XXXXXX CAPITAL CORP.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement"), effective as of January
1, 2005, by and between XXXXXX CAPITAL CORP., a Nevada corporation ("XXXXXX"),
and Xxxxx Xxxxx (the "Executive").
WHEREAS, the Executive has served XXXXXX, has been instrumental to the
success of XXXXXX to date, and has earned the respect of XXXXXX'x Board of
Directors and XXXXXX wishes to employ Executive in the capacity of Executive
Vice President and Chief Operating Officer; and
WHEREAS, the Executive wishes to become an employee of XXXXXX as its Chief
Executive Officer; and
WHEREAS, the parties believe it to be in their mutual interest to set
forth in writing the terms and conditions of Executive's employment by XXXXXX;
and
WHEREAS, the Agreement shall govern the employment relationship between
the parties from and after the effective date hereof and it supersedes all
previous employment agreements between them, except as defined below, either
written or oral, heretofore made.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. Recitals. The above recitals are true and correct and fully
incorporated herein and form an integral part of this Agreement.
2. Intent and Scope of Agreement. Executive shall be an important member
of XXXXXX'x management team and is essential to its continued success and
growth. During the Executive's service to XXXXXX, its business has significantly
improved. XXXXXX understands that Executive has foregone, and is likely to be
presented with, more lucrative business and employment opportunities and wishes
to retain the services of Executive pursuant to a written employment agreement.
3. Employment. XXXXXX hereby employs the Executive to serve as its EVP &
COO, and the Executive hereby accepts such employment with XXXXXX upon the terms
and conditions hereinafter set forth. The duties, responsibilities and
requisites of Executive shall remain commensurate with such title and shall not
diminish in quality from that currently experienced by Executive. 4. Term. The
term (which, for purposes of the Agreement, shall include any extensions) of the
Agreement shall commence as of the date of the signing of this Agreement, and,
except as otherwise provided in Section 12 hereof, shall terminate three years
from such commencement date (the "Initial Term"), and shall include all
additional periods, as extended. At the expiration date, and each year
thereafter, this Agreement shall be renewed upon mutual consent and agreed upon
terms, of XXXXXX and Executive for an additional period to be negotiated by the
parties.
5. Compensation
A. Base Compensation. For all services rendered during the term of
this Agreement by the Executive to XXXXXX, the Executive shall receive base
compensation of $300,000 per annum (the "Base Compensation"). XXXXXX shall pay
Executive the Base Compensation in twenty-four (24) equal Semi-Monthly payments
commencing on the commencement date as provided in section 4 hereof, and paid
every 15th and every 30th of the month (except the month of February, which
shall be paid on the 28th). The Base compensation shall increase to $325,000 per
annum when and if XXXXXX is successful it acquiring the assets of Indian River
Labs and certain assets of pHarlo Citrus Technologies. The effective base
compensation will remain in effect and shall increase annually at a rate
determined by the Board of Directors' Compensation Committee.
B. Bonus Payment. Given that Executive is key to XXXXXX'x continued
financial success and growth of its business XXXXXX desires to reward and
incentivize Executive through a bonus arrangement. Executive shall enjoy and
receive an annual bonus determined by five percent (5%) of operating earnings as
defined in paragraph 12G. The Board of Directors of XXXXXX, in its absolute and
sole discretion, may grant a discretionary bonus, in addition to the incentive
bonus (as described above) for services it considers above and beyond the scope
of Executive's responsibilities. A discretionary bonus may be paid in cash and
or stock options, at the sole discretion of the Board of Directors.
C. Additional Compensation to Executive. In addition to the
compensation stated above, Executive shall receive an option to purchase up to
1,000,000 shares of common stock in XXXXXX, which option shall vest and be
exercisable pursuant to the Notice of Grant dated August 25, 2004. A true and
correct copy of the Notice of Grant is attached hereto as Exhibit "A".
Notwithstanding the foregoing, the vesting of the option shall be pursuant to
the vesting schedule contained in the Notice of Grant ("Vesting Schedule"). In
addition, the Board of Directors of Xxxxxx Capital Corp. may, in its sole
discretion, grant Executive additional performance compensation in the form or
either cash or options or both.
