EXHIBIT 10.8
EMPLOYMENT AGREEMENT
Xxxxxxx X. Xxxx
January 1, 2001
This employment agreement (the "Agreement") is between K. & S., Inc.
("Employer" or if referring to entity prior to the Purchase, as that term is
defined below, then "K & S") and Xxxxxxx X. Xxxx ("Executive").
RECITALS
1. Effective December 31, 2000, Executive sold his ownership interest in
K & S (amounting to 90% of outstanding ownership of K & S) to Fechtor, Xxxxxxxx,
Xxxxxxxx & Co. ("FEDM") pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement"). FEDM purchased K & S (the "Purchase") for, among other
reasons, its clients, its sales and business systems, its seat on the Boston
Stock Exchange (the "BSE"), and the outstanding and special skills, its customer
relationships, its name recognition and goodwill, its reputation and integrity
and abilities of Executive and other key employees to maintain and enhance its
business, relationships, revenues and profits (the "Reasons");
2. Executive is and has been employed as President of Employer since he
founded K & S. Through such experience, he has acquired outstanding and special
skills and abilities and an extensive background in and knowledge of Employer's
business and the industry in which it is engaged;
3. Employer desires assurance of the continued association and services
of Executive in order to retain the benefit of the Reasons referenced above,
along with Executive's background and knowledge and is therefore willing to
engage his services on the terms and conditions set forth below;
4. Executive desires to continue in the employ of Employer and is willing
to do so on the terms and conditions set forth below;
5. In his capacity as an executive of Employer, Executive has access to
highly valuable and confidential trade secret information of Employer, including
but not limited to information regarding the identity of key contact personnel
and the contract terms with major clients and suppliers to Employer; the
identity and personnel information with regard to Employer's personnel; and the
terms, documents, methods and systems through which Employer engages in
business; and
6. The execution of this Agreement has been authorized by the Board of
Directors of FEDM (the "FEDM Board") and by the Employer's Board of Directors
(the "Employer's Board").
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NOW THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this Agreement, it is agreed as follows:
1. Position
--------
Employer shall employ Executive as President and General Manager of
Employer and shall provide general supervision, direction and control of the
business and officers of Employer and with such executive capacity or capacities
as the FEDM Board or the Employer's Board may from time to time prescribe.
Executive shall have an obligation to work 10 days each month (the "Work Days"),
subject to any services, which may be required on an emergency basis due to
staffing, etc.
2. Sole Employment
---------------
During the Work Days, Executive shall devote his full energies, interest,
abilities and productive time to the performance of this Agreement and shall
not, without express written approval of the President or Chief Executive
Officer of FEDM, render to others services of any kind for compensation, or
engage in other business activity that would interfere with the performance of
his duties under this Agreement.
3. Term of Employment
------------------
This Agreement takes effect on January 1, 2001 (the "Employment Date") and
shall have an initial term of three years. FEDM retains the right to renew this
Agreement on each annual anniversary date of the Employment Date, beginning on
the third anniversary of the Employment Date, by giving written notice of its
election to do so at least 30 days prior to such anniversary date. This
Agreement shall terminate in the event of executive's incapacity from illness,
accident or death.
4. Right of First Refusal
----------------------
Notwithstanding the foregoing, if the FEDM Board determines that it would
be in the best interest of FEDM to exit the specialist business conducted by
Employer on the BSE, Executive will have the right of first refusal to reacquire
the operations of Employer at such price and on the terms determined by the FEDM
Board. Written notice of such election to exit the specialist business on the
BSE shall be given by Employer to Executive and Executive shall have 30 days
from the date of such notice within which to exercise such option by irrevocable
written commitment or such option shall terminate and be of no further force and
effect.
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5. Salary
------
Employer shall pay a base salary to Executive at the rate of one hundred
and five thousand dollars ($105,000) per annum ("Base Salary"), payable in equal
monthly installments.
6. Annual Bonus Awards
-------------------
Employer may pay Executive an annual bonus award (the "Award"). The Award,
if any, will represent five percent (5%) of income before taxes of Employer
(determined in accordance with generally accepted accounting principles
consistently applied in accordance with the formula described below) at the end
of each fiscal year. Award payments are made 75% in December and the remaining
25% the following year upon completion of the annual audit of FEDM's results of
operations.
