AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of the 1st day of January 1999,
between SmartServ Online, Inc., a Delaware Corporation, with its principal
executive offices at Metro Center, Xxx Xxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx
00000 (the "Company"), and Xxxxxxxxx X. Xxxxxxxx, an individual and resident of
Westport, Connecticut (the "Executive").
WHEREAS, the Executive is and has been employed by the Company and is
currently Chairman, Chief Executive Officer, and Secretary of the Company;
WHEREAS, the Company and Executive have heretofore entered into and
executed an Employment Agreement dated as of January 31, 1994, as amended on
June ____, 1994 (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to amend and restate the
Employment Agreement on the terms and conditions hereafter expressed;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the Company and the
Executive hereby agree as follows:
1. Position and Duties.
(a) The Company agrees to, and hereby does, continue to employ
the Executive for the term of this Agreement as Chairman, Chief Executive
Officer, and Secretary, and the Executive agrees to perform such duties as the
Executive is now performing and such other duties commensurate with such
positions as the Executive may reasonably be directed to
perform by the Board of Directors. The Executive will continue to serve in his
present capacity, and in connection therewith, perform such duties as the
Executive is now performing and such other duties, commensurate with such
positions, as the Executive may reasonably be directed to perform by the Board
of Directors of the Company. The Executive shall have the right to devote a
reasonable amount of time to (i) industry, community or charitable
organizations, and (ii) and the management of personal investments so long as
such activities do not interfere or conflict with the performance by the
Executive of his obligations hereunder. Subject to the provisions of Section 9
and Section 10 hereof, the Executive may serve as a director of other companies
with the consent of the Board of Directors of the Company, which consent shall
not be unreasonably withheld.
(b) The Executive hereby accepts such employment and agrees
faithfully to perform to the best of his ability the duties described in Section
l (a).
2. Term. Subject to Section 4 hereof, the term of employment of the
Executive under this Agreement shall commence as of the date first above written
(the "Effective Date") and shall terminate on the last day of the calendar month
which is 36 calendar months after the Effective Date. Commencing on the last day
of the first full calendar month after the Effective Date and on the last day of
each succeeding calendar month, the term of this Agreement shall be
automatically extended without further action by either party for one additional
calendar month unless one party notifies the other in writing that such party
does not wish to extend the term of this Agreement. In the event that such
notice shall have been delivered, the term hereof shall no longer be subject to
automatic extension and the term hereof shall expire on the date which is 36
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calendar months after the last day of the month in which such written notice is
received. (The last day of the calendar month in which the term hereof, as
extended from time to time, shall end is hereinafter referred to as the
"Expiration Date").
3. Compensation. In consideration for the Executive's agreements
contained herein, and as compensation to the Executive for the performance of
the services required hereunder, the Company shall pay or grant to him the
following salary and other compensation and benefits:
(a) a base salary, payable in equal installments not less
frequently than monthly, at such annual rate not less than $185,000 per year
(the "Base Salary"), and determined from time to time by the Board of Directors
or an appropriate committee thereof, provided, however, that the Executive's
base salary shall be periodically reviewed by the Board of Directors and shall
be increased if the Board of Directors determines that an increase is
appropriate on the basis of the types of factors it generally takes into account
in increasing the salaries of executive officers of the Company, provided that
the Base Salary shall automatically be adjusted annually to reflect the
increase, if any, in the cost of living by adding to the Base Salary an amount
obtained by multiplying the Base Salary by the percentage by which the Consumer
Price Index for All-Urban Consumers, as reported by the Bureau of Labor
Statistics of the United States Department of Labor, has increased over its
level from the previous twelve month period ending December 31st of each year;
(b) the Executive shall have the opportunity to receive an
annual aggregate bonus in the amount of up to One Hundred percent (100%) of the
Base Salary (the
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"Cash Bonus"). The payment of the Cash Bonus will be dependent upon the yearly
revenue growth of the Company. For the fiscal year ending June 30, 1999 (the
"Initial Year") the amount of the Cash Bonus shall be determined as follows: for
each 10% increase in the revenues of the Company over the fiscal year ending
June 30, 1998 the Executive shall earn a Cash Bonus of 10% of the Base Salary,
up to a maximum Cash Bonus of 100% of the Base Salary. For each fiscal year
following the Initial Year, the amount of the Cash Bonus shall be 5% of the Base
Salary for each 5% increase in revenues, as compared to the preceding fiscal
year, up to a maximum Cash Bonus of 100% of the Base Salary. The Cash Bonus
shall be paid in cash and shall be paid within ninety (90) days of the end of
the fiscal year to which the Cash Bonus relates;
(c) such other awards under the Company's 1996 Employee Stock
Option Plan (the "Plan") or under any other stock option, incentive compensation