D. Board of Directors Compensation. If during the term of this
Agreement the Executive is invited to become a member of the Board of Directors,
in addition to the compensation stated above, Executive shall receive
compensation of $2,500 per month for serving as a member of the Board of
Directors of Xxxxxx Capital Corp.
6. Duties and Restrictions.
2
6.1 Position. During the term of this Agreement, the Executive shall serve
as Chief Executive Officer of XXXXXX or in a mutually agreeable position of
greater responsibility and status with XXXXXX, and shall devote time, attention,
energy and skills to the faithful and diligent performance of his duties,
including, without limitation, participating in the prosecution or defense of
any litigation on behalf of XXXXXX, which may include traveling as reasonably
requested by XXXXXX. Employee agrees to devote 100% of his business time,
attention, skill, and efforts to the performance of his duties and
responsibilities on behalf of XXXXXX which shall be assigned to him from time to
time by the XXXXXX. "100% of his business time" shall mean Monday through
Friday, excluding holidays as defined in 8(a) of this Agreement. Executive shall
also devote reasonable additional time (such as travel) from time to time as
requested by XXXXXX. Nothing in this Agreement shall preclude Executive from
devoting reasonable periods required for:
(a) serving as a director or member of a committee of any organization
or corporation involving no conflict of interest with the interests
of Xxxxxx;
(b) serving as a consultant in his area of expertise (in areas other
than in connection with the business of Xxxxxx), to government,
industrial, and academic panels where it does not conflict with the
interests of Xxxxxx; and
(c) managing his personal investments or engaging in any other
noncompeting business;
provided that such activities do not materially interfere with the regular
performance of his duties and responsibilities under this Agreement. "The
Business of Xxxxxx" for purposes of this paragraph and this Agreement shall mean
work in the area of telecommunications.
6.2 Non-Disclosure. Executive agrees that he will not disclose any
information which is treated by Xxxxxx as confidential, including, but not
limited to, information relating to the business of Xxxxxx, any of Xxxxxx'x
products, customers, affairs, trade secrets, developments, methods of
distribution and any other information relating to Xxxxxx which Xxxxxx shall
xxxx proprietary, to any person, firm, company, corporation, association, or any
other entity provided that disclosure of confidential information may be made
(i) to the extent that such information is generally available and known in the
industry, through no action of Executive, or (ii) as required by law.
6.3 Return of Documents. Upon the expiration or termination of this
Agreement, Executive shall not remove from Xxxxxx, without written consent of
Xxxxxx, any manuals, records, drawings, blueprints, data, tables, calculations,
letters, documents, or any copy or other reproduction thereof, or any other
property or confidential information, of or pertaining to Xxxxxx or any of its
subsidiaries. All of the foregoing shall be returned to Xxxxxx on or before the
date of expiration or termination of employment.
3
6.4 No Actions In Conflict of Xxxxxx'x Interest Executive recognizes that
the services to be performed by him pursuant to this Agreement are special,
unique and extraordinary. The parties confirm that it is reasonably necessary
for the protection of Xxxxxx'x goodwill that Executive agree not to act in any
way that would be detrimental to Xxxxxx and constitute a conflict of interest.
Therefore, during the term of this Agreement, Executive will not, directly or
indirectly, except for the benefit of Xxxxxx:
(i) solicit, cause or authorize, directly or indirectly, to be solicited
for or on behalf of himself or third parties from parties who are or
were customers of Xxxxxx (including its present and future
subsidiaries and affiliates) at any time during the term of this
Agreement, any business similar to the business transacted by Xxxxxx
with such customer. This shall not preclude Executive from
soliciting the services of a supplier or customer of Xxxxxx in
furtherance of a noncompeting business as allowed under Paragraph
6(a) hereof; or
(ii) accept or cause or authorize, directly or indirectly, to be accepted
for or on behalf of himself or third parties, business from any such
customers of Xxxxxx (including its present and future subsidiaries
and affiliates), except as allowed in the last sentence of Paragraph
6.4 (i) above; or
(iii) solicit, or cause or authorize, directly or indirectly, to be
solicited for employment for or on behalf of himself or third
parties, any persons who was at any time during the term of this
Agreement, employees of Xxxxxx (including its present and future
subsidiaries and affiliates); or
(iv) employ or cause or authorize, directly or indirectly, to be employed
for or on behalf of himself or third parties, any such employees of
Xxxxxx (including its present and future subsidiaries and
affiliates); or
(v) use the trade names, trademarks, or trade dress of any of the
products of Xxxxxx (including its present and future subsidiaries
and affiliates); or any substantially similar trade name, trademark
or trade dress likely to cause, or having the effect of causing,
confusion in the minds of manufacturers, customers, suppliers and
retail outlets and the public generally; provided however, that
Executive acknowledges that the restrictions contained in this
paragraph 6.4(v) shall continue permanently and shall not be limited
to any time period after the termination of this Agreement and/or
Executive's employment with Xxxxxx unless authorized by Xxxxxx or
its assigns through a license or similar agreement.