Notwithstanding the foregoing, the Award, if any, for the fiscal years
following the Employment Date will be calculated by using five percent (5%) of
the net amount of income before taxes of Employer for the year ended December
31, 2001, reduced by $______, representing the income before taxes of K & S for
the twelve month period ended December 31, 2000 ("Base Earnings").
7. Benefits
--------
Executive shall be entitled to receive all other benefits of employment
generally available to employees of FEDM's subsidiaries (the "FEDM Benefits"),
including reimbursement for reasonable out-of-pocket expenses incurred in
connection with Employer's business, subject to such policies as FEDM may from
time to time reasonably establish for employees of its subsidiaries. The FEDM
Benefits shall include, but not be limited to, a 401k savings plan providing up
to $10,500 of pre-tax employee contributions with FEDM matching contributions of
up to $5,100 per employee in the form of FEDM stock vesting over a three year
period, as well as medical, dependent care, parking and transportation
reimbursement accounts - each of which allows for significant pre-tax employee
contributions. Such FEDM Benefits shall not be charged to an employee's
respective profit and loss statement as used to determine monthly commissions
due such employee.
8. Stock Options
-------------
Executive shall, pursuant to the Stock Purchase Agreement, receive the
option to purchase 200,000 shares of FEDM common stock (the "Stock Options")
under the terms and conditions of a stock option agreement entered into on the
Employment Date (the "Stock Option Agreement") at a price equal to the closing
price of the FEDM common stock on the Nasdaq SmallCap Market on December 29,
2000, the trading date immediately preceding the Employment Date. Such Stock
Options will vest in three equal installments over a period of three years
following the date of grant (the "Grant Date") and shall expire on the tenth
anniversary of such Grant Date.
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9. Termination
-----------
Notwithstanding the stated term hereof, this Agreement may be terminated at
any time on written notice by Executive or by Employer with or without cause.
In such event, Employer's obligations to pay salary, benefits and incentive
compensation hereunder will vary depending upon the reason for termination, as
described below:
a. Resignation By Executive.
If Executive voluntarily terminates employment ("Voluntary
Termination"), then Employer shall pay Base Salary and Benefits pro-
rated to the effective date of resignation and his Stock Options shall
continue to vest in accordance with the Stock Option Agreement. In
case of such Voluntary Termination, Executive agrees not to be
employed by a competitor of Employer or to work in the industry of
Employer or in any way compete with Employer for a period of two
years.
b. Termination By Employer Without Cause.
If Employer terminates Executive without cause other than because
of incapacity from illness, accident or death, then Executive shall
receive Base Salary in the manner, timeframe and amount to which he
would have been entitled should employment have continued through the
stated term of this Agreement and his Stock Options shall continue to
vest in accordance with the Stock Option Agreement. Benefits shall
also be continued through the same term, to the extent FEDM reasonably
believes continuation is permitted by law and FEDM's insurance
carriers, so long as Executive is not eligible to receive comparable
benefits from another employer.
c. Termination By Employer For Cause.
If Employer terminates Executive for Cause (defined below), then
Executive shall receive Base Salary pro-rated through the date of
termination (the "Termination Date"). Benefits shall also be
continued through such date, to the extent permitted by law and the
FEDM's insurance carriers. Any unvested Stock Options existing on
the Termination Date will be canceled in accordance with the Stock
Option Agreement. "Cause" shall mean (i) continued failure to perform
substantially his or her duties, which standard of duties shall be
referenced to the standards set by FEDM at the date of this Agreement
(other than as a result of sickness, accident or similar cause beyond
your reasonable control) after receipt of a written warning and given
thirty (30) days to improve, (ii) willful and material misconduct,
which is demonstrably and materially injurious to the FEDM or any of
its subsidiaries, including willful and material failure to perform
your duties as an officer or employee of FEDM or any of its
subsidiaries or a material breach of this Agreement, (iii) conviction
of or plea of nolo contendere to a felony; (iv) conviction of an act
of fraud against, or the misappropriation of
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property belonging to the FEDM or any of its subsidiaries, or any
employee, customer, or supplier of the FEDM or any of its
subsidiaries.
9. Payment Limitations
-------------------
All payments to Executive hereunder shall be reduced by applicable federal,
state and local withholding requirements. Employer shall not be obligated to
reimburse Executive for his expenses (such as COBRA payments) in maintaining
benefits that Employer has discontinued hereunder. Employer shall have the
right to offset any debts or damages owed by Executive to Employer against
salary or other payment owed by Employer to Executive.