or other compensation plan, program or arrangement now existing, or hereafter
adopted and applicable to executive officers of the Company, as the Board of
Directors, or an appropriate committee thereof administering such plan, program
or arrangement, may determine appropriate in light of the duties and
responsibilities of the Executive in respect to other executive officers;
(d) participation on the same terms and conditions as all other
employees in all employee benefit plans, whether or not qualified within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as may be
amended from time to time (the "Code"), as may be now or hereafter sponsored or
maintained for all employees of the Company, and participation on the same terms
and conditions as other executive officers in such other plan,
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program or arrangement as may be now or hereafter sponsored or maintained for
executive officers of the Company;
(e) reimbursement of not less than a monthly allowance of
$500.00 for reasonable travel within the New York metropolitan area in
connection with the performance of services under this Agreement, covering a
vehicle allowance for business mileage at the applicable mileage rate as
established by the Internal Revenue Service, maintenance, gas, insurance,
parking and all other related expenses and the Company shall further reimburse
the Executive for all reasonable other travel and other expenses incurred by the
Executive in connection with the performance of services under this Agreement,
upon presentation of expense statements or vouchers and such other support
information as it may from time to time request, provided that such expenses
meet the usual test of being business related in accordance with the Company's
usual procedures in this regard; and
(f) reasonable vacations of not less than four (4) weeks per
year, absences on account of temporary illness and fringe benefits customarily
enjoyed by employees or officers of the Company under the terms and conditions
of the Company's policy in respect thereto.
(g) a yearly budget of not less than $12,000 to pay for dues,
assessments and expenses incurred by the Executive relating to membership or
participation in professional or social groups or organizations which the
Executive determines are useful or necessary for the purpose of promoting and
maintaining the business of the Company.
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(h) continuation of the Executive's life insurance and disability
insurance policies in existence as of the date of this Agreement.
4. Termination of Employment. This Agreement shall terminate upon the
Expiration Date or upon the death of the Executive. The Company may terminate
this Agreement prior to the Expiration Date (and the Executive's employment
hereunder shall terminate) for "Disability" or "Cause". Termination of this
Agreement by the Company for any reason not set forth in the preceding sentence
shall not be deemed a permitted termination and shall be deemed a breach of this
Agreement. In the event of any termination of this Agreement prior to the
Expiration Date, whether a permitted termination or otherwise, the provisions of
Section 5 of this Agreement shall determine the amount, if any, of any
compensation thereafter due the Executive in respect to such termination.
As used in this Agreement, the following terms shall have the meanings
set forth:
(a) Disability. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties with the Company on a full-time basis for four (4) consecutive months,
and within thirty days after written notice of termination is given by the
Company, the Executive shall not have returned to the full-time daily
performance of his duties, the Executive shall be deemed to have experienced a
Disability and the Company may terminate the Executive's employment. The
Executive shall be entitled to leaves of absence from the Company in accordance
with the Company's policy generally applicable to executives for illness or
other temporary disabilities for a period or periods not exceeding an
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aggregate of four months in any calendar year, and his compensation and status
as an employee hereunder shall continue during any such period or periods.
(b) Cause. Termination by the Company of employment for "Cause"
shall mean termination upon:
(i) the willful and continued failure by the Executive to
substantially perform his duties with the Company (other than
any such failure resulting from his incapacity due to physical
or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board of
Directors which specifically identifies the manner in which
the Board of Directors believes that the Executive has not
substantially performed his duties, and which failure has not
been cured within thirty days after such written demand; or
(ii) the willful and continued engaging by the Executive in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise.
For purposes of this Subsection (b), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by the Executive in bad faith and without reasonable belief that such
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to him a copy of a resolution duly adopted by the affirmative vote of not less
than 51% of the entire membership of the Board
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of Directors at a meeting of the Board of Directors called and held for that
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of Directors the
Executive was guilty of conduct set forth above in clauses (i) or (ii) of the
first sentence of this Subsection (b) and specifying the particulars thereof in
detail.
(c) Notice of Termination. Any purported termination by the
Company shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 14 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination, resignation or retirement provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination, resignation or retirement under
the provision so indicated.
