THE MARKED PORTIONS OF THIS EMPLOYMENT AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT EMPLOYMENT AGREEMENT
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REDACTED
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AS
FILED
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Exhibit
10.39
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THE
MARKED PORTIONS OF THIS EMPLOYMENT AGREEMENT HAVE BEEN OMITTED AND
FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT
THIS
EMPLOYMENT AGREEMENT
(this
“Agreement”),
dated
as of the 17th day of August, 2007 (“Effective
Date”),
by
and between Advanced Communication Technologies, Inc., a Florida corporation
(“ACT”
or
the
“Company”)
and
Xxxxxx X. Xxxxxx, an individual whose current address is 2248 Home Again Road,
Apopka, FL 32712 (“Executive”).
WITNESSETH
WHEREAS,
the
Company desires to employ Executive, and Executive desires to accept employment
by the Company, on the terms and conditions set forth herein.
NOW,
THEREFORE,
in
consideration of the mutual covenants and promises herein contained, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
agree
as follows:
1. Employment.
(a) ACT
hereby employs Executive, and Executive hereby accepts employment with ACT,
as
Chief Operating Officer, or such other executive position with similar
responsibilities and duties of a chief operating officer of a company as may
be
determined by the Board of Directors of ACT (the “Board”)
from
time to time during the Employment Period (as defined below).
(b) In
addition to his duties set forth in this Section 1 and in Section 3 below,
Executive shall at the request of the ACT CEO (as defined below) or the Board
serve as an officer or director of a subsidiary of ACT, without additional
compensation and subject to any policy of the Compensation Committee of the
Board (the “Compensation
Committee”)
with
respect to directors’ fees.
2. Term.
The
initial term of employment of Executive hereunder shall commence on the
Effective Date and shall continue until the second anniversary of the Effective
Date (the “Initial
Term”),
unless earlier terminated pursuant to §6, and shall be automatically renewed for
additional one (1) year terms (collectively with the Initial Term, the
“Employment
Period”)
thereafter unless terminated by either party by written notice to the other
given at least thirty (30) days prior to the expiration of the then current
term. If, prior to the second anniversary of the Initial Term, a Specified
Event
(as defined in Section 4.1(b) below) has occurred, the Initial Term shall
automatically be extended by one (1) year to the third anniversary of the
Effective Date.
3. Employment
and Duties.
3.1. Duties
and Responsibilities.
(a) Executive
shall perform all duties and functions customary for executives holding similar
offices with similarly situated companies. In addition, Executive shall perform
such duties and accept such responsibilities reasonably related to and
consistent with his positions as may be directed or assigned by the Board.
The
Executive shall report solely to the Board and its committees.
(b) During
the Employment Period, Executive shall (a) serve ACT faithfully and to the
best
of his ability; (b) use his best efforts to carry out his duties and
responsibilities; (c) devote such working time, attention and energy to his
services for the Company and the business of the Company as shall be reasonably
required; and (d) use his best efforts, skills and ability to promote the
Company’s interests and to perform such duties as from time to time may be
reasonably assigned to him and are consistent with his titles and positions
with
the Company.
(c) During
the Employment Period, in addition to any other duties or responsibilities
assigned to Executive, Executive shall be required to sign, and shall sign,
all
certifications and such other documents or instruments required of the Chief
Operating Officer of a public company or otherwise by (i) the Securities and
Exchange Commission, (ii) any exchange or association on which the Company’s
shares of capital stock are listed, (iii) any federal, state or local authority,
(iv) any other governmental, quasi-governmental or nongovernmental entity or
organization (foreign or domestic) that regulates or has authority over the
Company, and/or (v) the Company in connection with any of the
foregoing.
3.2. Observance
of Rules and Regulations.
Executive agrees to observe and comply with all applicable laws and regulations,
as well as rules and regulations of the Company with respect to the performance
of his duties, which do not conflict with the provisions of this
Agreement.
4. Compensation;
Expenses; Relationship.
4.1. Base
Salary.
(a) As
compensation for the services to be rendered hereunder by Executive, the Company
shall pay to Executive an annual Base Salary (the “Base
Salary”)
of
$187,500 during each year of the Employment Period. The Base Salary shall be
payable in equal monthly installments in accordance with the Company’s standard
payroll practices.
(b) The
annual Base Salary shall be increased to $225,000 for the portion of the
Employment Term thereafter (which increase shall be made on a ratable basis
for
the remainder of the then current calendar year) if (i) the Company or one
of
its wholly owned subsidiaries completes the acquisition of all of the assets
or
stock of [REDACTED] prior to the second anniversary of the date of this
Agreement or (ii) EBITDA of the Company for any twelve (12) consecutive calendar
month period ending prior to the second anniversary of the date of this
Agreement exceeds $[REDACTED] (each a “Specified
Event”).
