in connection with a Proceeding. For the purposes of this Section 12,
a "Proceeding" shall mean any action, suit or proceeding, whether civil,
criminal, administrative or investigative, in which the Executive is made, or is
threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Company or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Company,
whether or not the basis of such Proceeding arises out of or in connection with
the Executive's alleged action or omission in an official capacity.
(b) The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an itemized list of the costs and expenses and an
undertaking by the Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses.
(c) The Executive shall not be entitled to indemnification
under this Section 12 unless he meets the standard of conduct specified in the
Delaware General Corporation Law. Any indemnification under subsection (a)
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the Executive is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware Corporation Law. Such determination shall be
made (1) by the Board by a majority vote of a quorum consisting of directors who
were not parties to such Proceeding, or (2) if such a quorum is not obtainable,
or, even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders.
(d) The Company shall not settle any Proceeding or claim in
any manner which would impose on the Executive any penalty or limitation without
his prior written consent. Neither the Company nor the Executive will
unreasonably withhold its or his consent to any proposed settlement.
(e) The indemnification in this Section 12 shall inure to the
benefit of the Executive's heirs, executors and administrators.
(f) The Company agrees to use its best efforts to obtain,
continue and maintain an adequate directors and officers' liability insurance
policy and shall cause such policy to cover the Executive to the extent the
Company provides such coverage for its other executive officers.
13. SUCCESSORS; BENEFICIARIES. (a) This Agreement is personal
to the Executive and, without the prior written consent of the Company, shall
not be assignable by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
(d) The Executive shall be entitled, to the extent permitted
under any applicable law, to select and change the beneficiary or beneficiaries
to receive any compensation or benefit payable hereunder following the
Executive's death by giving the Company written notice thereof. In the event of
the Executive's death or a judicial determination of his incompetence, reference
in this Agreement to the Executive shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative.
14. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Mr. Xxxxxxx Xxxxxx, Jr.
0000 Xxxxx Xxxxx Xxxxx
00X Xxxxxx Xxxxxx
Xxxxxxx 00000
If to the Company:
Top Source Technologies, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxx, Xxxxxxx 00000
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 14. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 5 of
this Agreement) shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between them concerning the subject
matter hereof.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of the Board of Directors,
the Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
Xxxxxxx Xxxxxx, Jr.
TOP SOURCE TECHNOLOGIES, INC.
By:
Xxxxx Xxxxx
Vice President and CFO
TOP SOURCE TECHNOLOGIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
TO: Xxxxxxx Xxxxxx, Jr.
As referenced in your employment agreement with Top Source
Technologies, Inc. (the "Company") dated as of May 21, 1997 (the "Employment
Agreement"), pursuant to the Company's 1993 Stock Option Plan, as amended (the
Plan"), you have been granted non-qualified stock options for the purchase of
500,000 shares (the "Option") of the Company's Common Stock at various exercise
prices as outlined in the attached Schedule A-1, the closing price of the
Company's Common Stock on the American Stock Exchange on May 20, 1997. Please
sign and return to the Company the acceptance and Acknowledgement attached to
this Stock Option Agreement. The terms of the Plan, including, without
limitation, those relating to withholding taxes, are incorporated into this
Agreement by reference. This Option is not intended to qualify as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
The terms of the Option are set forth in the Plan and in this
Agreement. Certain of the terms set forth in the Plan are summarized below;
however, reference should be made to the Plan for the complete terms.
Term: This Option shall terminate ten years from date of grant
unless sooner terminated in accordance with the terms of the Plan and this
Agreement.
.
Exercise: During your lifetime only you can exercise the
Option. The Plan also provides for exercise of the Option by the personal
representative of your estate or the beneficiary thereof following your death.
You may use the Notice of Exercise in the form attached to this Agreement when
you exercise the Option.
Notices: All notices sent in connection with this Option shall
be in writing and, if to the Company, shall be delivered personally to the
Secretary of the Company or mailed to its principal office, addressed to the
attention of the Secretary and, if to the Optionee, shall be delivered
personally or mailed to the Optionee at the address noted on the attached
Acceptance and Acknowledgement. Such addresses may be changed at any time by
notice from one party to the other.
Payment for Shares: The Option may be paid for by delivery
to the Company of the following together with the Notice of Exercise:
(a) Bank certified or cashier's checks; or
(b) Unless the Committee (as defined in the Plan) in its sole
discretion determines otherwise, shares of the capital stock of the Company held
by you having a fair market value at the time of exercise, as determined in good
faith by the Plan Administrator, equal to the exercise price.
Upon receipt of written notice of exercise and payment and
delivery of any other required documentation, the Company shall deliver to the
person exercising the Option a certificate or certificates for such shares. It
shall be a condition to the performance of the Company's obligation to issue or
transfer Common Stock upon exercise of this option that the Optionee pay, or
make provision satisfactory to the Company for the payment of, any taxes which
the Company is obligated to collect with respect to the issue or transfer of
Common Stock upon exercise.
Termination: If your employment by the Company is terminated
for Cause, as defined in the Employment Agreement, the Option will terminate as
of the first discovery by the Company of any reason for termination for Cause.
If your employment stops because of your Death or Disability, as defined in the
Employment Agreement, the Option shall terminate 12 months after your employment
stops. Otherwise the Option will terminate three months after your employment
with the Company ends.
Nothing in the Plan or in this Agreement shall confer on you any right
to continue in the employ of the Company or any parent or subsidiary of the
Company or interfere in any way with the right of the Company or any parent or
subsidiary of the Company to terminate your employment at any time.
Transfer of Option: The Option is not transferable except by will or
by the applicable laws of descent and distribution.