(d) Date of Termination, Etc. "Date of Termination" shall mean
(i) if the Executive's employment is terminated for Disability, thirty days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of the Executive's duties on a full-time daily basis
during such thirty-day period), (ii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of Termination (which
shall not be less than thirty days nor more than sixty days, from the date such
Notice of Termination is given), or (iii) if within thirty days after any Notice
of Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment,
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order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected). Any party giving
notice of a dispute shall pursue the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Company will
continue to pay the Executive his full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue the Executive as a participant in all compensation,
employee benefit and insurance plans, programs and arrangements in which the
Executive was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this Subsection
(d).
5. Compensation Upon Termination.
(a) Death. If the Executive's employment hereunder terminates
by reason of his death, the Company shall be obligated to pay to his surviving
widow, or to his legal representatives if he leaves no surviving widow or if his
surviving widow dies prior to fulfillment of the Company's obligations, (i) the
Executive's then current base salary for a twelve (12) month period commencing
on the first day of the month following the Executive's death, or until the
Expiration Date, whichever shall be the first to occur; and (ii) any benefits to
which the Executive is entitled under any insurance policies on the life of the
Executive, under the Company's insurance programs and other employee benefit
plans, programs and arrangements then in effect and under the Company's pension
plan for salaried employees, if any. In addition to the foregoing, the Company
shall be obligated to continue coverage, to the extent not prohibited by law,
for a period of twelve (12) months from the date of the Executive's death for
the Executive's eligible dependents under all of the Company's benefit plans in
effect and applicable to the Executive's
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eligible dependents as of the date of death, provided that in the event that
such eligible dependents, cannot be covered or fully covered under any or all of
the Company's benefit plans, the Company shall continue to provide such eligible
dependents with the same level of such coverage in effect prior to the
Executive's death, on an unfunded basis if necessary.
(b) Disability. If the Executive's employment hereunder
terminates by reason of his Disability, the Company shall (i) continue to pay to
the Executive, in accordance with the payroll practices of the Company in effect
prior to the Date of Termination, the Executive's then current base salary for
twenty-four (24) months after the Date of Termination, reduced by any benefits
to which the Executive may be entitled under any Company sponsored disability
income or income protection plan, policy or arrangement, the premiums for which
or benefits under which are paid by the Company (ii) for the first year after
the Date of Termination pay an amount equal to the highest annual bonus that the
Executive received in the three years prior to the Date of Termination, payable
in a lump sum at approximately the same time as annual bonuses were paid by the
Company in the year prior to the Date of Termination, and (iii) continue
coverage, to the extent not prohibited by law, for a period of twelve (12)
months from the Date of Termination or until comparable benefits are made
available to the Executive in connection with subsequent employment, whichever
period is shorter, for the Executive and his eligible dependents under all of
the Company's benefit plans in effect and applicable to the Executive and his
eligible dependents as of the Date of Termination, provided that in the event
that the Executive and his eligible dependents, because of the Executive's
terminated status, cannot be
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covered or fully covered under any or all of the Company's benefit plans, the
Company shall continue to provide the Executive and/or his eligible dependents
with the same level of such coverage in effect prior to termination, on an
unfunded basis if necessary. If the Executive dies prior to the date on which
such additional amounts would have ceased to be payable under this Subsection
(b), the amount that would have been payable by the Company had he lived shall
continue to be paid by the Company to his surviving widow, for a period of 12
months following the Executive's death, at the same times and rates as it would
have been payable to him.
(c) Cause. If the Executive's employment hereunder is
terminated by the Company for Cause, the Company shall pay to the Executive his
full base salary through the Date of Termination at the rate in effect at the
time Notice of Termination is given and the Company shall have no further
obligations to the Executive under this Agreement.
(d) Voluntary Resignation or Retirement. In the event the
Executive retires or resigns other than for Good Reason (as defined below), the
Company shall pay to the Executive his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given
and, except as provided in Section 8, the Company shall have no further
obligations to the Executive under this Agreement.