4
6.5 Assignment of Inventions. If at any time during the term of this
Agreement, or for a one year period following the termination of this Agreement
and/or Executive's employment, (either alone or with others) Executive makes,
conceives, creates, discovers, invents or reduces to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
trade secret, or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright, trademark or similar
statutes or subject to analogous protection (each, an "Invention") that (i)
relates to the Business of Company or any of its Affiliates or any customer of
or supplier to Company or any of its Affiliates or any of the products or
services being developed, manufactured or sold by Xxxxxx or any of its
Affiliates or which may be used in relation therewith; or (ii) results from
tasks assigned to Executive by Xxxxxx or any of its Affiliates; or (iii) results
from the use of premises or personal property (whether tangible or intangible)
owned, leased or contracted for by Xxxxxx or any of its Affiliates, then all
such Inventions and the benefits thereof are and shall immediately become the
sole and absolute property of Xxxxxx and its assigns, as works made for hire or
otherwise. Executive hereby agrees that he shall promptly disclose to Xxxxxx (or
any persons designated by it) each such Invention. Executive hereby assigns all
rights (including, but not limited to, rights to any inventions, patentable
subject matter, copyrights and trademarks) he may have or may acquire in the
Inventions and all benefits and/or rights resulting therefore to Xxxxxx and its
assigns without further compensation and shall communicate, without cost or
delay, and without disclosing to others the same, all available information
relating thereto (with all necessary plans and models) to Xxxxxx. .
7. Facilities. The Executive shall be furnished with such facilities and
services as are adequate and sufficient in the reasonable opinion of the
Executive and Board of Directors for the performance of his duties.
8. Employee Benefits. XXXXXX agrees to provide the Executive with the
following benefits:
A. Vacation. The Executive shall be entitled each year to vacation
time that totals four (4) weeks, during which time his compensation shall be
paid in full. Notwithstanding the foregoing, the Board of Directors in its
discretion may grant additional paid vacation to the Executive. All vacation
time shall be taken at times and in duration convenient to XXXXXX. The vacation
time provided herein shall not be cumulative and not carried forward to any
subsequent year(s) by the Executive.
B. Holidays. Executive shall be entitled to the following Holidays:
New Year's Day, Good Friday, Memorial Day, 4th of July, Labor Day, Thanksgiving,
the Friday after Thanksgiving, Christmas Eve, Christmas Day, and one Floating
Holiday.
C. Employee Benefits. During the Term of this Agreement, XXXXXX
shall provide the Executive with any other fringe benefits generally available
to employees of XXXXXX. In addition, the Executive, and his family, shall enjoy
full participation at no cost to him in all fringe benefits of XXXXXX,
including, without limitation, the medical, health, hospitalization and dental
insurance and other plan or arrangement affording the Executive and his family
insurance coverage or expense or cost reimbursement of no lesser quality than
the medical, health, hospitalization and dental insurance and other plan or
arrangement coverage and benefits currently enjoyed by Executive as an employee
of XXXXXX, or generally afforded to the Employees of XXXXXX. In the event Xxxxxx
does not have a medical, health and hospitalization plan, Xxxxxx shall reimburse
Executive the reasonable cost of such plan in order to enable Executive to
obtain health care from another source.
