EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of July 7, 2000, by and between
Xxxx X. Xxxx ("Executive") and BRG Acquisition Corporation, a Delaware
corporation (together with any successor by merger or otherwise the "Company").
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this
Agreement, the Company agrees to employ Executive in the position of President
and Chief Executive Officer ("CEO"). Executive shall report to the Company's
Board of Directors. Executive will also be a member of the Board of Directors of
the Company.
(b) Obligations to the Company. During the term of his
employment, Executive shall devote his full business efforts and time to the
Company. Executive shall comply with the Company's policies and rules, as they
may be in effect from time to time during the term of his employment.
(c) No Conflicting Obligations. Executive represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use or disclose,
in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person or entity. Executive represents and warrants to the Company that he
has returned all property and confidential information belonging to any prior
employers.
(d) Commencement Date. Executive shall commence his position as
("EVP of Sales")under this Agreement subject to the consummation of the merger
of the Company with and into Business Resources Group, Inc. ("BRG") as
contemplated by the Plan and Agreement of Merger dated July 7, 2000, between BRG
and the Company (the "Merger Agreement"), upon the "Effective Time" of such
merger (as such term is defined in the Merger Agreement) (the "Commencement
Date").
(2) Term of Employment.
(a) Basic Rule. The Company agrees to continue Executive's
employment, and Executive agrees to remain in employment with the Company, from
the Commencement Date set forth in Section 1(d) until the date when Executive's
employment terminates pursuant to Section 2(b) below (the "Employment Period").
Executive's employment with the Company shall be "at will," which means that
either Executive or the Company may terminate Executive's employment at any time
for any reason, with or without Cause. This Agreement shall constitute the full
and complete agreement between Executive and the Company
on the "at will" nature of Executive's employment, which may only be changed in
an express written agreement signed by Executive and a duly authorized officer
of the Company (other than Executive).
(b) Termination. The Company or Executive may terminate
Executive's employment at any time for any reason (or no reason) by one party
giving the other party thirty (30) days' notice in writing. Executive's
employment shall terminate automatically in the event of his death.
(3) Cash and Incentive Compensation.
(a) Salary. The Company shall pay Executive as compensation
for his services an annual base salary of $375,000.00, payable in accordance
with the Company's standard payroll schedule for U.S. employees. (The
compensation specified in Section 3(a), together with any increases in such
compensation that the Company may grant from time to time, are referred to in
this Agreement as "Base Salary.")
(b) Earnings Bonus. Executive will earn an annual bonus
(the "Bonus"). The Bonus for fiscal year 2000 will be based on the current BRG
Fiscal Year 2000 Executive Bonus Program adopted by the Board of Directors of
BRG. The fiscal year 2000 Bonus, however, will be based on achieving earnings
targets before taxes and management bonuses (encompassing approximately ten (10)
executives) above $6,248,200 and as follows:
Operating Earnings Executive Bonus Amount
------------------ ----------------------
$6,248,200 $60,000
$7,019,100 $120,000
$7,507,500 $130,000
$8,010,900 $140,000
$8,514,300 $150,000 etc.
Executive's annual bonus for future years shall be based on a pool (the "Bonus
Pool"). The Bonus Pool for fiscal years after fiscal year 2000 will equal twenty
percent (20%) of Excess Earnings; provided that the Compensation Committee of
the Company's Board of Directors shall have the right to limit the aggregate
Bonus Pool available to be divided among all participants to $1,360,000. Subject
to the provisions of Section 3(e) of this Agreement, the Bonus Pool will be
divided equally among Executive and the three (3) individuals serving as
Executive Vice President of Marketing, Vice President of Sales and the Chief
Financial/Operating Officer of the Company as of the Commencement Date. If any
portion of the Bonus Pool for any year is not paid as a result of the
termination of resignation of any such individual, the unpaid amount may, in the
discretion of the Compensation Committee of the Company's Board of Directors, be
reallocated and paid, in whole or in part, to Executive. The Bonus will be paid
no later than the second business day following the later of completion of the
audit of the Company's annual financial statement or sixty-five (65) days after
the end of the Company's fiscal year.