(e) Other. If the Executive's employment hereunder is
terminated by the Company other than for Cause or Disability or by the Executive
for Good Reason (as defined below), then the Executive shall be entitled all to
the benefits provided below :
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(i) the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given;
(ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall
pay as severance pay to the Executive, not later than the
fifteenth day following the Date of Termination, a lump sum
severance payment equal to the Executive's full base salary for
the then remaining term of this Agreement (without regard to the
date of such Notice of Termination) at the rate then in effect
(the "Lump Sum Payment"), discounted to present value at a
discount rate of 8% per annum applied to each future payment from
the time it would have become payable;
(iii) in lieu of shares of common stock issuable upon exercise of
outstanding stock options ("Options"), if any, or any stock
appreciation rights ("SAR"), if any, whether or not such Options
or SARs are vested or then exercisable pursuant to their
respective terms, granted to the Executive under the Plan or
another of the Company's stock option or stock appreciation
rights plans or otherwise (which Options and SARs shall be
canceled upon the making of the payment referred to below), the
Executive shall receive, not later than the fifteenth day
following the Date of Termination, an amount in cash equal to the
product of (x) the difference (to the extent that such difference
is a positive number) obtained by subtracting the per share
exercise price of each Option and each SAR held by the Executive,
whether or not then fully exercisable, from the closing price of
the Common Stock
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(on the Date of Termination) as reported on the National
Association of Securities Dealers Automatic Quotation
System/National Market System or such quotation system or stock
exchange as the Common Stock is then listed or principally traded
(or if not traded on the Date of Termination, the closing price
on the next preceding business day on which the Common Stock
traded and in the event that there is no established trading
market for the Common Stock, the per share exercise price shall
be subtracted from the fair market value of the Common Stock on
the Date of Termination as determined in good faith by the Board
of Directors of the Company and approved by an independent
accounting firm), and (y) the number of shares of Common Stock
covered by each such Option or SAR;
(iv) the Company shall remove all restrictions on vesting and any
and all forfeiture provisions or repurchase options applicable to
any shares of restricted stock held by the Executive shall
automatically lapse and be of no further force or effect;
(v) the Company shall continue coverage, to the extent not
prohibited by law, for a period of twelve (12) months from the
Date of Termination or the remaining term of this Agreement,
whichever period is shorter, for the Executive and his eligible
dependents under all of the Company's benefit plans in effect and
applicable to the Executive and his eligible dependents as of the
Date of Termination, provided that in the event that the
Executive and his eligible dependents, because of the Executive's
terminated status, cannot be covered or fully covered under any
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or all of the Company's benefit plans, the Company shall continue
to provide the Executive and/or his eligible dependents with the
same level of such coverage in effect prior to termination, on an
unfunded basis, if necessary;
(vi) the Company shall also pay to the Executive all legal fees
and expenses incurred by the Executive in contesting or disputing
any such termination or in seeking to obtain or enforce any right
or benefit provided by this Agreement or in connection with any
tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to any payment or benefit
provided hereunder;
(vii) the payments under this Subsection (e) are intended by the
parties to be due and payable under the circumstances of a
termination for the reasons set forth above whether or not such
circumstances are preceded by a change in control of the Company.
If, notwithstanding the intentions of the parties, it is asserted
by any governmental agency, in any tax audit, administrative
proceeding or otherwise, that any payments provided under this
Section 5(e) (the ASeverance Payments@) are or will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
and/or that a federal income tax deduction for amounts paid as
Severance Payments will not be allowed to the Company for any
year by reason of Section 28OG of the Code, the Executive may
contest or refute such assertion with
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respect to the Excise Tax in any appropriate forum (the
"Executive's Contest") and the Company shall diligently and
vigorously contest or refute such assertion with respect to the
disallowance of such deduction in all administrative proceedings
and in the federal district court or the Tax Court, whichever
shall have jurisdiction (the "Company's Contest"). The
Executive's Contest and the Company's Contest shall be conducted
and presented separately unless the Executive, in his discretion
but with the consent of the Company, joins in the Company's
Contest. In any event, the Executive shall be entitled to retain
attorneys and other experts deemed necessary or appropriate by
the Executive to the proper presentation of the Executive's
Contest and shall not be compelled by the Company to compromise,
settle or otherwise terminate the Executive's Contest without his
written consent thereto. The Company and the Executive shall
cooperate one with the other and each shall provide to the other
copies of all documents relevant to or useful in connection with
either the Executive's Contest or the Company's Contest as may
reasonably be requested by the other. The Executive shall attend
any hearing, deposition or other proceeding at which his
attendance in person is material to the Company's Contest. The
Company shall cause the appropriate authorized officer or
officers of the Company to attend any hearing, deposition or
other matter at which the Company's appearance is requested by
any party. In the event that the Severance Payments are finally
determined to be subject to the Excise Tax, then the Company
shall pay to the Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive
of all taxes (including any interest or penalties), including,
without limitation, any income taxes (including any interest or
penalties) and Excise Tax imposed on the Gross-Up
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Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Severance Payments; and
(viii) The payments provided for in this Subsection (e), shall be
made not later than the fifteenth day following the Date of
Termination, provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Company, of the minimum amount of
such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the
Date of Termination provided that any Gross-Up Payment shall be
made within thirty days of the final determination that the
Severance Payments are subject to the Excise Tax. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive payable on the
fifth day after demand by the Company (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(f) For purposes of this Agreement Good Reason shall mean the
occurrence of any one of the following events:
(i) a material breach by the Company of this Agreement,
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(ii) the Company's assignment to Executive of duties inconsistent
in any material respect with his position (including status and
reporting) or any other diminution of authority, duties or
responsibilities, excluding any isolated action by the Company
not taken in bad faith and which is remedied by the Company
within 15 days after receipt of notice from the Executive,
(iii) a Change of Control (as defined below), other than a Change
of Control Transaction (as defined below) that was approved by a
majority of the Continuing Directors (as defined below), or
(iv) the relocation of the Executive's principal place of
employment to a location more than 50 miles from his principal
place of employment on the date of this Agreement (unless such
relocation is closer to the Executive's principal residence).