5
D. Within 60 days of the date of this Agreement, XXXXXX shall
purchase, and maintain thereafter throughout the term of this Agreement, life
insurance on the Executive's life in an amount no less than One million Dollars
($1,000,000.00). The life insurance will also include a double indemnity clause,
in the event of an accidental death of Executive while (s)he is traveling on
XXXXXX business The life insurance policy shall name as beneficiary the person
Executive instructs XXXXXX to name as beneficiary. XXXXXX shall have the
obligation to maintain said life insurance in effect throughout the term of this
Agreement.
E. Within 60 days of this Agreement, XXXXXX shall purchase and
maintain in effect thereafter during the term of this Agreement disability
insurance. XXXXXX shall cause the disability insurance policy to contain
provisions stating that, upon Executive's disability and after customary waiting
periods, the policy shall pay the Executive sixty percent (60%) of his full Base
Compensation during the term of Executive's disability, not to exceed six
months.
9. Development and Other Activity Expenses. XXXXXX recognizes that the
Executive will have to incur certain out-of-pocket expenses, including, but not
limited to, travel expenses, relating to his services and XXXXXX'x business, and
XXXXXX agrees to promptly reimburse the Executive for all reasonable expenses
necessarily incurred by him in the performance of his duties to XXXXXX upon
presentation of a receipt, voucher, copy of credit card statement or
documentation indicating the amount and business purposes of any such expenses.
These expenses include, but are not limited to, travel, meals, entertainment,
etc.
10. Office and Support Staff. During the term of this Agreement, Executive
shall be entitled to an office of a size and with furnishings and other
appointments, and to secretarial and other assistants, at least equal to those
provided to other management level employees of XXXXXX.
11. Termination.
A. Grounds. This Agreement shall terminate in the event of the
Executive's death. In the case of the Executive's Disability, XXXXXX may elect
to terminate the Executive as a result of such Disability provided such
Disability prevents the Executive from performing his duties as defined in
Section 13.A. Where appropriate, XXXXXX also may terminate the Executive
pursuant to a Termination With Cause. Finally, the Executive may terminate his
employment with XXXXXX pursuant to a Voluntary Termination or a Voluntary
Termination for Good Reason. For purposes of this Agreement, Disability,
Voluntary Termination, Voluntary Termination for Good Reason, and Termination
With Cause are defined in Section 13 of this Agreement.
6
B. Notice of Termination. Any termination by XXXXXX or by Executive
(other than upon death) shall be communicated by Notice of Termination to the
Executive and vice versa. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon and the specific ground(s) for
termination; (ii) sets forth in reasonable detail the facts and circumstances
claimed to provided a basis for such termination; and (iii) the date of
termination in accordance with (c) below. The failure of the Executive to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstance in enforcing his
rights hereunder
X. Xxxx of Termination. "Date of Termination" means (i) if XXXXXX
intends to treat the termination as a termination based upon the Executive's
Disability, the Executive's employment with XXXXXX shall terminate effective on
the twentieth day after receipt of Notice of Termination by XXXXXX; (ii) if the
Executive's employment is terminated by reason of Death, the Date of Termination
shall be the date of death of the Executive; (iii) if the Executive's employment
is terminated by reason of Voluntary Termination, the Date of Termination shall
be thirty (30) days from the date of the Notice of Termination. In addition, the
Executive shall be deemed to have terminated his employment by Voluntary
Termination if the Executive voluntary refuses to provide substantially all of
the services described in Section 6 hereof for a period greater than four (4)
consecutive weeks; In such event, the Date of Termination shall be the last day
substantially all of the services described in Section 6 hereof were performed;
(iv) if XXXXXX intends to treat the termination as a Termination With Cause
based upon the grounds described in clauses 12(c)(iv) of this Agreement, XXXXXX
shall provide the Executive written notice of such grounds for termination and
the Executive shall have a period of thirty (30) days to cure such cause to the
reasonable satisfaction of the Chairman of the Board, provided such cause can be
cured; failing which employment shall be deemed terminated at the end of the
such 30 day period; (v) if the Executive's employment is terminated by reason of
Voluntary Termination for Good Reason, Executive shall provide the XXXXXX
written notice of such grounds for termination and XXXXXX shall have a period of
thirty (30) days to cure such cause to the reasonable satisfaction of Executive,
unless the time to cure is shortened by another provision in this Agreement,
provided such cause can be cured; failing which employment shall be deemed
terminated at the end of the such 30 day period, or the shortened cure period
stated in another provision of this Agreement: and; (vi) if the Executive's
employment is terminated by reason of Termination Without Cause, the termination
shall be effective as of the date of the notice of such Termination Without
Cause.