The
determination of EBITDA for any twelve (12) complete calendar month period
shall
be made by the Compensation Committee based on the Company’s financial
statements for the applicable period. In the event that the Company or any
of
its subsidiaries acquires all or substantially all of the stock, equity or
assets of another company, companies, business, or businesses, EBITDA of the
Company for any twelve (12) complete calendar month period ending on the date
of
such acquisition or for any complete 12 month period ending thereafter shall
be
determined by the Compensation Committee in good faith on a pro forma basis
based on the financial statements of the Company and the acquired entity or
business for the applicable period.
2
4.2. Bonus
Compensation.
(a) Subject
to Section 4.2(c), Executive shall receive from the Company in each fiscal
year
during which this Agreement is in effect, beginning with the fiscal year ending
June 30, 2008, an annual “Performance Bonus” if earned in accordance with the
bonus plan set forth on Schedule
1
hereto.
The amount of the Performance Bonus earned for the fiscal year ending June
30,
2008 shall be reduced by the amount of the “Special Bonus”, if any, earned for
the five month period ending December 31, 2007. The Performance Bonus, if earned
for any fiscal year of the Employer, shall be paid in cash on the earlier of
30
days after the completion of the audit with respect to such fiscal year or
November 15 of the following fiscal year.
(b) Executive
shall receive a one time “Exit Bonus” in accordance with the Exit Bonus Plan set
forth on Schedule
2
hereto.
Any Exit Bonus payable to Executive by the Company shall be paid in cash not
later than thirty (30) days after a Disposition Event (as defined on
Schedule
2, paragraph (a).
(c) Executive
shall receive a one time “Special Bonus” if earned in accordance with the bonus
plan set forth on Schedule
1
hereto.
The Special Bonus, if earned, shall be paid in cash on or about March 15, 2008.
(d) Bonus
compensation earned under this Section 4.2 will be paid to Executive no later
than the time period specified in Treas. Reg. § 1.409A-1(b)(4) to qualify as a
short-term deferral.
4.3. Life
Insurance.
(a) During
the Employment Period, the Company shall provide term life insurance on the
life
of Executive with a death benefit equal to $2,000,000. The Company shall pay
all
premiums with respect to such life insurance. Executive shall designate the
beneficiary of such life insurance.
(b) In
addition to Section 4.3(a) above, the Company may, at its option, maintain
“key
man”
life
insurance on the life of Executive. Executive will cooperate with and assist
the
Company in the procurement of any such policy. The Company shall pay all
premiums for, and shall at all times be the beneficiary of, such “key
man”
life
insurance.
4.4. Other
Benefits.
Executive shall be eligible to participate in any health insurance programs
(but
not life insurance programs) that the Company makes available to all of its
executives, and the Company shall pay the premiums for such benefits.
4.5. Business
Expenses.
Executive will be reimbursed, in a reasonable amount of time, in accordance
with
the Company’s expense reimbursement policy, for business expenses upon
presentation of vouchers or other documents reasonably necessary to verify
the
expenditures and sufficient, in form and substance, to satisfy Internal Revenue
Service requirements for such expenses.
3
4.6. Automobile
Allowance.
Company
shall pay to Executive an automobile allowance in the amount of Seven Hundred
Fifty Dollars ($750.00) per month, payable at the time and in the manner
dictated by the Company’s regular payroll policies and procedures, but not less
frequently than monthly. Executive shall provide his own automobile and pay
all
operating expenses of any nature whatsoever with regard to such automobile.
4.7. Vacation.
Executive shall be entitled to take up to four (4) weeks of paid vacation per
calendar year, which shall be taken in accordance with the Company’s vacation
policy in effect from time to time for executives of comparable seniority.
Executive shall also be entitled to take a reasonable number of personal and
sick leave days, taking into account his responsibilities, the Company’s
policies and the practices of similarly situated companies.
4.8. Stock
Option Agreement.
The
parties incorporate herein as part of this Employment Agreement the Stock Option
Agreement between the Company and the Executive that is being executed
contemporaneously with this Employment Agreement.
5. No
Competitive Activities; Confidentiality; Invention
5.1. General
Restriction.
During
the Employment Period, and for the Restricted Period (as defined below),
Executive covenants and agrees that, except on behalf of the Company, he will
not, directly or indirectly:
(a) Competing
Business.
During
the Restricted Period, own, manage, operate, control, participate in the
ownership, management, operation or control of, be employed by, or provide
services as a consultant to, any individual or business that is involved in
business activities that are the same as, similar to or in competition with,
directly or indirectly, with any business activities conducted, or actively
planned, by the Company and/or its subsidiaries during the Employment Period
(it
being acknowledged that the Company’s and its subsidiaries’ businesses are
national in scope). The ownership of less than five percent (5%) of the
outstanding stock of any public corporation shall not be deemed a violation
of
this provision.
(b) Soliciting
Customers.
During
the Restricted Period, attempt in any manner to contact or solicit any
individual, firm, corporation or other entity (i) that is or has been, a
customer of the Company or any of its subsidiaries at any time during the
Employment Period, (ii) to which a proposal has been made by the Company or
any
of its subsidiaries during the Employment Period or (iii) appearing on the
Company’s new business target list, as such list has been prepared and
maintained in accordance with the Company’s past practice, in any of the above
cases for the purpose of providing services or products similar to the services
and products provided by the Company or any of its subsidiaries, or engaging
in
any activity which could be, directly or indirectly, competitive with the
business of the Company or any of its subsidiaries.