(g) For purposes of this Agreement, a Change of Control shall occur
if:
(i) at any time less than 60% of the members of the Board of
Directors shall be individuals who were either (x) Directors on
the effective date of this Agreement or (y) individuals whose
election, or nomination for election, was approved by a vote
(including a vote approving a merger or other agreement providing
for the membership of such individuals on the Board of Directors)
of at least two-thirds of the Directors then still in office who
were Directors on the effective date of this Agreement or who
were so approved (the "Continuing Directors"); or
(ii) the shareholders of the Corporation shall approve an
agreement or plan providing for the Corporation to be merged,
consolidated or otherwise combined with, or for all or
substantially all its assets or stock to be acquired by, another
corporation, as a consequence of which the former shareholders of
the Corporation will own, immediately after such merger,
consolidation, combination or acquisition, less than a majority
of the Voting Power of such surviving or acquiring corporation or
the parent thereof (a "Change of Control Transaction").
(h) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 5 be reduced by
any compensation earned by the Executive as the result of employment by another
employer, or otherwise.
(i) In addition to all other amounts payable to the Executive under
this Section 5, the Executive shall be entitled to receive all benefits payable
to him under the Company's retirement savings plan and pension plan, if any, and
any other plan, program or arrangement relating to retirement, profit sharing,
or other benefits including, without limitation, any employee stock ownership
plan or any plan established as a supplement to any such plans. No amount
payable to the Executive under Subsection 5(e) shall be considered for any
benefit calculation or other purpose under the Company's pension plan, if any.
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6. Change of Control. In the event of a Change of Control, the Company
shall provide the Executive with the following benefits:
(a) in lieu of shares of common stock issuable upon exercise
of outstanding stock options ("Options"), if any, or any stock appreciation
rights ("SAR"), if any, whether or not such Options or SARs are vested or then
exercisable pursuant to their respective terms, granted to the Executive under
the Plan or another of the Company's stock option or stock appreciation rights
plans or otherwise (which Options and SARs shall be canceled upon the making of
the payment referred to below), the Executive shall receive, not later than the
fifteenth day following the date of the Change of Control, an amount in cash
equal to the product of (x) the difference (to the extent that such difference
is a positive number) obtained by subtracting the per share exercise price of
each Option and each SAR held by the Executive, whether or not then fully
exercisable, from the closing price of the Common Stock (on the date of the
Change of Control) as reported on the National Association of Securities Dealers
Automatic Quotation System/National Market System or such quotation system or
stock exchange as the Common Stock is then listed or principally traded (or if
not traded on the date of the Change of Control, the closing price on the next
preceding business day on which the Common Stock traded and in the event that
there is no established trading market for the Common Stock, the per share
exercise price shall be subtracted from the fair market value of the Common
Stock on the date of the Change of Control as determined in good faith by the
Board of Directors of the Company and approved by an independent accounting
firm), and (y) the number of shares of Common Stock covered by each such Option
or SAR;
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(b) the Company shall remove all restrictions on vesting and
any and all forfeiture provisions or repurchase options applicable to any shares
of restricted stock held by the Executive shall automatically lapse and be of no
further force or effect.
7. Retirement. Nothing contained in this Agreement shall be deemed to
limit the Executive's ability to retire for any reason and to receive benefits
under the Company's retirement policies and pension plan for salaried employees,
if any and to thereby receive all benefits for which he is eligible under such
plans and any other plan, program or arrangement relating to retirement.