12. Definitions. For the purposes of this Agreement, the following terms
shall have the following definitions:
A. "Disability" means a complete physical or mental inability,
confirmed by an independent licensed physician, to perform substantially all of
the services described in Section 3 hereof that continues for a period of 60
consecutive days or 90 days during any six month period.
7
B. "Voluntary Termination" means the Executive's voluntary
termination of his employment, other than a Voluntary Termination With Good
Reason, hereunder for any reason. For purposes of this Section 13, voluntary
refusal to perform services shall not include taking a vacation in accordance
with Section 8.(A.) hereof, the Executive's failure to perform services on
account of his illness or the illness of a member of his immediate family,
provided such illness is adequately substantiated at the reasonable request of
XXXXXX, or any other absence from service with written consent of the Board of
Directors.
C. "Termination With Cause" means the termination of the Executive's
employment by act of XXXXXX'x Board of Directors for any of the following
reasons:
(i) the Executive's conviction of a crime involving some act of
dishonesty or moral turpitude (specifically excepting simple
misdemeanors not involving acts of dishonesty and all traffic
violations);
(ii) the Executive's theft, embezzlement, misappropriation of or
intentional and malicious infliction of damage to XXXXXX'x
property or business opportunity;
(iii) the Executive's abuse of alcohol, drugs or other substances as
determined by an independent medical physician; or
(iv) the Executive engages in material dereliction of duties,
refusal, on more than two (2) occasions, to perform assigned
duties consistent with his position or violation of XXXXXX'x
written policies, on more than two (2) occasions, after
written warning.
(v) the Executive's breach of Paragraph 6.4 of this Agreement.
D. "Voluntary Termination for Good Reason" means the Executive's
termination of his employment hereunder following an intentional breach by
XXXXXX of any material provision of this Agreement if such breach continues for
a period of thirty (30) days after the Board of Directors receive written notice
of such breach. For purposes of this Agreement, such breaches include, but are
not limited to, the following:
(i) XXXXXX'x failure to timely pay the Executive's compensation as
provided in Section 5 of this Agreement;
(ii) a material diminution by XXXXXX of the Executive's duties,
functions and responsibilities as in effect immediately before
such modification without the Executive's written consent;
(iii) a requirement by XXXXXX that the Executive relocate his
employment more than fifty miles from Danbury, Connecticut
without the Executive's written consent;
8
(iv) a reduction in Executive's Base Compensation; or
(v) XXXXXX'x failure to acquire and maintain the
director's/officer's insurance required by Section 21 of this
Agreement.
E. "Termination Without Cause" means any termination of Executive's
employment for reasons other than Cause, Death or Disability.
F. NET REVENUE for the purposes of this document will be defined as
gross revenue receipts less costs of goods sold and any accounts receivable
considered uncollectible or outstanding for more than 120 days.
G. NET OPERATING EARNINGS for the purposes of this document will be
defined as NET REVENUE, as defined in 12F, less OPERATING COSTS, as defined in
12H.
H. OPERATING COSTS for the purposes of this document will include
selling, general and administrative costs; marketing costs; research costs
(capitalized and non-capitalized); depreciation and amortization charges; and
any adjustments thereof.
13. Compensation Upon Termination - Obligations of XXXXXX Upon
Termination.
