Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into as of this second day of October 2, 2000,
between Alloy Steel International, Inc., a Delaware corporation (the
"Corporation") having an address at 00 Xxxxxxxxxx Xxx Xxxxxx, X.X. Xxx 0000
Xxxxxx X X 0000,Xxxxxxx Xxxxxxxxx and Xxxx Xxxxxxx Xxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive is presently employed by the Corporation; and
WHEREAS, the Corporation and the Executive desire to set forth the terms
of Executive's employment with the Corporation, pursuant to the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree with each other as follows:
1. Term of Employment. The Corporation agrees to and does hereby employ
Executive, and Executive agrees to and does hereby accept employment by
the Corporation, as the Chief Financial Officer of the Corporation,
subject to the supervision and direction of its Board of Directors, for
the five (5) year period commencing on October 2, 2000, and ending at
midnight on the first day of October, 2005 (the "Term"). The Term shall be
automatically renewed on an annual basis (each such period, a "Renewal
Period") for an additional year (the "Renewal Term"), unless this
Agreement is terminated in writing by the Executive or the Corporation
(the "Notice of Nonrenewal") not less than one hundred eighty (180) days
prior to the expiration of the Term or any Renewal Period, unless
otherwise terminated
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pursuant to the provisions of this Agreement.
2. Duties of Executive. Executive shall devote such time, attention and
energy to the affairs of Corporation as shall be reasonably required to
perform his duties hereunder, and, in pursuance of the policies and
directions of the Board of Directors, Executive shall use his best efforts
to promote the business and affairs of the Corporation.
3. Base Compensation. In consideration of the Executive's services pursuant
to this Agreement, Corporation shall pay to Executive, during the period
of Executive's employment under this Agreement, (i) a salary at the rate
of Eighty Thousand Dollars (U.S.$80,000.00) per year for the first year of
this Agreement (the "Base Compensation); and (ii) for each year
thereafter, annual compensation shall be determined by the Board of
Directors, but in no event less than $80,000.00. The Base Compensation
shall be payable in equal installments, in accordance with the
Corporation's customary procedures for executive employees (but in no
event less frequently than semi-monthly), subject to applicable tax and
payroll deductions. The Board of Directors of the Corporation may increase
Executive's Base Compensation at such time or times and in such amount or
amounts as it may in its sole discretion determine.
4. Incentive Compensation. (a). Provided Executive has duly performed his
obligations pursuant to this Agreement, Executive will receive, as
additional compensation for the services to be rendered by Executive under
this Agreement, cash incentive compensation, the amount of which shall be
determined by the Board of Directors based on the Executive's performance
and contributions to the Corporation's success.
(b). Provided Executive's employment continues during the term hereof and
he is in good
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standing, Executive shall receive stock options to purchase shares in
accordance with the Corporation's 2000 Stock Option Plan.
5. Other Benefits. During the term of this Agreement the Executive shall be
entitled to participate in any benefit plans adopted by the Corporation
for the general and overall benefit of all employees and/or for key
executives of the Corporation such as health care, life insurance,
disability, stock option plans, tax, legal and financial planning
services, pension, profit sharing and savings. Executive shall be entitled
to receive at no cost full family coverage health care insurance.
6. Vacation. Executive shall be entitled to a fully paid vacation of four (4)
weeks per calendar year, which vacation shall be scheduled at such time or
times as the Corporation in consultation with Executive may reasonably
determine.
7. Expenses. The Corporation shall pay or reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with his
duties hereunder, upon submission by Executive to the Corporation of such
reasonable evidence of such expenses as the Corporation may require.
8. Insurance. The Corporation may from time to time apply for policies of
life, health and accident insurance or disability insurance upon the
Executive in such amounts as the Corporation deems appropriate. The
Executive agrees to aid the Corporation in procuring such insurance,
including submitting to a physical examination, if required, and
completing any and all forms required for application for any insurance
policy.
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9. Support. The Executive shall be provided by the Corporation at its expense
with office space, furnishings and facilities, reserved parking,
secretarial and administrative assistance, supplies and other support
equipment (including a computer, mobile phone, facsimile machine and
photocopier).
10. No Forced Relocation. The executive shall not be required to move his
principal place of residence from the greater Perth, Western Australia
area or to perform regular duties that could reasonably be expected to
require either such move against his wish or to spend amounts of time each
week outside the greater Perth, Western Australia area which are
unreasonable in relation to his duties and responsibilities of the
Executive hereunder, and the Corporation agrees that, if it requests the
Executive to make such a move and the Executive declines the request, (i)
that declination shall not constitute any basis for a determination that
Cause exists, and (ii) no animosity or prejudice will be held against
Executive.