2
(i) Definitions For Bonus:
The following definitions apply to the Bonus Sections of this
Agreement and not for any other purpose.
(a) "Net Assets": The Company's total assets minus
non-interest bearing debt.
(a) "Operating Earnings": Earnings before interest, taxes,
and amortization of goodwill and, for purposes of Section 3(b), before the
payment of the Bonus (if any) paid or payable under Section 3(b).
(c) "Excess Earnings": Operating Earnings above fifteen
percent (15%) return on average Net Assets during each of the twelve months in
the fiscal year of the Company.
(c) Stock Incentive Plan. Executive will be allowed to
purchase 6.5% of the issued and outstanding shares of BRG's Common Stock as of
the Commencement Date (but not less than 1,300,000) ("Incentive Stock") at $.05
per share, which will be the fair market value of the Incentive Stock. As soon
as possible after the Commencement Date, Executive may purchase such Incentive
Stock by check made payable BRG. BRG and the Company represent and warrant that
immediately following the completion of the tender offer and the merger and the
changes in the capitalization of BRG contemplated by the Merger Agreement, the
Common Stock of BRG will consist of 25,000,000 shares of Common Stock (of which
20,000,000 shares will be outstanding or issueable). The number of shares of
Incentive Stock shall be adjusted to reflect proportionately and equitably the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into the BRG Common Stock),
reorganization, recapitalization, reclassification or other like change in the
capitalization of the BRG occurring on or after the date hereof and prior to the
Commencement Date. Upon termination of Executive's employment, the BRG may
repurchase the Incentive Stock or other shares not vested before or
simultaneously with termination. Unvested shares may be repurchased by BRG at
the price paid by the Executive if his employment terminates before the shares
vest. The shares of Incentive Stock will vest as follows: Thirty percent (30%)
of the shares of Incentive Stock will vest on the Commencement Date. The
remaining shares of Incentive Stock will vest in equal monthly amounts on the
last day of each month during the forty-eight (48) months immediately following
the Commencement Date.
(d) Effect of Termination of Employment. If the Company
terminates Executive's employment "Without Cause" (other than within one year
following a "Change of Control") or Executive quits for "Good Reason", then
Executive shall receive: (A) payment of his Base Salary and any accrued but
unused vacation earned through Executive's last date of employment; (B) a
severance payment equal to his annual Base Salary, to be paid out in accordance
with Company policy; (C) his full Bonus for the year in which termination
occurs, to be paid no later than the second business day following the later of
completion of the audit of the
3
Company's annual financial statement or sixty-five (65) days after the end of
the Company's fiscal year; (D) continuation of medical insurance benefits at
Company expense for the twelve (12) months following Executive's last day of
employment; and (E) accelerated vesting of all shares Incentive Stock issued to
Executive pursuant to Section 3(c) above and also of any of Executive's
outstanding stock options.
(e) Termination for Cause: If the Company terminates Executive's
employment for "Cause" or Executive resigns without "Good Reason," he will
receive his Base Salary and earned and unused vacation through the last day
worked but no severance unless terminated under Section 3(f)(i)(b)(iv) or
3(f))(i)(b)(v)below, in which case he will receive a severance payment equal to
his annual Base Salary, proportional and equitable share of the Bonus and
nothing else. Such severance will be paid out in accordance with Company policy,
and the Bonus will be paid no later than the second business day following the
later of completion of the audit of the Company's annual financial statement or
sixty-five (65) days after the end of the Company's fiscal year. Upon
termination for "Cause", Executive's unvested Incentive Stock will not
accelerate in vesting.
(f) Termination Following Change of Control. If, within one year
following a "Change of Control," the Company terminates Executive's employment
"Without Cause" or Executive quits for "Good Reason," then Executive shall
receive compensation and benefits as if terminated "Without Cause" under Section
3(d) of this Agreement.