Vesting: The Option is vested as outlined in Schedule A-1:
Notwithstanding the foregoing, the vesting of such Options shall be
accelerated in the event of a Change in Control, as that term is defined in the
Employment Agreement.
Date of Grant: The date of grant of the Option is May 21, 1997.
YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 15 OF THE PLAN WHICH
DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES
LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND BEFORE THE
COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER
THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF SUCH
SHARES ARE NOT REGISTERED, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM
REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT
BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY, YOU
MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO RECEIVE SHARES UPON SUCH
EXERCISE. IN ADDITION, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR CONCERNING THE
RAMIFICATIONS TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING
THE SHARES UNDERLYING SUCH OPTIONS.
You understand that, during any period in which the shares
which may be acquired pursuant to your Option are subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 (and you are also so subject),
in order for your transactions under the Plan to qualify for the exemption from
Section 16(b) provided by Rule 16b-3, a total of six months must elapse between
the grant of the Option and the sale of the Option (other than upon exercise or
conversion) or the shares underlying the Option.
All decisions or interpretations made by the Committee with
regard to any question arising hereunder or under the Plan shall be binding and
conclusive on the Company and you.
This Agreement shall bind and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the extent
provided in the Plan, your executors, administrators, legatees, and heirs.
Please execute the Acceptance and Acknowledgement set forth
below on the enclosed copy of this Agreement and return it to the undersigned.
Very truly yours,
TOP SOURCE TECHNOLOGIES, INC.
Dated: As of May 21, 1997
By:_/s/Xxxxx Xxxxx
XXXXX XXXXX
INSTRUCTION: PLEASE COMPLETE THE INFORMATION REQUESTED BELOW, DETACH THIS PAGE
AFTER SIGNING WHERE INDICATED AND RETURN TO THE COMPANY.
ACCEPTANCE AND ACKNOWLEDGEMENT
I, a resident of the State of Florida, accept the non-qualified stock option
described in the Non-Qualified Stock Option Agreement dated as of May 21, 1997
and in the Top Source Technologies, Inc. 1993 Stock Option Plan, as amended, and
acknowledge receipt of a copy of this Agreement. I have read and understand all
the provisions and limitations of the Plan, particularly those relating to
non-qualified stock options and the provisions of Section 15 of the Plan
relating to securities regulations.
Dated: As of May 21, 1997
/s/Xxxxxxx X. Xxxxxxx
------------------------------
Signature
Name: Xxxxxxx Xxxxxx, Jr.
Address:
TOP SOURCE TECHNOLOGIES, INC.
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
------------------------------
(Name, please print)
------------------------------
(Date)
TOP SOURCE TECHNOLOGIES, INC.
0000 Xxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxx Xxxxxx, Xxxxxxx 00000
Gentlemen:
I hereby exercise my right to purchase _______________ shares of Common Stock of
Top Source Technologies, Inc., a Delaware corporation (the"Company"), pursuant
to, and in accordance with, the Top Source Technologies, Inc. 1993 Stock Option
Plan and the Non-Qualified Stock Option Agreement ("Agreement") dated as of ,
1997. As provided in that Agreement, I hereby: [check one]
[ ] deliver herewith a certified or bank cashier's
check in the amount of the aggregate option exercise
price; or
[ ] undertake to deliver shares of the capital stock of
the Company held by me having a fair market value at
the time of exercise, as determined in good faith by
the Plan Administrator, equal to the aggregate option
exercise price.
Please deliver to me stock certificates representing the
subject shares registered as follows:
Name:___________________________________________
Address:_________________________________________
------------------------------------------------
Social Security Number ____________________________
The aggregate exercise price is $ _________ (total number of
shares to be purchased x $--------).
(1) Tax Implications. I understand that there are certain tax
implications to my exercise of my right to purchase shares of Common Stock under
the Agreement. I further understand that it is my obligation to confer with my
own tax advisor with respect to such tax implications.
(2) Securities Regulation. I hereby represent and acknowledge that (i)
the shares of Common Stock I propose to purchase (i) are being purchased for
investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provisions of the Securities Act of 1933, as
amended (the "Act")), (ii) I have been advised and understand that (A) such
shares have not been registered under the Act and are "restricted securities"
within the meaning of Rule 144 under the Act and are subject to restrictions on
transfer and (B) the Company is under no obligation to register such shares
under the Act or to take any action which would make available to me any
exemption from such registration, and (iii) such shares may not be transferred
without compliance with all applicable federal and state securities laws.
Very truly yours,
------------------------------
Name:
SCHEDULE A - 1
OF
EMPLOYMENT AGREEMENT
BETWEEN
TOP SOURCE TECHNOLOGIES, INC.
AND
XXXXXXX X. XXXXXX, XX.
MAY 21, 1997
============================================================================
On May 21, 1997, the Company granted to Xxxxxxx X. Xxxxxx, Xx. 300,000
non-qualified stock options at a price of $2.00 per share which vest in three
equal increments of 100,000 options each on May 21, 1998, 1999 and 2,000,
subject to Xx. Xxxxxx' continued employment with the Company.
Additionally, on May 21, 1997, the Company granted to Xxxxxxx X.
Xxxxxx, Xx. 200,000 non-qualified stock options at a price of $2.00 per share
which become exercisable, if at all, in two 100,000 increments if the closing
price of the Company's common stock on the American Stock Exchange is or exceeds
$7.00 and $9.00, respectively, for at least 30 consecutive trading days and Xx.
Xxxxxx is employed by the Company at the end of such period. All 500,000 options
become immediately exercisable in the future upon certain unusual contingencies.
The above information was filed with the Securities and Exchange
Commission on a Form 3 dated May 27, 1997.