(c) Interfering
with Other Relations.
During
the Restricted Period, persuade or attempt to persuade any supplier, vendor,
licensor or other entity or individual doing business with the Company or any
of
its subsidiaries to discontinue or reduce its business with the Company or
any
of its subsidiaries or otherwise interfere in any way with the business
relationships and activities of the Company or any of its
subsidiaries.
4
(d) (i) Employees.
During
the Restricted Period, attempt in any manner to solicit any individual, who
is
at the time of such attempted solicitation, or at any time during the one (1)
year period preceding the termination of Executive’s service, an employee or
consultant of the Company or any of its subsidiaries, to terminate his or her
employment or relationship with the Company or any of its subsidiaries, or
engage such individual, as an employee or consultant.
(ii) During
the Restricted Period, cooperate with any other person in persuading, enticing
or aiding, or attempting to persuade, entice or aid, any employee of or
consultant to the Company or any of its subsidiaries to terminate his or her
employment or business relationship with the Company or any of its subsidiaries,
or to become employed as an employee or retained as a consultant by any person
other than the Company or any of its subsidiaries.
(e) Exceptions.
Nothing
in paragraphs (a) through (d) shall prohibit Executive from providing tax
accounting, financial accounting or tax consulting services to any business
or
person after the termination of his employment with the Company.
(f) Restricted
Period.
The
Restricted Period shall be equal to two (2) years after the Employment Period,
provided, however,
that in
the event the Severance Period is determined in accordance herewith to be six
(6) months, the Restricted Period shall be reduced to one (1) year.
5.2. Confidentiality
Agreement.
Executive shall not, either during the Employment Period or at any time
thereafter, other than in the performance of his duties hereunder, use or
disclose to any third person any Confidential Information of the Company or
any
of its subsidiaries, other than at the direction of the Company, or pursuant
to
a court order or subpoena, provided that Executive will give notice of such
court order or subpoena to the Company prior to such disclosure. Upon the
termination of Executive’s service with the Company for any reason, Executive
shall return any notes, records, charts, formulae or other materials (whether
in
hard copy or computer readable form) containing Confidential Information, and
will not make or retain any copies of such materials. Without limiting the
generality of the foregoing, the parties acknowledge that the Company and its
subsidiaries from time to time may be subject to agreements with its customers,
suppliers or licensors to maintain the confidence of such other persons’
confidential information. The terms of such agreements may require that the
Company’s employees, consultants, contractors and other personnel, including
Executive, be bound by such agreements, and Executive shall be deemed so bound
upon notice to him of the terms of such agreements. The term “Confidential
Information”
as
used
herein shall mean any confidential or proprietary information of the Company
or
any of its subsidiaries whether of a technical, engineering, operational,
financial or economic nature, including, without limitation, all prices,
discounts, terms and conditions of sale, trade secrets, know-how, customers,
inventions, business affairs or practices, systems, products, product
specifications, designs, plans, manufacturing and other processes, data, ideas,
details and other information of the Company. Confidential Information shall
not
include information which can be proven by Executive to have been developed
by
his own work as of the Effective Date completely independent of its disclosure
by the Company or which is in the public domain, provided such information
did
not become available to the general public as a result of Executive’s breach of
this Paragraph 5.2.
5
5.3. Disclosure
of Innovations.
Executive shall make prompt and full disclosure to the Company and solely the
Company of all writings, inventions, processes, methods, plans, developments,
improvements, procedures, techniques and other innovations of any kind that
Executive may make, develop or reduce to practice, alone or jointly with others,
at any time during the Employment Period and for a period of one (1) year
thereafter, whether during working hours or at any other time and whether at
the
request or upon the suggestion of the Company or otherwise, and whether or
not
they are eligible for patent, copyright, trademark, trade secret or other legal
protection (collectively, “Innovations”).
Examples of Innovations shall include, but are not limited to, discoveries,
research, formulas, tools, know-how, marketing plans, new product plans,
production processes, advertising, packaging and marketing techniques and
improvements to computer hardware or software.
5.4. Assignment
of Ownership of Innovations.
All
Innovations shall be the sole and exclusive property of the Company. Executive
hereby assigns all rights, title or interest in and to the Innovations to the
Company. At the Company’s request and expense, during the Employment Period and
at any time thereafter, Executive will assist and cooperate with the Company
in
all respects and will execute documents and give testimony to obtain, maintain,
perfect and enforce for the Company any and all patent, copyright, trademark,
trade secret and other legal protections for the Innovations.