(i) Definitions.
(a) "Change of Control." For all purposes
under this Agreement, "Change of Control" shall mean (i) a sale or transfer of
securities possessing at least fifty percent (50%) of the total combined voting
power of the Company's outstanding securities to a person or persons different
from the persons holding those securities immediately prior to such transaction,
(ii) a merger, consolidation, recapitalization, reorganization, share exchange,
or other business combination or transaction in which securities possessing at
least fifty percent (50%) of the total combined voting power of the resulting,
surviving or acquiring entity are held by a person or persons or its or their
controlled affiliates different from the person, persons or affiliates who held
such securities immediately before such combination or transaction, (iii) the
sale, transfer or other disposition of all or substantially all of the Company's
assets, or (iv) liquidation or dissolution of the Company.
(b) Termination for "Cause." For all purposes
under this Agreement, a termination for "Cause" shall mean a good faith
determination by the Company's Board of Directors that Executive's employment be
terminated for any of the following reasons: (i) willful misconduct that is
materially injurious to the Company; (ii) misappropriation of assets of the
Company; (iii) indictment (if not dismissed within 90 days), conviction, or a
plea of "guilty" or "no contest" to a felony under the laws of the United States
or any state thereof; (iv) Executive's continued material neglect of his duties
with demonstrable adverse effect on the Company following written notice and a
sixty (60)-day opportunity to cure; or (v) continued unsatisfactory performance
after receipt of a written warning and at least sixty (60) days to improve
However, Section 3(f))(i)(b)(v) will be inapplicable and will not constitute
"Cause" after the occurrence of any event constituting a "Change of Control" as
4
defined above. A termination of Executive's employment by the Company in any
other circumstance or for any other reason, other than death or Disability, will
be a termination "Without Cause."
(c) "Good Reason": For purposes of Sections
3(d) and (e) above, "Good Reason" includes: Executive terminates his employment
within sixty (60) days of the occurrence of (i) material diminution of the
duties or responsibilities of Executive, or (ii) moving the current location
where Executive performs his principal duties twenty-five (25) or more miles,
without Executive's advance, written and personal consent.
(ii) Termination Due to Death or Disability. If
Executive's employment terminates due to death or Disability, Executive or his
estate shall receive payment for Executive's Base Salary and any accrued but
unused vacation earned through Executive's last date of employment, and a
proportional and equitable share of the annual Bonus, but nothing else. Such
Bonus will be paid no later than the second business day following the later of
completion of the audit of the Company's annual financial statement or
sixty-five (65) days after the end of the Company's fiscal year. For purposes of
this Agreement, Disability shall mean Executive's inability to work due to a
disability for four (4) consecutive months or more and the Board terminates
Executive's employment for that reason.
(g) Accelerated Vesting Upon a "Change of Control". Upon a
"Change of Control" as defined in Section 3(f)(i)(a) above, Executive's unvested
shares of Incentive Stock will be accelerated as if he had worked for the
Company until the end of the vesting period specified in Section 3(c) above.
4. Vacation, Executive Benefits and Additional Equity.
(a) During the term of his employment, Executive shall be
eligible for paid vacation in accordance with the Company's standard policy for
officers of the Company, as it may be amended from time to time. During the term
of his employment, Executive shall receive the standard automobile allowances
currently in effect for his position, and be eligible to participate in any
employee benefit plans maintained by the Company for similarly situated U.S.
employees, subject in each case to the generally applicable terms and conditions
of the plan in question and to the determinations of any person or committee
administering such plan.
(b) On the Commencement Date, Executive shall purchase from the
BRG, and BRG shall sell to Executive an additional 360,000 shares of BRG's
Common Stock at the purchase price of $0.05 per share for a total purchase price
of $18,000 payable in cash by Executive. The purchased shares shall be fully
vested upon purchase and shall not be subject to forfeiture or repurchase by BRG
or the Company upon Executive's termination of employment.