A. If the Executive shall suffer a death or a termination hereunder based
upon Executive's Disability, as defined under Section 13, XXXXXX shall pay the
Executive the following:
(i). the Executive's full Base Compensation up to the Date of
Termination at the rate in effect on the Date of Termination;
(ii). only in the case of Voluntary Termination for Good Reason, any
stock options rights possessed by the Executive and, not withstanding anything
to the contrary contained in the Xxxxxx Stock Option Plan and the Vesting
Schedule, the Executive shall have the right, in his sole and absolute
discretion, to immediately, or at any time thereafter, exercise the stock
options provided to Executive as additional compensation under Paragraph 5(c),
and at the time Executive exercises such stock options, Xxxxxx shall cause such
stock options to immediately vest and be freely exercisable by Executive. In the
event the Executive shall suffer a death or termination hereunder based on
Executive's Disability, any stock option rights possessed by the Executive shall
vest in accordance with the Vesting Schedule;
(iii). the product of the Annual Bonus paid to the Executive for the
last full fiscal year multiplied by a number fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365;
9
(iv). any compensation previously deferred by the Executive and not
yet paid by XXXXXX and any accrued vacation pay not yet paid by XXXXXX;
(v). any other amounts or benefits owing to, or accrued or vested
for the account of, the Executive under the then-applicable employee benefit
plans or policies of XXXXXX. All such accrued obligations shall be paid to the
Executive (or in the event of Termination due to Death, to his estate) in a lump
sum, in cash, within ninety (90) days of the Date of Termination. Anything in
this Agreement to the contrary notwithstanding, the Executive's family shall be
entitled to receive benefits at least equal to the benefits provided by XXXXXX
under such plans, programs and policies relating to death benefits, if any, in
accordance with the most favorable policies of XXXXXX.
B. If the Executive shall suffer a Voluntary Termination for Good Reason,
as defined under Section 13, then XXXXXX shall pay the Executive (or, in the
case of death, the Executive's estate), in addition to the items stated in
Section 14(D)(i)-14(D)(v), cash compensation in a lump sum equal to (a) the
Executive's then-current annual Base Compensation, (b) plus the average of the
annual bonuses paid to the Executive for the previous two years and the
annualized bonus accrual for the Executive for the then-current year.
C. If the Executive shall suffer a Termination With Cause or a Voluntary
Termination, then the Executive shall not be entitled to any such compensation
after the effective date of such Termination With Cause or Voluntary Termination
(except compensation accrued but unpaid as of such effective date, including any
vested or accrued options, shares or similar grants by or of XXXXXX.
D. If the Executive shall suffer a Termination Without Cause, then
Executive shall be entitles to cash compensation in a lump sum equal to (a) the
Executive's then-current annual Base Compensation, (b) plus the average of the
annual bonuses paid to the Executive for the previous two years and the
annualized bonus accrual for the Executive for the then-current year, and (c)
any unused vacation due in the year of termination; immediate vesting of all
options, warrants and shares; use for six months of an on-premise office
equipped with working telephone, Internet and fax services; a reasonable working
computer; and the use of an out-placement service for one year.
14. Change in Control. In the event of a Change in Control, as defined
below, the Executive or XXXXXX, shall have the option at any time within 60 days
after the Change in Control occurs to terminate Executive's employment.
A. Notice. Written notice that a "Change in Control" has occurred must be
delivered by XXXXXX within ten (10) days after such "Change in Control" occurs.
Proper notice to effectuate a termination upon Change in Control shall be the
date the Executive or XXXXXX receive written notice which (i) indicates that
this Employment Agreement is being terminated on the basis of Change in Control,
and, (ii) sets forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
10
B. Definitions - Change in Control.
(i) "Acquiring Person" means that a Person, considered alone or together
with all Control Affiliates and Associates of that Person, is or
becomes directly or indirectly the beneficial owner of securities
representing at least fifty-one (51) percent of XXXXXX'x then
outstanding securities entitled to vote generally in the election of
the Board.
(ii) "Affiliate" means any "subsidiary" or "parent" corporation (within
the meaning of Section 424 of the Code) of XXXXXX.
(iii) "Board" means the Board of Directors of XXXXXX.
(iv) "Control Affiliate" with respect to any Person, means an Affiliate
as defined in Rule 12B-2 of the General Rules and Regulations under
the Exchange Act, as amended as of January 1, 1990.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as amended
and as in effect from time to time.