5.5. Remedies.
Executive acknowledges that the restrictions contained in the foregoing
paragraphs 5.1 through 5.4, in view of the nature of the businesses in which
the
Company and its subsidiaries are engaged, are reasonable and necessary in order
to protect the legitimate interests of the Company and its subsidiaries, and
that the legal remedies for a breach of any of the provisions of this section
5
will be inadequate and that such provisions may be enforced by restraining
order, injunction, specific performance or other equitable relief. Such
equitable remedies shall be cumulative and in addition to any other remedies
which the injured party or parties may have under applicable law, equity, this
Agreement or otherwise. Executive shall not, in any action or proceeding to
enforce any of the provisions of this Paragraph 5, assert the claim or defense
that an adequate remedy at law exists. The prevailing party shall be entitled
to
recover its legal fees and expenses in any action or proceeding for breach
of
this section 5.
5.6. Company
Property.
All
Confidential Information; all Innovations; and all correspondence, files,
documents, advertising, sales, manufacturers’ and other materials or articles or
other information of any kind, in any media, form or format furnished to
Executive by the Company, which may not deemed confidential, shall be and remain
the sole property of the Company (“Company
Property”).
Upon
termination or at the Company’s request, whichever is earlier, Executive shall
immediately deliver to the Company all such Company Property.
5.7. Public
Policy/Severability.
The
parties do not wish to impose any undue or unnecessary hardship upon Executive
following his departure from the Company’s service. The parties have attempted
to limit the provisions of this section 5 to achieve such a result, and the
parties expressly intend that all provisions of this section 5 be construed
to
achieve such result. If, contrary to the effort and intent of the parties,
any
covenant or other obligation contained in this section 5 shall be found not
to
be reasonably necessary for the protection of the Company, to be unreasonable
as
to duration, scope or nature of restrictions, or to impose an undue hardship
on
Executive, then it is the desire of the parties that such covenant or obligation
not be rendered invalid thereby, but rather that the duration, scope or nature
of the restrictions be deemed reduced or modified, with retroactive effect,
to
render such covenant or obligation reasonable, valid and enforceable. The
parties further agree that in the event a court, despite the efforts and intent
of the parties, declares any portion of the covenants or obligations in this
section 5 invalid, the remaining provisions of this section 5 shall nonetheless
remain valid and enforceable.
6
6. Termination.
6.1. Termination
For Cause.
Notwithstanding anything to the contrary contained herein, this Agreement may
be
terminated prior to the expiration of the Employment Period upon seven (7)
days’
prior written notice from the Company to Executive for “Cause”.
The
effective date of termination is hereinafter referred to as the “Termination
Date”.
Upon a
termination for Cause, Executive’s right to Base Salary, any bonus pursuant to
Section 4 and employment benefits shall cease as of the Termination Date, and
Company shall have no further obligations or liabilities to Executive for
compensation whether under this Agreement or otherwise other than as set forth
in Section 6.3 below. As used herein and throughout this Agreement, the term
“Cause”
shall
mean (i) any act or omission by Executive that constitutes malfeasance in the
course of Executive’s duties hereunder, or the Executive has been grossly
negligent, or insubordinate in carrying out his duties hereunder, (ii) a
material breach of this Agreement by Executive that is not cured within ten
(10)
days of receipt of notice thereof, (iii) Executive’s breach of a fiduciary duty
of loyalty owed to the Company or its affiliates, or (iv) Executive shall have
been (A) charged with or indicted for a criminal offense or crime constituting
a
felony, (B) convicted of or pleaded nolo contendere to, a criminal offense
or
crime constituting a felony or a misdemeanor, or (C) convicted of or pleaded
nolo contendere to any act involving fraud, dishonesty or moral turpitude (other
than minor traffic infractions or similar minor offenses).
6.2. Termination
Without Cause or for Good Reason.
(a) Without
Cause.
The
employment of Executive by the Company may be terminated by the Company or
Executive without Cause and for any reason or no reason at any time prior to
the
expiration of the Employment Period upon written notice.
(b) Good
Reason.
The
employment of Executive by the Company may be terminated by Executive upon
seven
(7) days’ prior written notice from Executive to the Company for “Good Reason,”
(as defined below) which notice must be given within thirty (30) days after
the
occurrence of the event giving rise to the “Good Reason.” For purposes of this
Agreement, “Good
Reason”
shall
mean the occurrence of any of the following without Executive’s consent: (i) a
material reduction in Executive’s duties or authority, or a change in reporting
relationship which requires Executive to report directly or indirectly to any
person or persons other than the Board or a Committee of the Board; (ii) a
requirement that Executive be relocated to an office outside of the New York
City metropolitan area; (iii) a reduction in Base Salary during the Employment
Term; or (iv) Company’s violation of any material term of this Agreement,
provided that Executive first gives Company written notice of the violation
and
Company fails to cure the violation within thirty (30) days after receipt of
the
written notice.