5. Business Expenses. During the term of his employment, Executive
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse Executive for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5
6. Non-Solicitation and Non-Disclosure.
(a) Non-Solicitation. Following the Commencement Date and
continuing until the third anniversary of the date when Executive's employment
terminates for any reason, Executive shall not directly or indirectly,
personally or through others, solicit or attempt to solicit (on Executive's own
behalf or on behalf of any other person or entity) for hire or hire any employee
of the Company or any of the Company's affiliates.
(b) Non-Disclosure. As a condition of employment,
Executive will execute the Company's standard Proprietary Information Agreement,
a copy of which is attached.
(c) Enforcement. Because Executive's services are unique
and because Executive has access to confidential information, the parties hereto
agree that money damages would be an inadequate remedy for any breach of this
Agreement. Therefore, in the event a breach or threatened breach of this
Agreement, the Company or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions hereof.
7. Change in Control Benefit Limit.
(a) Benefit Limit. The aggregate Present Value (measured
as of the Change of Control) of the benefits to which Executive becomes entitled
under this Agreement either at the time of a Change of Control or at the time of
his subsequent termination of employment following a Change of Control and which
constitute "parachute payments" under federal tax law shall be limited to the
greater of the following dollar amounts (the "Benefit Limit"):
(i) 2.99 times Executive's Average Compensation,
less the Present Value (measured as of the Change of Control) of any Other
Parachute Payments to which Executive is entitled other than pursuant to the
provisions this Agreement, or
(ii) the amount which yields Executive the
greatest after-tax amount payable to him under this Agreement after taking into
account the excise tax (if any) imposed under Code Section 4999) on the Vesting
Parachute Payment and any Other Parachute Payments which are provided Executive
under this Agreement or otherwise.
(b) Definitions. For purposes of applying Code Sections
280(G) and 4999 and the Treasury Regulations thereunder to determine the Benefit
Limit in effect under Section 7(a), the following definitions shall be in
effect:
Average Compensation means the average of Executive's W-2 wages
or other compensation from the Company (or any predecessor corporation)
for the five (5) calendar years (or such fewer number of calendar years
of employment with the Company or such predecessor corporation)
completed immediately prior to the calendar year in which the Change of
Control is effected. Any W-2 wages
6
or other compensation for a partial year of employment will be
annualized, in accordance with the frequency which such wages or
compensation is paid during such partial year, before inclusion in
Average Compensation.
Code means the Internal Revenue Code of 1984, as amended from
time to time.
Vesting Parachute Payment means, with respect to any of
Executive's Incentive Stock or outstanding stock options accelerated
pursuant to the provisions of this Agreement, the portion of that
acceleration benefit deemed to be a parachute payment under Code Section
280G and the Treasury Regulations issued thereunder. The portion of the
acceleration benefit which is categorized as a Vesting Parachute Payment
shall be calculated in accordance with the valuation provisions
established under Code Section 280G and the applicable Treasury
Regulations and shall include an appropriate dollar adjustment to
reflect the lapse of Executive's obligation to remain in the Company's
employ as a condition to the vesting of the accelerated Incentive Stock
or stock options. In no event, however, will the Vesting Parachute
Payment attributable to the accelerated vesting of any Incentive Stock
or stock option exceed the spread (the excess of the fair market value
of the accelerated Incentive Stock or option shares over the purchase
price paid for the Incentive Stock or the option exercise price payable
for the accelerated option shares) existing at the time of the vesting
acceleration.
Other Parachute Payment means any payments in the nature of
compensation (other than the Vesting Parachute Payment) which are made
to Executive, whether under this Agreement or any other arrangement, in
connection with the Change of Control and which accordingly qualify as
parachute payments within the meaning of Code Section 280G(b)(2) and the
Treasury Regulations issued thereunder.