11. Disclosure of Information. The Executive shall, during his employment
under this Agreement and thereafter, keep confidential and refrain from
disclosing to any unauthorized persons all data and information relating
to the respective businesses of the Corporation or any of its
subsidiaries.
12. Intellectual Property Rights.
(a) The Executive shall promptly disclose to the Corporation in writing,
any and all charts, layouts, maps, inventions, improvements, techniques,
markets, sales and advertising plans, processes, concepts and plans,
whether or not copyrightable or patentable, secret processes and
"know-how," conceived by the Executive during the
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term of his employment by the Corporation (the "Executive's Work
Product"), whether alone or with others and whether during regular working
hours and through the use of facilities and property of the Corporation or
otherwise, which directly relates to the present business of the
Corporation. Upon the Corporation's request at any time or from time to
time during the Term of the Executive's employment, the Executive shall
(i) deliver to the Corporation copies of the Executive's Work Product that
may be in his possession or otherwise available to him; and (ii) execute
and deliver to the Corporation such applications, assignments and other
documents as it may reasonably require in order to apply for and obtain
copyrights or patents in the United States of America and other countries
with respect to any Executive's Work Product that it deems to be
copyrightable or patentable, and/or otherwise to vest in itself full title
thereto.
(b) All documents that pertain to the Corporation, including but not
limited to the Executive's Work Product, shall be the sole and exclusive
property of the Corporation. Upon the termination of the Executive's
employment, all such documents that may be in his possession or otherwise
available to him or shall thereafter come into his possession or control
shall be promptly returned to the Corporation without the necessity of a
request therefor.
13. Non-Competition Covenant.
(a) The Executive shall not, during his employment by the Corporation,
engage, directly or indirectly, in any business competitive with the
business of the Corporation without the consent of the Board of Directors.
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(b) For a period of one (1) year after the termination of the Executive's
employment hereunder (the "Non-Competition Period"), for any reason
whatsoever, other than a termination by the Corporation without Good
Cause, the Executive shall not (i) engage, directly or indirectly, as an
officer, director, shareholder, owner, partner, joint venturer or in a
managerial capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative in any business
relating to Internet products and services, and directly related
activities as presently conducted by the Corporation throughout the United
States (the "Territory"), without the permission of the Board of
Directors, which permission shall not be unreasonably withheld or delayed
or (ii) induce or actively attempt to influence any other employee or
consultant of the Corporation to terminate his or her employment or
consultancy with the Corporation. Nothing herein contained shall be deemed
to prevent ownership by Executive (as said term is defined in regulation
14(A) promulgated under the Securities Exchange Act of 1934 as in effect
on the date hereof), collectively, of not more than 5% of the outstanding
capital stock of a corporation listed on a national securities exchange.
(1) The parties to this Agreement consider the restrictions
contained herein reasonable as to the duration of the Non-Competition
Period and the extent of the Territory. However, if the duration if the
Non-Competition Period or the extent of the Territory herein specified
should be judged unreasonable by any Court or arbitration proceeding, the
validity and effect of the remaining provisions of this Agreement shall
not be affected thereby and, the duration of the Non-
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Competition Period shall be reduced by such number of months and/or the
area of the Territory shall be reduced such that, the Territory and the
Non-Competition Period shall be deemed reasonable so that the foregoing
covenant not to compete may be enforced.
(2) Executive agrees and recognizes that in the event of a breach of
threatened breach by Executive of the provisions of the aforegoing
covenants, the Corporation may suffer irreparable harm, and that money
damages may not be an adequate remedy. Therefore, the Corporation shall be
entitled as a matter of right to specific performance of the covenants of
Executive contained herein by way of temporary or permanent injunctive
relief in a Court of competent jurisdiction.
14. Termination. This Agreement and Executive's employment may be terminated
in any one of the following ways:
(a) Termination of Employment by the Corporation. The Corporation
shall be entitled, if acting at the direction of the Required Board
Majority, to terminate the Executive's employment at any time with or
without Good Cause. The Corporation's termination of the Executive's
employment will be effective on the date the Corporation delivers a notice
of termination to the Executive pursuant to this Section 14(a) (together
with any required certified Board resolution). If the Corporation
terminates the Executive's employment for Good Cause, the Corporation
shall, within thirty (30) business days thereafter, pay the Executive an
amount equal to the Accrued Benefits plus severance pay and, when that
payment is made, the Corporation shall have no further obligation
hereunder to compensate the
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Executive. If the Corporation terminates the Executive's employment
without Good Cause, or elects not to renew Executive's employment upon
expiration of the original term or any renewal term, the Corporation
shall, within thirty (30) business days thereafter, pay the Executive an
amount equal to the sum of Accrued Benefits, plus the Severance Payment,
and shall continue to provide health insurance benefits for the Executive,
his spouse and minor children, if any (on the same terms in effect on the
Termination date) for a period of three (3) years after the termination
date.