7
(c)
Compensation on Termination:
In the
event that the Executive’s employment with the Company is terminated for any
reason, the Company shall pay to Executive (i) any Base Salary accrued through
the Termination Date, (ii) a reimbursement for all business expenses and
automobile and other allowances incurred in accordance with Paragraph 4.7 and
4.8, prior to the Termination Date, and (iii) any Performance Bonus, to the
extent any of such bonuses have been earned in accordance with this Agreement
but not yet paid by the Company prior to the Termination Date, which amounts
shall be payable in cash to Executive in a lump sum no later than 30 days after
the Termination Date. In the event Executive’s employment is terminated by the
Company for any reason other than for Cause or by Executive for Good Reason
at
any time after the 270th
day in
the then current fiscal year, a Performance Bonus shall be earned for that
fiscal year in accordance with Schedule
1,
except
that the amount of such Performance Bonus shall be pro-rated by the number
of
days (out of 365) that Executive remained employed by the Company in such fiscal
year. Any such bonus shall be paid upon satisfaction of the conditions set
forth
in Schedule
1
hereto
and Section 4.2(a). Any such Bonus shall be paid in accordance with Section
4.2(a). In the event that the Executive’s employment with the Company is
terminated by the Company without Cause (which shall not include an election
not
to renew the Employment Term) or by Executive for Good Reason, Company shall
also pay Executive an amount of Base Salary (“Severance
Payment”)
which
would have been payable to Executive during (x) the six (6) month period
immediately following the Termination Date, if a Specified Event has not
occurred prior to the Termination Date or (y) the twelve (12) month period
immediately following the Termination Date, if a Specified Event has occurred
prior to the Termination Date (in either case, the “Severance
Period”).
The
Severance Payment shall be paid in accordance with the Company’s standard
payroll practices over the course of the Severance Period after the date on
which Executive incurs a “separation from service,” as such term is defined in
Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the
“Code”),
and
regulations thereunder, from Employer (the “Separation
Date”).
Except as provided in the preceding sentence, the Company shall have no further
obligations or liabilities to Executive for compensation whether under this
Agreement or otherwise and Executive’s right to further compensation and
benefits hereunder (including, but not limited to, unvested stock) shall
immediately cease.
8
6.3. Specified
Employee.
Notwithstanding Section 6.2(c), if, at the Executive’s Separation Date, he is a
“specified employee”, as such term is defined in Section 409A(a)(2)(B)(i) of the
Code, of the Employer, as determined by the Employer, (a) in the case of a
six
(6) month Severance Period, the payments described in Section 6.2(c) will be
paid to the Executive in a lump sum on the first business day of the seventh
month following the Separation Date, without interest and (b) in the case of
a
twelve (12) month Severance Period, (i) 50% of the Severance Payment shall
be
paid in a lump sum on the first business day of the seventh month following
the
Separation Date and (ii) the remaining 50% of the Severance Payment shall be
paid in accordance with the Company’s standard payroll practices over the course
of remaining six (6) months of the Severance Period. Notwithstanding the
foregoing, in the event that Executive’s employment is terminated by the Company
for any reason other than for Cause or by Executive for Good Reason, the
payments described in Section 6.2(c) shall be made in a lump sum upon the
Executive’s Separation Date (and not on the first day of the seventh month
following the Separation Date) to the extent the amounts do not exceed the
limit
set forth in Treas. Reg. § 1.409A-1(b)(9)(iii). Amounts in excess of the limit
will be paid on the first day of the seventh month following the Separation
Date.
6.4. Termination
of Other Positions; Termination of Severance Payments.
Upon
the Termination Date, Executive hereby resigns from all positions as officer,
director or employee Executive may then hold with the Company or its
subsidiaries, and as fiduciary of any benefit plan of the Company. Executive
shall promptly execute any further documentation as requested by the Company
in
furtherance of the requirements of this Section 6.4 and, if Executive is to
receive any payments from the Company, execution of such further documentation
shall be a condition thereof. Executive’s right to receive the Severance Payment
is expressly conditioned upon receipt by the Employer within thirty (30) days
following the Termination Date of a written release of claims related to
Executive’s employment, or the termination of such employment, against the
Company and its affiliates in form and substance reasonably acceptable to the
Company and its counsel, executed by Executive. In the event that Executive
breaches any of the covenants, terms or provisions of Section 5 hereof, without
limiting any other rights that the Company may have, including the right to
enforcement of the provisions of Section 5 hereof for the entire term, the
Company’s obligation to make payments under this Section 6 shall immediately
terminate.
6.5. Severance
Payment upon Dismissal of Charges or Not Guilty Verdict.
In the
event Executive is terminated by the Company prior to the expiration of the
Employment Period for Cause as a result of the circumstances described in
Section 6.1(iv)(A), and either (i) the felony charges relating to the
circumstances of such termination for Cause are ultimately dismissed or
withdrawn in their entirety, or (ii) Executive’s indictment does not result in a
“guilty” verdict, then Executive’s termination for cause shall be deemed to have
been without Cause and the Executive shall be entitled to the Severance Payment
described in Section 6.2(c), provided,
that
Executive makes prompt and reasonable efforts to collect the Severance Payment
in accordance with Treas. Reg. 1.409A-3(g). Notwithstanding the foregoing,
the
Severance Payment in connection with such circumstances shall be made no later
than 74 days after such dismissal or withdrawal of charges occurs or a final
verdict other than a “guilty” verdict is rendered.
9
7. Disability
or Death.