8. Indemnification.
(a) The Company shall indemnify and hold harmless to the
fullest extent not prohibited by law, as the same exists or may hereinafter be
amended, interpreted or implemented (but, in the case of any amendment, only to
the extent that such amendment permits the Company to provide broader
indemnification rights than are permitted the Company to provide prior to such
amendment), each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in (as a witness or otherwise) any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative and whether or not by or in the right of the
Company or otherwise, (hereinafter, a "proceeding") by reason of the fact that
he or she, or a person of whom he or she is the heir, executor, or
administrator, is or was a director or officer of the Company or is or was
serving at the request of the Company as a director, officer or trustee of
another Company or of a partnership, joint venture, trust or other enterprise
(including, without limitation, service with respect to employee
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benefit plans), or where the basis of such proceeding is any alleged action or
failure to take any action by such person while acting in an official capacity
as a director or officer of the Company or in any other capacity on behalf of
the Company while such person is or was serving as a director or officer of the
Company, against all expenses, liability and loss, including but not limited to
attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid or
to be paid in settlement whether with or without court approval, actually
incurred or paid by such person in connection therewith.
(b) Notwithstanding the foregoing, except as provided in
Section 8(f) below, the Company shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Company.
(c) Subject to the limitation set forth above concerning
proceedings initiated by the person seeking indemnification, the right to
indemnification conferred in this Section 8 shall be a contract right and shall
include the right to be paid by the Company the expenses incurred in defending
any such proceeding (or part thereof) or in enforcing his or her rights under
this Section 8 in advance of the final disposition thereof promptly after
receipt by the Company of a request therefor stating in reasonable detail the
expenses incurred; provided, however, that to the extent required by law, the
payment of such expenses incurred by a director or officer of the Company in
advance of the final disposition of a proceeding shall be made only upon receipt
of an undertaking, by or on behalf of such person, to repay all amounts so
advanced if and to the extent it shall ultimately be determined by a court that
he or she is not entitled to be indemnified by the Company under this Section 8,
or in the case of a criminal action, the majority
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of the Board of Directors so determines that he or she is not entitled to be
indemnified by the Company, or otherwise.
(d) The right to indemnification and advancement of expenses
provided herein shall continue as to a person who has ceased to be a director or
officer of the Company or to serve in any of the other capacities described
herein, and shall inure to the benefit of the heirs, executors and
administrators of such person.
(e) Any dispute related to the right to indemnification,
contribution or advancement of expenses as provided under this Section 8, except
with respect to indemnification for liabilities arising under the Securities Act
of 1933, that the Company has undertaken to submit to a court for adjudication,
shall be decided only by arbitration as provided in Section 13 of this
Agreement.
(f) The Company shall reimburse an indemnified person or his
representative for the expenses (including attorneys' fees and disbursements)
incurred in successfully prosecuting or defending any arbitration pursuant to
Section 13 of this Agreement.
(g) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of a final disposition conferred
in this Section 8 and the right to payment of expenses conferred in Section
12(h) shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses hereunder may be entitled under any
Bylaw, agreement, vote of shareholders, vote of directors or otherwise, both as
to actions in his or her official capacity and as to actions in any other
capacity while holding that office, the Company having the express authority to
enter into such agreements or arrangements as the Board of Directors deems
appropriate for the indemnification of and advancement of
-21-
expenses to present or future directors and officers as well as employees,
representatives or agents of the Company in connection with their status with or
services to or on behalf of the Company or any other Company, partnership, joint
venture, trust or other enterprise, including any employee benefit plan, for
which such person is serving at the request of the Company.
(h) The Company may create a fund of any nature which may,
but need not be, under the control of a trustee, or otherwise secure or insure
in any manner its indemnification obligations, including its obligation to
advance expenses, whether arising under or pursuant to this Section 8 or
otherwise.
(i) The Company may purchase and maintain insurance on behalf
of any person who is or was a director or officer or representative of the
Company, or is or was serving at the request of the Company as a representative
of another Company, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of his or her status as such, whether or
not the Company has the power to indemnify such person against such liability
under the laws of this or any other state.
Neither the modification, amendment, alteration or repeal of this
Section 8 or any of its provisions nor the adoption of any provision
inconsistent with this Section 8 or any of its provisions shall adversely affect
the rights of any person to indemnification and advancement of expenses existing
at the time of such modification, amendment, alteration or repeal or the
adoption of such inconsistent provision.
9. Non-Competition. During the term of this Agreement and for two
years after the Date of Termination, the Executive shall refrain from competing
with the Company or
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any subsidiary of the Company except with the Company's prior written consent.