(vi) "Person" means any human being, firm, corporation, partnership, or
other entity. Person also includes any human being, firm,
corporation, partnership, or other entity as defined in Section
13(d)(3) and 14 (d)(2) of the Exchange Act, as amended as of January
1, 1990. The term Person does not include XXXXXX or any related
entity within the meaning of Code Section 1563(a), 414(b) or 414(c),
and the term Person does not include any employee-benefit plan
maintained by XXXXXX or by any Related Entity, and any Person or
entity organized, appointed, or established by XXXXXX or by any
subsidiary for or pursuant to the terms of any such employee-benefit
plan, unless the Board determines that such an employee-benefit
plan, or such Person or entity is a Person
(vii) "Change in Control". For purposes of this Agreement, a "Change in
Control" shall mean any of the following events:
(a) In the event a Person is or becomes an Acquiring Person;
11
(b) In the event a Person enters into a agreement that would
result in that Person becoming an Acquiring Person;
(c) In the event that XXXXXX enters into any agreement with any
Person(s) that involves the transfer of at least fifty-one
(51) percent of XXXXXX'x total assets on a consolidated basis,
as reported in XXXXXX'x consolidated financial statements
filed with the Securities and Exchange Commission, or, if
XXXXXX is not required to file consolidated financial
statements with the Securities and Exchange Commission,
similar financial statements;
(d) In the event that XXXXXX enters into an agreement to merge or
consolidate XXXXXX or to effect a statutory share exchange
with another Person, where the Person and its subsidiaries and
affiliates own at least fifty-one (51) percent of the company,
if XXXXXX is not intended to be the surviving or resulting
entity after the merger, consolidation, or statutory share
exchange;
(e) In the event the individuals who, as of the date of this
Agreement, are members of the Board, cease for any reason to
constitute a majority of the members of the Board;
(f) A complete liquidation or dissolution of XXXXXX;
(g) Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person acquired
Beneficial Ownership as defined in the Exchange Act of more
than the permitted amount of the then outstanding securities
as a result of the acquisition of securities by XXXXXX which
by reducing the number of securities then outstanding,
increased the proportional number of shares Beneficially Owned
by the subject Person(s) provided that if a Change in Control
would occur as a result of the acquisition of securities by
XXXXXX, and after such share acquisition by XXXXXX, the Person
becomes the Beneficial Owner of any additional securities
which increases the percentage of the then outstanding
securities Beneficially Owned by the subject Person, then a
Change in Control shall occur.
12
C. Compensation Upon Termination Based Upon Change in Control -
Payment of Excise Taxes. If a termination occurs upon a Change in Control as
defined above, then the Company shall pay the Executive an amount equal to ten
times salary and those same amounts at the same time as indicated in Section 14
and Sections 14(A)-14(E) and, with regard to Section 14(B),the Executive shall
have the right, in his sole and absolute discretion, to immediately, or at any
time thereafter, exercise the stock options provided to Executive as additional
compensation under Paragraph 5(c), and at the time Executive exercises such
stock options, XXXXXX shall cause such stock options to immediately vest and be
freely exercisable by Executive, as if the Executive had terminated the
Agreement as a Voluntary Termination for Good Reason (a "Termination Payment").
In addition, if the excise tax on "excess parachute payments," as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), will
be imposed on the Executive under Code Section 4999 as a result of the
Executive's receipt of the Termination Payment or any other payment (without
regard to the "Additional Amount" described below) which the Executive receives
or has the right to receive from XXXXXX or any of its affiliates (the "Change of
Control Benefits"), XXXXXX shall indemnify the Executive and hold him harmless
against all claims, losses, damages, penalties, expenses, and excise taxes. To
effect this indemnification, XXXXXX shall pay to Executive the "Additional
Amount" described in this Section 15(C). The Additional shall be the amount that
is sufficient to indemnify and hold the Executive harmless from the application
of Code Section 280G and 4999 of the Code, including the amount of (i) the
excise tax that will be imposed on the Executive under Section 4999 of the Code
with respect to the Change of Control Benefits; (ii) the additional (A) excise
tax under Section 4999 of the Code, (B) hospital insurance tax under Section
3111(b) of the Code, and (C) federal, state and local income taxes for which the
Executive is or will be liable on account of the payment of the amount described
in item (i); and (iii) the further excise, hospital insurance and income taxes
for which the Executive is or will be liable on account of the payment of the
amount descried in item (ii) and this item (iii) and any other indemnification
payment under this Section 15(C). The Additional Amount shall be calculated and
paid to the Executive at the time that the Termination Payment is paid to the
Executive. In calculating the Additional Amount, the highest marginal rates of
federal and applicable state and local income taxes applicable to individuals
and in effect for the year in which the Change or Control occurs shall be used.