7.1. Disability.
If,
during the Employment Period, Executive becomes disabled or incapacitated as
determined under the Company’s Long Term Disability Policy(“Permanently
Disabled”),
the
Company shall have the right at any time thereafter (but in no event less than
120 days after the event causing such disability or incapacity), so long as
Executive is then still Permanently Disabled, to terminate this Agreement upon
thirty (30) days’ prior written notice to Executive. In the event the Company
does not have a Long Term Disability Policy at the time of the event causing
the
Executive to become Permanently Disabled, “Permanently
Disabled”
shall
mean Executive’s inability, after reasonable accommodation as required by law,
to fully perform his duties and responsibilities hereunder to the full extent
required by the Company by reason of illness, injury or incapacity for 120
consecutive days or for more than six (6) months during any twelve (12) month
period. If the Company elects to terminate the Executive’s employment with the
Company in accordance with this Section 7.1, the Company shall have no further
obligations or liabilities to Executive for compensation, whether under this
Agreement or otherwise, other than as set forth in Section 6.3.
7.2. Death.
If
Executive dies during the Employment Period, this Agreement and Executive’s
employment with the Company shall automatically terminate as of the date of
Executive’s death. Upon any such termination, the Company shall have no further
obligations or liabilities to Executive for compensation, whether under this
Agreement or otherwise, other than as set forth in Section 6.3.
8. Indemnification.
The
Company shall indemnify Executive for any losses, damages, liabilities,
judgments, claims, costs, penalties and expenses incurred by Executive or on
his
behalf (including, without limitation, costs and reasonable attorneys’ fees and
costs), resulting
from any act or omission of Company
or from
the Company’s failure to perform any of their obligations contained in this
Agreement. The Company shall be obligated to indemnify Executive against those
liabilities incurred in connection with any proceeding to which either is made
a
party as the result of Executive’s performing his duties hereunder solely in
accordance with, and as permitted by, the Company’s articles of incorporation.
As an officer of the Company and/or a director (if elected as such) Executive
shall be entitled to statutory indemnification from the Company to the maximum
extent permitted by law.
9. Governing
Law.
This
Agreement shall be governed by the internal laws of the State of New York.
Any
action to enforce any term hereof shall be brought exclusively within the state
or federal courts sitting in New York to which jurisdiction and venue all
parties hereby submit themselves.
10. Binding
Effect.
Except
as otherwise herein expressly provided, this Agreement shall be binding upon,
and shall inure to the benefit of the parties hereto, their respective heirs,
legal representatives, successors and assigns.
11. Assignment.
Any
assignee of the Company shall have the right to enforce the restrictive
covenants set forth in this Agreement, and the Company shall have the right
to
assign this Agreement and the right to enforce such covenants to any successor
or assign of the Company.
10
12. Notices.
All
notices, designations, consents, offers, acceptances, waivers or any other
communication provided for herein, or required hereunder, shall be sufficient
if
in writing and if sent by registered or certified mail, return receipt
requested, overnight courier, or delivered by hand to (i) Executive at his
last
known address on the books of the Company or (ii) the Company at its principal
place of business.
13. Additional
Documents.
Each of
the parties hereto agrees to execute and deliver, without cost or expense to
any
other party, any and all such further instruments or documents and to take
any
and all such further action reasonably requested by such other of the parties
hereto as may be necessary or convenient in order to effectuate this Agreement
and the intents and purposes thereof.
14. Counterparts.
This
Agreement may be executed simultaneously in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and
the same instrument, and such counterparts may be delivered by facsimile
transmission, which facsimile copies shall be deemed originals.
15. Entire
Agreement.
This
Agreement contains the sole and entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior agreements, discussions, negotiations, commitments and understandings
among the parties hereto with respect to the subject matter hereof. There are
no
representations, agreements, arrangements or understandings, oral or written,
between or among the parties concerning the subject matter hereto, which are
not
fully expressed herein or in any supplemental written agreements of even or
subsequent date hereof.
16. Severability.
If any
provision of this Agreement, or the application thereof to any person or
circumstances, shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby,
but
rather shall be enforced to the greatest extent permitted by law.
17. Modification.
This
Agreement cannot be changed, modified or discharged orally, but only if
consented to in writing by all parties.
18. Contract
Headings.
All
headings of the Paragraphs of this Agreement have been inserted for convenience
of reference only, are not to be considered a part of this Agreement, and shall
in no way affect the interpretation of any of the provisions of this
Agreement.
19. Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants, or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition, nor
shall any waiver or relinquishment of any right or power hereunder at any one
time or more times be deemed a waiver or relinquishment of such right or power
at any other time or times.
20. Representation
of Executive.
Executive, with the full knowledge that the Company is relying thereon,
represents and warrants that he has not made any commitment inconsistent with
the provisions hereof and that he is not under any disability which would
prevent him from entering into this Agreement and performing all of his
obligations hereunder.
11
21. Joint
Participation in Drafting.
Each
party to this Agreement participated in the drafting of this Agreement. As
such,
the language used herein shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of strict
construction shall be applied against any party to this Agreement.