The phrase "refrain from competing with the Company or any subsidiary of the
Company" shall mean that the Executive will not engage, directly or indirectly
(including, by way of example only, as a principal, partner, venturer, employee
or agent) nor have any direct or indirect interest in any enterprise (a
"Competing Enterprise") which competes with the Company or any subsidiary
thereof by engaging in the online informational and transactional services
business or in substantial and direct competition with any other business
operation actively conducted by the Company or its subsidiaries at the Date of
Termination. It is agreed that the foregoing provisions shall not restrict the
Executive from either (i) being a director of or having any investments or other
interests in an enterprise which is not a competing enterprise, or (ii) having
any investments in any competing enterprise the stock of which is listed on a
national securities exchange or traded publicly over-the-counter so long as such
investment does not give the Executive more than five percent (5%) of the voting
stock of such enterprise. Provided further that if the Executive's employment
hereunder is terminated pursuant to Section 5(e) and the Executive provides a
written waiver of the Lump Sum Payment, the Executive shall be automatically
released from the limitations imposed by this Section 9 and this Section shall
be of no force and effect.
10. Non-Solicitation of Customers and Suppliers. Employee agrees that
during his employment with the Company he shall not, directly or indirectly,
solicit the trade of, or trade with, any customer, prospective customer,
supplier, or prospective supplier of the Company for any business purpose other
than for the benefit of the Company. Employee further agrees that for two (2)
years following termination of his employment with the Company, including
without limitation termination by the Company for cause or without cause,
Employee shall not, directly or
-23-
indirectly, solicit the trade of, or trade with, any customers or suppliers, or
prospective customers or suppliers, of the Company. Provided further that if the
Executive's employment hereunder is terminated pursuant to Section 5(e) and the
Executive provides a written waiver of the Lump Sum Payment, the Executive shall
be automatically released from the limitations imposed by this Section 10 and
this Section shall be of no force and effect.
11. Non-Solicitation of Employees. Employee agrees that, during his
employment with the Company and for two (2) years following termination of
Employee's employment with the Company, including without limitation termination
by the Company for cause or without cause, Employee shall not, directly or
indirectly, solicit or induce, or attempt to solicit or induce, any employee of
the Company to leave the Company for any reason whatsoever, or hire any employee
of the Company. Provided further that if the Executive's employment hereunder is
terminated pursuant to Section 5(e) and the Executive provides a written waiver
of the Lump Sum Payment, the Executive shall be automatically released from the
limitations imposed by this Section 11 and this Section shall be of no force and
effect.
12. Confidentiality and Inventions. The Executive agrees:
(a) To keep secret all confidential matters of the Company and its subsidiaries
and affiliates and not to disclose them to anyone outside the Company or its
subsidiaries and affiliates, either during or after his employment with the
Company, except with the Company's prior written consent or as required by law;
(b) To deliver promptly to the Company on termination of
employment of the Executive by the Company all memoranda, notes, records,
reports and other documents (and all copies thereof) with respect to any such
confidential matters and other proprietary
-24-
information (such as customers lists, suppliers lists, etc.) which the Executive
may then possess or have under his control (For purposes of this Section 12, all
information which is not publicly available shall be deemed to be confidential
and covered by the foregoing provisions);
(c) He will promptly and fully disclose to the Company or
such officer or other agent as may be designated by the Company any and all
inventions made or conceived by Executive (whether made solely by Executive or
jointly with others) during employment with the Company (i) which are along the
line of the business, work or investigations of the Company, or (ii) which
result from or are suggested by any work which Executive may do for or on behalf
of the Company; and
(d) He will assist the Company and its nominees during and
subsequent to such employment in every proper way (entirely at its or their
expense) to obtain for its or their own benefit patents for such inventions in
any and all countries; the said inventions, without further consideration other
than such salary as from time to time may be paid to him by the Company as
compensation for his services in any capacity, shall be and remain the sole and
exclusive property of the Company or is nominee whether patented or not; and
(e) He will keep and maintain adequate and current written
records of all such inventions, in the form of but not necessarily limited to
notes, sketches, drawings, or reports relating thereto, which records shall be
and remain the property of and available to the Company at all times.
(f) Promptly upon termination of his employment, he will
disclose to the Company, or to such officer or other agent as may be designated
by the Company, all inventions which have been partly or wholly conceived,
invented or developed by him for which
-25-
applications for patents have not been made and will thereafter execute all such
instruments of the character hereinbefore referred to, and will take such steps
as may be necessary to secure and assign to the Company the exclusive rights in
and to such inventions and any patents that may be issued thereon any expense
therefor to be borne by the Company.
(g) He will not at any time aid in attacking the patentability,
scope, or validity of any invention to which the provisions of subparagraphs (c)
through (f), above, apply.