(b) Termination of Employment by the Executive. The Executive shall
be entitled to terminate his Employment, by delivery of a notice of
termination to the Corporation: (1) for Good Reason at any time within one
hundred eighty (180) days after the facts or circumstances constituting
that Good Reason first exist and are known to the Executive, (ii) in the
event of his Disability, as provided in Section 14(c), or (iv) without
Good Reason and other than for Disability at any time. If the Executive
terminates his Employment for Good Reason, the Corporation shall pay to
the Executive in a cash lump sum within five (5) business days after the
date the Corporation receives the Executive's notice of termination, an
amount equal to the sum of Accrued Benefits plus the Severance Payment,
and shall continue to provide health insurance benefits for the Executive,
his spouse and minor children (on the same terms in effect on the
Termination date) for a period of three (3) years after the termination
date. If the Executive terminates his Employment without Good Reason and
other than for Disability, the Corporation shall pay to the Executive, in
a cash lump sum within five (5) business days after the termination date,
the Accrued
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Benefits.
(c) Termination by Reason of Disability. If the Executive incurs any
Disability prior to termination of this Agreement, either the Executive or
the Corporation may terminate the Executive's Employment effective on the
date the Nonterminating Party receives a notice of termination from the
Terminating Party pursuant to this Section 14(c); provided, however that
the Corporation shall, within five (5) business days thereafter, pay the
Executive an amount equal to the sum of Accrued Benefits plus the
Termination Payment, and the Corporation shall continue to provide health
insurance benefits for the Executive, his spouse and minor children (on
the same terms in effect on the Termination date) for a period of three
(3) years after the Termination date.
(d) Termination of Employment by Death. The Executive's Employment
shall terminate automatically at the time of his death. If the Executive's
Employment is terminated by reason of the Executive's death, the
Corporation shall pay to the Executive's estate, in a cash lump sum within
thirty (30) days after the Termination date, an amount equal to the sum of
the Accrued Benefits plus the Termination Payment, and shall continue to
provide health insurance benefits for the Executive's spouse and minor
children (on the same terms in effect on the Termination date) for a
period of three (3) years after the Termination date.
(e) Return of Property. On termination of the Executive's
Employment, however brought about, the Executive (or his representatives)
shall promptly deliver and return to the Corporation all the Corporation's
property that is in the possession
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or under the control of the Executive.
(f) Stock Options. Notwithstanding any provision of this Agreement
to the contrary: (i) except in the case of a termination of the
Executive's Employment for Cause, all stock options previously granted to
the Executive under the Company's 2000 Stock Option Plan, or any other
applicable Stock Option Plan, that have not been exercised and are
outstanding as of the time immediately prior to the Termination date
shall, notwithstanding any contrary provision of any applicable Stock
Option Plan, automatically become vested and immediately exercisable, and
remain outstanding until exercised or the expiration of their term,
whichever is earlier; and (ii) in the case of a termination of the
Executive's Employment for Cause, all stock options previously granted to
Executive under Incentive Plans that have not been exercised and are
outstanding as of the Termination date shall automatically be terminated,
unless the Compensation Committee determines otherwise in its discretion,
notwithstanding any contrary provision of any applicable Incentive Plan.
(g) Change in Control of the Corporation. In the event of a "Change
in Control" (as defined below) of the Corporation during the Term,
Executive may terminate this Agreement as provided herein.
Upon termination of this Agreement for any reason provided above,
Executive shall be entitled to receive all compensation earned and all
benefits and reimbursements due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Executive only to the extent and in the manner expressly
provided above or in paragraph 5
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hereof.
If termination of Executive's employment arises out of the
Corporation's failure to pay Executive on a timely basis the amounts to
which he is entitled under this Agreement or as a result of any other
breach of this Agreement by the Corporation, the Corporation shall pay all
amounts and damages to which Executive may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and
expenses and other costs incurred by Executive to enforce his rights
hereunder. Further, none of the provisions of paragraph 11 hereof shall
apply in the event this Agreement is terminated as a result of a breach by
the Corporation.
15. Change in Control.
(a) Unless Executive elects to terminate this Agreement pursuant to
subparagraph (c) below, Executive understands and acknowledges that the
Corporation may be merged or consolidated with or into another entity and
that such entity shall automatically succeed to the rights and obligations
of the Corporation hereunder or that the Corporation may undergo another
type of Change in Control. In the event such a merger of consolidation or
other Change in Control is initiated prior to the end of the Term, then
the provisions of this paragraph shall be applicable.