Nothing in this Section 15(C) shall give the Executive the right to receive
indemnification from XXXXXX or its affiliates for federal, state or local income
taxes or hospital insurance taxes payable solely as a result of the Executive's
receipt of (a) the Termination Payment or (b) any additional payment, benefit or
compensation other than additional compensation in the form of the excise tax
payment specified in item (i) above. As specified in items (ii) and (iii) above,
all income, hospital insurance and additional excise taxes resulting from
additional compensation in the form of the excise tax payment specified in item
(i) above shall be paid to the Executive.
The provisions of this Section 15(C) are illustrated by the
following example:
Assume that the Termination Payment and all other Change in Control
Benefits result in a total federal, state and local income tax and hospital
insurance tax liability of $180,000; and an excise tax liability under Code
Section 4999 of $70,000. Under such circumstances, the Executive is solely
responsible for the $180,000 income and hospital insurance tax liability; and
XXXXXX must pay to the Executive $70,000, plus an amount necessary to indemnify
the Executive for all federal, state and local income taxes, hospital insurance
taxes, and excise taxes that will result from the $70,000 payment to the
Executive and from all further indemnification to the Executive of taxes
attributable to the initial $70,000 payment.
13
15. Notices. All notices required to be given under the Agreement shall be
in writing, sent certified mail, return receipt requested, postage prepaid, to
the following addresses:
(A) If to the Executive, then to:
Xxxxx Xxxxx
0 Xxxxx Xxxx
Xxxxxxx, XX. 00000
(B) If to XXXXXX, then to:
Xxxxxx Xxxxxxx, CFO
Xxxxxx Capital Corp.
000 Xxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
16. Governing Law and Venue. The Agreement shall be governed by and
construed in accordance with the laws of the State of New York. Venue for any
action or suit brought hereunder or in connection herewith, or relating hereto,
shall lie with the Courts in and for New York, New York.
17. Waiver. The waiver by either party hereto of any breach of any
provision of the Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party hereto
18. Binding Effect and Assignment. The Executive acknowledges that his
services are unique and personal. Accordingly, the Executive may not assign his
rights or delegate his duties or obligations under this Agreement. The
Executive's rights and obligations under this Agreement shall inure to the
benefit of and shall be binding upon the Executive's heirs, personal
representatives and successors and assigns. The Agreement shall be binding upon
XXXXXX'x successors and/or assigns.
19. Attorneys Fees. In the event either party files any action or suit
regarding any of the terms of this Agreement or in relation to, or involving,
Executive's employment by XXXXXX, then the prevailing party shall be entitled to
recover upon final judgment on the merits of its or his reasonable attorney's
fees and court costs (including, without limitation, appellate attorney's fees
and court costs) incurred in bringing such action and all costs or expenses,
including, without limitation, attorney's fees and court costs, incurred in
collecting any judgment .
14
20. Indemnification. Xxxxxx shall indemnify the Executive in the event he
is or becomes a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or by the Company on his behalf in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. Xxxxxx shall be required
to purchase adequate directors/officers insurance, or other adequate insurance
in an amount not less than $5 million insuring Xxxxxx'x obligation as set forth
in this Section 20.
In the event Executive is made a party to a lawsuit or is involved in a
legal proceeding in any manner (including by subpoena or as a witness), which
relates directly or indirectly to Xxxxxx or the Executive's performance of his
duties under this Agreement, in which Executive in his reasonable discretion
believes that it is in his best interest to retain independent legal and other
professional counsel, XXXXXX shall be obligated to pay all reasonable
professional fees, costs, and expenses so incurred within 30 days of a notice
provided by Executive advising of his selection of counsel.
21. Entire Understanding; Amendment. The Agreement contains the entire
understanding of the parties relating to the employment of the Executive by
XXXXXX and supersedes any and all previous agreements among the parties. It may
not be changed orally but only by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change, modification, extension
or discharge is sought.
****
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
In the presence of:
EXECUTIVE:
---------------------------
Name:______________________
---------------------------
-------------------------
Name:______________________
15
---------------------------
Name:______________________
--------------------------- --------------------------
Name:______________________ Name:
Title:
Attest:
--------------------------
Name:
Title: President and CEO
(Seal)
16