In the event that (i) Executive institutes any legal action to enforce
his rights under, or to recover damages for breach of this agreement, or (ii)
the Company institutes any action to avoid making any payments due to Executive
under this agreement, Executive, if he is the prevailing party, shall be
entitled to recover from the Company any actual expenses for attorney's fees and
other disbursements incurred by him in relation thereto.
13. Arbitration. Any disputes hereunder shall be settled as follows:
(a) Election Of Arbitration. At the option of either party, any
and all disputes or controversies whether of law or fact and of any nature
whatsoever arising from or respecting this Agreement shall be decided by
arbitration by the American Arbitration Association in accordance with the rules
and regulations of that Association.
(b) Selection Of Arbitrators. The arbitrators shall be selected
as follows: In the event the Company and Executive agree on one arbitrator, the
arbitration shall be conducted by such arbitrator. In the event the Company and
Executive do not so agree, the Company and Executive shall each select one
independent, qualified arbitrator, and the two arbitrators so selected shall
select the third arbitrator. The Company reserves the right to object to any
individual arbitrator who shall be employed by or affiliated with a competing
organization.
-26-
(c) Conduct Of Arbitration. Arbitration shall take place in
Stamford, Connecticut or any other location mutually agreeable to the parties.
Reasonable notice of the time and place of arbitration shall be given to all
persons other than the parties as shall be required by law, and such persons or
their authorized representatives shall have the right to attend and/or
participate in all the arbitration hearings in such manner as the law shall
require.
(d) Secrecy Of Proceedings. At the request of either party,
arbitration proceedings will be conducted in the utmost secrecy; in such case
all documents, testimony and records shall be received, heard and maintained by
the arbitrators in secrecy under seal, available for the inspection only of the
Company or Executive and their respective attorneys and their respective
experts, who shall agree in advance and in writing to receive all such
information confidentially and to maintain such information in secrecy until
such information shall become generally known.
(e) Relief. The arbitrators, who shall act by majority vote,
shall be able to award damages, with or without an accounting and costs. The
decree or judgment of an award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
14. Notices. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail addressed to the party concerned
at the following addresses:
If to the Company:
SmartServ Online, Inc.
Metro Center
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
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If to the Executive:
Xx. Xxxxxxxxx X. Xxxxxxxx
0 Xxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx Ingersoll Professional Corporation
Eleven Xxxx Xxxxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
or to such other address as shall be designated by notice in writing to the
other party in accordance herewith. Notices and other communications hereunder
shall be deemed effectively given when personally delivered, or, if sent by
overnight courier, upon receipt, or, if mailed, 48 hours after deposit in the
United States first class mail, postage prepaid.
15. Miscellaneous.
(a) This Agreement supersedes all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof, without limitation, including the Employment Agreement.
(i) This Arrangement shall inure to the benefit of the
Executive's heirs, representatives or estate to the extent stated
herein.
(ii) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the
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business or assets of the Company, by agreement in form and
substance satisfactory to the Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform if no
such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as defined in the preamble to
this Agreement and any successor to its business or assets which
executes and delivers the agreement provided for in this
Subsection 15 (b) (ii) or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(iii) This Agreement may be amended, modified, superseded,
canceled, renewed or extended and the terms or covenants hereof
may be waived, only by a written instrument executed by both of
the parties hereto, or in the case of a waiver, by the party
waiving compliance. The failure of either party at any time or
times to require performance of any provisions hereof shall in no
manner affect the right at a later time to enforce such
provisions thereafter. No waiver by either party of the breach of
any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of
any such breach or a waiver of the breach of any other term or
covenant contained in this Agreement.
(iv) In the event any one or more of the covenants, terms or
provisions contained in this Agreement shall be invalid, illegal
or unenforceable in any respect,
-29-
the validity of the remaining covenants, terms and provisions
contained herein shall be in no way affected, prejudiced or
disturbed thereby.
(v) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder,
except as provided in Subsection 15(b) above. Without limiting
the foregoing, the Executive's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than
a transfer by his will or by the laws of descent or distribution,
and in the event of any attempted assignment or transfer contrary
to this Subsection 15(e) the Company shall have no liability to
pay any amount so attempted to be assigned or transferred.
(vi) This Agreement shall be governed by laws of the State of
Connecticut, without regard to its choice of law provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
ATTEST: SMARTSERV ONLINE, INC:
By: ____________________________ By: __________________________________
____________________________ __________________________________
WITNESS: EXECUTIVE:
By: ____________________________ By: __________________________________
____________________________ __________________________________
Xxxxxxxxx X. Xxxxxxxx
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