(b) In the event of a pending Change in Control wherein the
Corporation and Executive have not received written notice at least five
(5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a
substantial portion of the Corporation's business and/or
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assets that such successor is willing as of the closing to assume and
agree to perform obligations under this Agreement in the same manner and
to the same extent that the Corporation is hereby required to perform,
then such Change in Control shall be deemed to be a termination of this
Agreement by the Corporation without Good Cause during the Term and the
applicable portions herein will apply; however, under such circumstances,
the amount of the lump-sum severance payment due to Executive shall be
twice the amount of the Severance Payment and the non-competition
provisions herein shall not apply whatsoever.
(c) In any Change in Control situation, Executive may, at his sole
discretion, elect to terminate this Agreement by providing written notice
to the Corporation at least five (5) business days prior to the
anticipated closing of the transaction giving rise to the Change in
Control. In such case, the Corporation shall pay to Executive the amount
of the Severance Payment and the non-competition provisions herein shall
all apply for a period of one (1) year from the effective date of
termination.
(d) For purposes of applying paragraph 12 hereof under the
circumstances described in (b) and (c) above, the effective date of
termination will be the closing date of the transaction giving rise to the
Change in Control and all compensation, reimbursements and lump-sum
payments due Executive must be paid in full by the Corporation at or prior
to such closing. Further, Executive will be given sufficient time and
opportunity to elect whether to exercise all or any of his options to
purchase shares of common stock of the Corporation, such that he may
convert the options to
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shares prior to the closing of the transaction giving rise to the Change
in Control, if he so desires.
(e) A "Change in Control" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended, as in effect on the date of this Agreement, or if Item
6(c) is no longer in effect, any regulations issued by the United States
Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended, which serve similar purposes; provided further that,
without limitation, a Change in Control shall be deemed to have occurred
if and when:
(i) the following individuals no longer constitute a majority
of the members of the Board of Directors of (A) the individuals who, as of
the day after the closing date of the Corporation's initial public
offering, constitute the Board of Directors of the Corporation (the
"Original Directors"); (B) the individuals who thereafter are elected to
the Board of Directors of the Corporation and whose election, or
nomination for election, to the Board of Directors of the Corporation was
approved by a vote of at least two-thirds (2/3) of the Original Directors
then still in office (such directors becoming "Additional Original
Directors" immediately following their election); and (c) the individuals
who are elected to the Board of Directors of the Corporation and whose
election, or nomination for election, to the Board of Directors of the
Corporation was approved by a vote of at least two-thirds (2/3) of the
Original Directors and Additional Original Directors then still in office
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(such directors also becoming "Additional Original Directors" immediately
following their election);
(ii) a tender offer or exchange offer is made whereby the
effect of such offer is to take over and control the Corporation, and if
such offer is consummated for the equity securities of the Corporation
representing twenty percent (20%) or more of the combined voting power of
the Corporation's then outstanding voting securities;
(iii) the stockholders of the Corporation shall approve a
merger, consolidation, recapitalization, or reorganization of the
Corporation, a reverse stock split of outstanding voting securities, or
consummation of any such transaction if stockholder approval is not
obtained, other than any such transaction which would result in at least
seventy-five percent (75%) of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being beneficially owned by at least seventy-five percent
(75%) of the holders of outstanding voting securities of the Corporation
immediately prior to the transaction, with the voting power of each such
continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of the Corporation shall approve a plan
of complete liquidation of the Corporation or an agreement for the same or
disposition by the Corporation of all or a substantial portion of the
Corporation's assets to another person or entity which is not a
wholly-owned subsidiary of the Corporation (i.e., fifty percent (50%) or
more of the total assets of the Corporation).
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(f) Sales of the Corporation's Common Stock beneficially owned or
controlled by the Corporation shall not be considered in determining
whether a Change in Control has occurred.
(g) Executive shall be notified in writing by the Corporation at any
time that the Corporation or any member of its Board anticipates that a
Change in Control may take place.
(h) In the event that a Change in Control occurs and the aggregate
amount of any payments made to Executive hereunder, or pursuant to any
plan, program or policy of the Corporation in connection with, on account
of, or as a result of, such Change in Control constitutes "excess
parachute payments" as defined in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), subject to the excise tax imposed
by Section 4999 of the Code, or any successor sections thereof, Executive
shall receive from the Corporation, in addition to any other amounts
payable under this Agreement, a lump sum payment equal to the amount of
(i) such excise tax, and (ii) the federal and state income taxes payable
by the Executive with respect to any payments made to Executive under this
subparagraph (h). Such amount will be due and payable by the Corporation
or its successor within ten (10) days after executive delivers a written
request for reimbursement accompanied by a copy of his tax return(s)
showing the excise tax actually incurred by Executive.