22. D&O
Insurance.
The
Company agrees to maintain directors and officers liability insurance in
reasonable amounts and with reasonably acceptable insurers.
23. Enforcement
Costs.
In the
event any dispute, controversy or claim arises out of or in connection with
this
Agreement or the claims released in this Agreement, the prevailing party shall
be entitled to all reasonable attorneys’ fees, costs and expenses.
[Signature
Page Follows]
12
IN
WITNESS WHEREOF
the
parties hereto have executed this Agreement as of the day and year first above
written.
|
ADVANCED
COMMUNICATIONS TECHNOLOGIES, INC.
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|||
|
By:
|
/s/
Xxxxxxx X. Xxxxxx
|
||
|
|
Name:
Xxxxxxx
X.
Xxxxxx
|
||
|
|
Title:
Director/Chair,
Compensation
Committee
|
||
|
EXECUTIVE:
|
|||
|
/s/
Xxxxxx X. Xxxxxx
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|||
|
Xxxxxx
X. Xxxxxx
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13
SCHEDULE
1
Performance
Bonus
The
Performance Bonus payable to Executive (if any) for any fiscal year of the
Company ending during the Employment Term, commencing with the fiscal year
ending June 30, 2008, shall be paid in cash and in an amount determined in
accordance with this Schedule
1.
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Employment Agreement to which this Schedule is
attached. As used in this Schedule
1,
the
following terms shall have the following meanings:
(a) “Actual EBITDA”
means,
with respect to any fiscal year of the Company, EBITDA for such fiscal year
calculated on the basis of the Company’s audited financial statements for such
fiscal year.
(b) “Consolidated Net Income”
means,
for any period, the net income (or loss) of the Company and its subsidiaries
for
such period on a consolidated basis, after deducting all operating expenses,
provisions for all taxes and reserves (including reserves for deferred income
taxes) and all other proper deductions, all determined in accordance with
generally accepted accounting principles consistently applied, after eliminating
all intercompany items, but excluding from the definition of Consolidated Net
Income any extraordinary gains and/or losses and any gains and/or losses from
the sale or other disposition of assets other than in the ordinary course of
business, all determined in accordance with generally accepted accounting
principles consistently applied.
(c) “EBITDA”
means,
with respect to any fiscal year, the sum of the Consolidated Net Income (or
loss) of the Company and its subsidiaries for such fiscal year, calculated
in
accordance with generally accepted accounting principles consistently applied
but excluding any extraordinary items of income, plus
all
amounts deducted in the computation thereof on account of (a) interest expense
(net of any interest income), (b) income taxes, (c) depreciation and
amortization, (d) charges for stock-based compensation, (e) amounts accrued
for
Success or Exit Bonus expense, (f) implementation expenses for Xxxxxxxx-Xxxxx
compliance not to exceed $150,000, and (g)
expenses incurred to file a Demand Registration Statement on behalf of Investor
Stockholders, as defined in that certain Registration Rights Agreement dated
[August 7, 2007
]; and
(h) H.I.G. Capital L.L.C. management fees accrued or paid during such fiscal
year.
(d) “Performance
Bonus”
means,
with respect to any fiscal year of the Company:
|
(i)
|
if
Actual EBITDA for such fiscal year is less than eighty percent (80%)
of
the Target EBITDA for such fiscal year,
zero;
|
|
(ii)
|
if
Actual EBITDA for such fiscal year is equal to eighty percent (80%)
of the
Target EBITDA for such fiscal year, an amount equal to thirty-five
percent
(35%) of the Base Salary;
|
|
(iii)
|
if
Actual EBITDA for such fiscal year is more than eighty percent (80%)
and
less than one hundred percent (100%) of the Target EBITDA for such
fiscal
year, an amount equal to the sum of (A) thirty five percent (35%)
of the
Base Salary, plus
(B) the product of one and 75/100 percent (1.75%) of the Base Salary
multiplied by
the number of full percentage points by which Actual EBITDA exceeds
eighty
percent (80%) of the Target EBITDA;
and
|
14
|
(iv)
|
if
Actual EBITDA for such fiscal year equals or exceeds one hundred
percent
(100%) of the Target EBITDA for such fiscal year, an amount equal
to
seventy percent (70%) of the Base
Salary.
|
(e) “Special
Bonus”
means,
with respect to the five month period ending December 31, 2007:
|
(i)
|
if
Special Bonus Actual EBITDA for such five month period is less than
eighty
percent (80%) of the Special Bonus Target EBITDA for such five month
period, zero;
|
|
(ii)
|
if
Special Bonus Actual EBITDA for such five month period is equal to
eighty
percent (80%) of the Special Bonus Target EBITDA for such five month
period, an amount equal to fourteen and 6/100 percent (14.6%) of
the Base
Salary;
|
|
(iii)
|
if
Special Bonus Actual EBITDA for such five month period is more than
eighty
percent (80%) and less than one hundred percent (100%) of the Special
Bonus Target EBITDA for such fiscal year, an amount equal to the
sum of
(A) fourteen and 6/100 percent (14.6%) of the Base Salary, plus
(B) the product of 73/100 percent (0.73%) of the Base Salary multiplied by
the number of full percentage points by which Special Bonus Actual
EBITDA
exceeds eighty percent (80%) of the Special Bonus Target EBITDA;
and
|
|
(iv)
|
if
Special Bonus Actual EBITDA for such five month period equals or
exceeds
one hundred percent (100%) of the Special Bonus Target EBITDA for
such
five month period, an amount equal to twenty nine and 17/100 percent
(29.17%) of the Base Salary.