Present Value means the value, determined as of the date of the
Change of Control, of any payment in the nature of compensation to which
Executive becomes entitled in connection with the Change of Control or
the subsequent termination of his employment, including (without
limitation) the Vesting Parachute Payment attributable to the
accelerated vesting of his Incentive Stock and outstanding stock options
and any Other Parachute Payments to which Executive becomes entitled.
The Present Value of each such payment shall be determined in accordance
with the provisions of Code Section 280G(d)(4), utilizing a discount
rate equal to one hundred twenty percent (120%) of the applicable
Federal rate in effect at the time of such determination, compounded
semi-annually to the effective date of the Change of Control.
(c) Resolution Procedure. In the event there is any
disagreement between Executive and the Company as to whether one or more
payments to which Executive becomes entitled in connection with either the
Change of Control or his subsequent termination of employment constitute Vesting
Parachute Payments or Other Parachute Payments or as to the determination of the
Present Value thereof, such dispute will be resolved as follows:
7
(i) In the event temporary, proposed or final
Treasury Regulations in effect at the time under Code Section 280G (or
applicable judicial decisions) specifically address the status of any such
payment or the method of valuation therefor, the characterization afforded to
such payment by the Regulations (or such decisions) will, together with the
applicable valuation methodology, be controlling.
(ii) In the event Treasury Regulations (or
applicable judicial decisions) do not address the status of any payment in
dispute, the matter will be submitted for resolution to independent tax counsel
("Independent Counsel") mutually acceptable to the Company and Executive. The
resolution reached by such Independent Counsel shall will be final and
controlling. and all expenses incurred in connection with the retention of
Independent Counsel to resolve the dispute shall be shared equally by the
Company and Executive.
(iii) In the event Treasury Regulations (or
applicable judicial decisions) do not address the appropriate valuation
methodology for any payment in dispute, the Present Value thereof will be
submitted to the Company's independent auditors for determination, and the
expenses incurred in obtaining such valuation shall be paid by the Company.
(iv) A portion of the benefits provided under
this Agreement to Executive at the time of his termination of employment
following a Change of Control shall be allocated as compensation for his
non-compete covenant appearing in an Employee Stock Program which will be
implemented before the Commencement Date, and to the extent the allocated
benefits do not exceed the value of the non-compete covenant to the Company,
those benefits shall not be considered to be parachute payments under Code
Section 280G. The value of the non-compete covenant shall be determined by
independent appraisal obtained at the sole cost of the Company.
8. Successors
(a) Company's Successors. This Agreement shall be binding
upon any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Executive's Successors. This Agreement and all rights
of Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
9. Miscellaneous Provisions
8
(a) Notice. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when deposited with a nationally
recognized overnight courier for next-day delivery or mailed by U.S. registered
or certified mail, return receipt requested and postage prepaid. Mailed notices
shall be addressed to Executive at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(b) Modifications and Waivers. No provision of this
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by Executive and by an
authorized officer of the Company (other than Executive). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No other agreements, representations
or understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement, the Proprietary
Information Agreement, and applicable stock option agreements and stock plans,
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) Taxes. All payments made under this Agreement shall be
subject to reduction to reflect taxes or other charges required to be withheld
by law.
(e) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California (except provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) No Assignment. This Agreement and all rights and
obligations of Executive hereunder are personal to Executive and may not be
transferred or assigned by Executive at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or a substantial
portion of the Company's assets to such entity.
(h) Forum. Any dispute or claim arising out of or in
connection with this Agreement shall be resolved by a court of competent
jurisdiction in Santa Xxxxx County, California.
(i) Headings. The headings of the paragraphs contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of any provision of this Agreement.
9
(j) Counterparts. 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.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
EXECUTIVE
s/s____________________________________
Xxxx X. Xxxx
BRG Acquisition Corporation
By: s/s________________________________
Xxxxxx Xxxxxx, II
President
And solely with respect to the obligations under Sections 3 and 4
of the Agreement, BRG has executed this Agreement as of the day and year first
above written.
Business Resources Group, Inc.
By: s/s_________________________________
Xxxxxx Xxxxxx, II
President
10