16. Indemnification. In the event Executive is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Corporation
against Executive), by reason
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of the fact that he is or was performing services under this Agreement,
then the Corporation shall indemnify Executive against all expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Executive in connection
therewith to the maximum extent permitted by applicable law. The
advancement of expenses shall be mandatory. In the event that both
Executive and the Corporation are made a party to the same third-party
action, complaint, suit or proceeding, the Corporation agrees to engage
competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Corporation shall
have a conflict of interest that prevents such counsel from representing
Executive, Executive may engage separate counsel and the Corporation shall
pay all attorneys' fees of such separate counsel. Further, while Executive
is expected at all times to use his best efforts to faithfully discharge
his duties under this Agreement, Executive cannot be held liable to the
Corporation for errors or omissions made in good faith where Executive has
not exhibited gross, willful and wanton negligence and misconduct or
performed criminal and fraudulent acts which materially damage the
business of the Corporation.
17. Effect of Waiver. The waiver by either party of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
18. Notices. Any notice permitted, required, or given hereunder shall be in
writing and shall be personally delivered; or delivered by any prepaid
overnight courier delivery service then in general use; or mailed,
registered or certified mail, return receipt
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requested, to such other address as may be designated by notice given
hereunder. Delivery shall be deemed made when actually delivered, or if
mailed, three days after delivery to a United States Post Office and/or to
an office of the Australian Postal Commission.
19. Assignment. Executive shall not be entitled to assign his rights, duties
or obligations under this Agreement.
20. Amendments. The terms and provisions of this Agreement may be amended or
modified only by a written instrument executed by the party to be charged
by such amendment or modification.
21. Governing Law. The terms and provisions herein contained and all the
disputes or claims relating to this Agreement shall be governed by,
interpreted and construed in accordance with the internal laws of the
State of New York, without reference to its conflict of laws principles.
22. Captions. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
23. Merger and Severability. This Agreement shall constitute the entire
Agreement between the Corporation and Executive with respect to the
subject matter hereof. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
24. Counterparts; Facsimile. This Agreement may be executed by facsimile and
in two (2) or more counterparts, each of which shall be deemed an original
and all of which
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together shall constitute but one and the same instrument.
25. Definitions
A. "Accrued Benefits" means an amount equal to the sum of (a) the
portion of the Base Salary payable through and including the
Termination date which has not yet been paid, (b) all compensation
previously deferred by the Executive (together with any accrued
interest and earnings thereon) which has not yet been paid, and (c)
any accrued but unpaid expense reimbursements and vacation pay.
B. Good Cause. "Good Cause," shall mean any one or more of the
following: (1) Executive's willful, material and irreparable breach
of this Agreement; (2) Executive's gross negligence in the
performance or intentional nonperformance (continuing for ten (10)
days after receipt of written notice of need to cure) of any of
Executive's material duties and responsibilities hereunder; (3)
Executive's willful dishonesty, fraud or misconduct with respect to
the business or affairs of the Corporation which materially and
adversely affects the operations or reputation of the Corporation;
(4) Executive's conviction of a felony crime; or (5) confirmed
positive illegal drug test result.
C. "Good Reason" for the Executive's termination of his Employment
means: (a) any violation hereof in any material respect by the
Company; (b) without approval of 5/7 of the Board either (1) a
failure of the Company to continue in effect any Compensation Plan
in which the Executive was participating,
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or (2) the taking of any action by the Company which would adversely
affect the Executive's participation in or materially reduce the
Executive's benefits under, any such Compensation Plan; or (c) the
assignment to the Executive of duties inconsistent in any material
respect with the Executive's then current positions (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities or any other action by the Company which
results in a material diminution in those positions, authority,
duties or responsibilities.
D. "Required Board Majority" means at any time a majority of the
members of the entire Board then in office which shall include at
least a majority of the Outside Directors then in office.
E. "Severance Payment" means at any time an amount equal to three (3)
times the Executive's Average Annual Compensation during the term of
this Agreement.
F. "Termination Payment" means at any time an amount equal to one and
one-half (1.5) times the Executive's Average Annual Compensation
during the term of this Agreement.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures the
day and year first above written.
Alloy Steel International, Inc.
By:_______________________________________
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Name:
Title:
Xxxx Xxxxxxx Xxxxxxx
_______________________________________
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