|
(f) “Special
Bonus Actual EBITDA”
means,
with respect to the five month period ending December 31, 2007, EBITDA for
such
five month period calculated on the basis of the Company’s reviewed financial
statements for such five month period as included in the Company’s filings with
the Securities and Exchange Commission.
(g) “Special
Bonus Target EBITDA”
means
$[REDACTED].
(h) “Target
EBITDA”
means,
(a) for the Company’s 2008, 2009 and 2010 fiscal years:
|
·
|
2008
- $[REDACTED]
|
15
|
·
|
2009
- $[REDACTED]
|
|
·
|
2010
- $[REDACTED];
|
and
(b)
for each calendar year of the Company thereafter, an amount to be determined
by
the Compensation Committee no later than 30 days after the Board’s approval of
the Company’s budget for such calendar year; provided,
that if
the Company or any of its subsidiaries in any calendar year enters into any
extraordinary transaction, such a business acquisition or disposition, the
Compensation Committee in the exercise of its sole discretion may, at any time
during such calendar year, adjust upward or downward the Target EBITDA for
such
calendar year to take into account such extraordinary transaction. The
Compensation Committee shall notify Executive of the Target EBITDA for any
such
calendar year promptly after determining such Target EBITDA.
16
SCHEDULE
2
Exit
Bonus
The
“Exit
Bonus”
payable
to Executive (if any) shall be paid in cash and in an amount determined in
accordance with this Schedule
2.
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Employment Agreement to which this Schedule is
attached. As used in this Schedule
2,
the
following terms shall have the following meanings:
(a) “Disposition
Event”
means
one of the following events occurring while Executive is an Employee of the
Company or after termination of Executive’s employment with the Company without
Cause or by the Executive for Good Reason: (A) a liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, (B) the
sale
or other transfer of a majority of the outstanding shares of common stock of
the
Company in a single transaction or a series of related transactions, in either
case to any entity who is not an affiliate of the Company, or of a stockholder
thereof, immediately prior to such transaction or transactions,
(C) a
consolidation or merger of the Company with or into any other person(s), entity
or entities in which less than a majority of the outstanding voting power of
the
surviving person(s), entity or entities is held by persons or entities who
were
stockholders of the Company prior to such event or (D) a sale or other
disposition (whether in a single transaction or a series of related
transactions) of substantially all of the assets of the Company.
(b) “Exit
Bonus”
means,
in the case of any Target Disposition Event that occurs while Executive is
an
employee of the Company, an amount (the “Calculated
Amount”)
equal
to (i) $805,000 multiplied
by
(ii) a
fraction the numerator of which is Target Amount and the denominator of which
is
three (3)1 .
Notwithstanding the foregoing, (A) in no event shall the Exit Bonus exceed
$805,000, (B) in no event shall the sum of the Exit Bonus and any other amounts
required to be taken into account under Section 280G of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the “Code”)
in
connection with the Change of Control exceed 299% of the Executive’s “Base
Amount” as determined pursuant to Section 280G of the Code, and (C) in
the
case of any Target Disposition Event that occurs after
the
termination of Executive’s employment with the Company without Cause or by the
Executive for Good Reason, the Exit Bonus shall equal an amount equal to the
quotient of the Calculated Amount divided by two (2).
(c) “Investor”
means
ACT-DE LLC.
(d) “Investment
Amount”
means
$6,300,000.
(e) “Investor
Proceeds”
means
the total amount of dividends, distributions and redemption or sales proceeds
received (credited on the date actually received) with respect to Investor
Securities, during the period beginning on the date hereof and ending on the
date of the first Disposition Event to occur after the Closing Date.
1
This is
to scale across the 3 points between 2 times and 5 times the Investment
Amount.
17
(f) “Investor
Securities”
means
the equity securities of the Company acquired by the Investor on the Closing
Date, and any other equity securities of the Company issued upon conversion
of
such equity securities
(g) “Purchase
Agreement”
means
that certain Purchase Agreement, of even date herewith, among the Company,
the
Investor and certain other purchasers of Series C Preferred Stock.
(h) “Target
Amount”
means,
with respect to a Target Disposition Event, an amount equal to (i) the quotient
of (A) the Investor Proceeds divided
by
(B) the
Investment Amount minus
(ii) two
(2). In no event shall the Target Amount exceed three (3).
(i) “Target
Disposition Event”
means
a
Disposition
Event in which the Investor Proceeds exceeds two (2) times the Investment
Amount.
18