10. Protection of Trade Secrets; Confidential Information & Employee
----------------------------------------------------------------
Relationships.
-------------
Because of his employment by Employer, Executive has access to trade
secrets and confidential information of Employer, including but not limited to
knowledge of and contact with key employees; financial records; contract terms;
business plans, policies and procedures; cost information; customer lists and
client or acquisition opportunities; business and computer systems; management
information and methods which are unique to Employer's methods of business; and
customer servicing techniques (all of the above trade secrets and confidential
information hereinafter referred to as "Confidential Information"). In
consideration hereof and in recognition of the fact that the Confidential
Information constitutes a valuable trade secret or otherwise valuable asset of
Employer, Executive will not appropriate to his own use or benefit in anyway
whatsoever, or disclose to any third parties, any Confidential Information
during or after this Agreement.
Executive agrees that solicitation of Employer's customers and personnel
would constitute a misappropriation of Employer's Confidential Information. In
recognition thereof, Executive will not during his employment, and for one year
thereafter, solicit, hire, contract with or otherwise take away any customer or
employee of Employer or participate in any such solicitation, hiring,
contracting or otherwise taking away. In addition, all information about such
customers and employees which becomes known to Executive during the course of
this Agreement and which is not otherwise known to the public is a trade secret
of the Employer and shall not be used in soliciting or taking away customers or
employees of the Employer at any time. Notwithstanding the forgoing, if
employment of Executive is terminated by Employer for any reason other than
Voluntary Termination, Executive may seek employment in the industry of Employer
as long as Executive complies with all other restrictions within this Section
10.
Executive acknowledges that any breach of this Section will result in
irreparable damage to the Employer, for which Executive further acknowledges
that Employer shall be entitled to injunctive relief hereunder. The parties
hereby consent to an injunction in favor of Employer, without bond, enjoining
any breach of this Agreement by any court of competent jurisdiction, without
prejudice to any other right or remedy to which Employer may be entitled.
Executive's obligations hereunder shall survive the termination of this
Agreement.
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11. Entire Agreement
----------------
This Agreement contains the entire agreement between theses two parties
relating to employment and supersedes all prior oral and written agreements,
understandings, commitments, and practices between the parties. No waiver or
modification to this Agreement may be made except by a writing signed by the
party against whom it is enforced.
12. Choice of Law; Interpretation of Agreement
------------------------------------------
The formation, construction, and performance of this Agreement shall be
construed in accordance with the internal laws of the State of Delaware, without
reference to principals of conflict of laws. This Agreement shall not be
interpreted for or against either party on the ground that such party or its
representative drafted the agreement or any portion thereof.
13. Arbitration
-----------
Any dispute hereunder shall be subject to binding arbitration pursuant to
Section 9.5 of the Stock Purchase Agreement.
14. Notices
-------
Any notice required or permitted under this Agreement shall be given in
writing, either by personal delivery or by registered, overnight or certified
mail, postage prepaid, to the following addresses: Executive - then current
home address as shown on Employer's files; Employer - the CEO at FEDM's then
current place of business.
15. Severability
------------
If any portion of this Agreement is held invalid or unenforceable, the
remainder of this Agreement shall nevertheless remain in full force and effect.
If any provision is held invalid or unenforceable with respect to particular
circumstances, it shall nevertheless remain in full force and effect in all
other circumstances.
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16. Acknowledgment
--------------
Executive acknowledges that he has had the opportunity to consult with
independent counsel of his own choice concerning this Agreement and has been
advised to do so by Employer, and Executive has read and understands this
Agreement, and is fully aware of its legal effect, and has entered into it
freely based on Executive's own judgment.
17. Headings
--------
Section headings in this Agreement have been inserted for convenience and
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.
Executed by the parties as of the day and year first above written.
AGREED AND ACCEPTED:
K. & S., Inc.
By: /s/ Xxxxxx Xxxxxxxx 1/24/01
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Xxxxxx Xxxxxxxx, Chief Executive Officer Date
AGREED AND ACCEPTED:
By: /s/ Xxxxxxx X. Xxxx 1/24/01
-------------------------------------------- ----------------------
Xxxxxxx X. Xxxx Date
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