Exhibit 10.4
EMPLOYMENT AGREEMENT
OF
Xxxxxx X. Xxxxxxxx, Xx.
This EMPLOYMENT AGREEMENT ("Agreement") dated as of the 15th day of June,
1998, between Xxxxxx X. Xxxxxxxx, Xx. ("Executive") an individual residing at
0000 X. Xxxxxxxx Xx., Xxxxx, Xx 00000, and NetWolves Corporation ("Company") a
New York Corporation having its principal place of business at 00 Xxxx Xxxxxxx
Xx., Xxxxx 000, Xxxxxxxxxx Xxxxxxx, Xxx Xxxx 00000;
WITNESSETH:
WHEREAS, the Company desires to retain Executive as the President of
Manufacturing, Research and Development of the Company, and Executive desires to
perform such duties,
NOW, THEREFORE, it is mutually agreed by and among the parties as
follows:
Section 1. Employment.
Upon the terms and subject to the conditions contained herein, during the
Employment Term (hereinafter defined), the Company hereby employs Executive as
the President of Manufacturing, Research and Development of the Company.
Executive shall be responsible for such duties as are commensurate with his
office and as may from time to time be assigned to Executive by the Board of
Directors of the Company. Executive shall report directly to the Board.
Executive hereby accepts such employment and during the Employment Term shall
devote his full business time, skill, energy and attention to the business of
the Company, and shall perform his duties in a diligent, trustworthy, loyal and
businesslike and efficient manner, all for the purpose of advancing the business
of the Company. Executive shall not be engaged in any other business activity,
whether or not the activity is pursued for gain, profit, or other pecuniary
advantage, during the term of this Agreement without Company's prior written
consent. Executive agrees to serve, if elected, as an officer and/or director of
the Company and any of its subsidiaries without additional compensation.
However, Executive shall not be required to serve as an officer or director of
any of the Company's subsidiaries if to do so would expose Executive to adverse
financial consequences.
Section 2. Compensation.
2.1. Salary. During the Employment Term, the Company shall pay, and
Executive shall be entitled to receive from the Company, as a base salary for
the employment referred to in Section 1 hereof, compensation at the rate of
$100,000 per annum, payable in 26 equal installments. Executive's base salary
shall be increased after the first full year as follows:
(A) to $130,000 per annum, payable in 26 equal installments;
(B) to $150,000 per annum, payable in 26 equal installments, if the
operating subsidiary NetWolves Corporation generates revenues
between $5,000,000 and $9,999,999, within one year of the initial
employment term.
(C) to $250,000 per annum, payable in 26 equal installments, if the
operating subsidiary NetWolves Corporation generated revenues of
at least $10,000,000, within one year of the initial employment
term. The base salary will be reviewed at least once a year by
the Company's Board of Directors and may be increased if the
performance of the Company warrants any such increase.
2.2. Bonus. Executive shall be entitled to a bonus of 2% of gross profit
of the Company. One fourth of the bonus will be paid quarterly after the
completion of the Company's quarterly financial statement, and the remaining
balance will be paid after the completion of the annual financial statement.
2.3. Stock Options; Warrants: Executive shall be entitled to receive in the
aggregate warrants to purchase 200,000 shares of the stock of the Company and
shall also share in an employee stock option plan. The warrants, which shall be
subject to a separate Warrant Agreement, shall provide as follows:
(A) 50,000 warrants will become exercisable if the operating subsidiary
generates revenues of at least $5,000,000, without a pretax loss,
within one year following the signing of this agreement;
(B) 100,000 warrants will become exercisable if the operating subsidiary
generates revenues of at least $10,000,000 in revenues, with at least
$2,000,000 in pretax profit [before interest, taxes, depreciation, and
amortization ("EBITDA")], within one year following the signing of
this Agreement; and
(C) 50,000 warrants will become exercisable if the operating subsidiary
generates revenue of $10,000,000 with at least $1,000,000 in pretax
profit (EBITDA), within the second year following the signing of this
Agreement;
(D) If the warrants described in paragraph 2.3 (2) do not become
exercisable under the conditions stated, then such warrants will
become exercisable if the operating subsidiary generates $20,000,000
in revenues, with at least $4,000,000 in pretax income (EBITDA) during
the second year following the signing of this agreement.
The Company agrees to establish an employee stock option plan and reserve
at least 282,500 shares of the common stock of the Company for issuance under
the plan.
2.4. Expenses. The Company shall reimburse Executive for all expenses
incurred and paid by Executive in the course of the performance of his duties
pursuant to this Agreement and consistent with the Company's policies in effect
from time to time with respect to travel, entertainment and other business
expenses, and subject to the Company's requirements with respect to the manner
of reporting such expenses.
2.6. Fringe Benefits. Executive shall be entitled to participate in various
fringe benefit programs now in force or hereafter established by the Company for
all employees of the Company, provided, however, that such participation shall
be subject to all of the terms and conditions pertaining to said programs as
they may now exist or as hereafter adopted, modified or amended. The fringe
benefit program of the Company may be changed or canceled at any time by the
Company in its sole discretion without prior notice to or consent of Executive.
2.7. Vacation. Executive shall be entitled to a paid vacation of two (2)
weeks commencing six (6) months from the Effective Date of this Agreement, three
(3) weeks after the first year and four (4) weeks every year thereafter.
2.8. Holidays. Executive shall be entitled to the same paid holidays as
authorized by the Company for all its other executives.
Section 3. Employment Term.
3.1. Employment Term. The Employment Term shall be three (3) years
commencing on the date of the signing of this Agreement. The Employment
Agreement will be automatically renewed for another three (3) years unless
otherwise terminated or canceled pursuant to Section 4 hereof.
Section 4. Termination
4.1. Death. The Agreement shall terminate upon death of the Executive.
Should the Agreement terminate as a result of Executive's death, the Executive's
Estate shall be entitled to receive compensation equal to six months of
Executive's base salary, base salary determined at the time of death.
4.2. Termination by Company.
(a) Termination For Cause. Company may terminate Executive's employment for
cause.
(b) 'Cause' Defined. Company shall have cause to terminate Executive's
employment if Executive wilfully fails to substantially perform any duties
required by this Agreement (unless Executive's failure is due to a physical or
mental incapacity), Executive is consistently, flagrantly, and grossly negligent
in the performance of required duties, Executive engages in conduct that
demonstrably and substantially damages Company, Executive is convicted of a
felonious act of moral turpitude, or Executive discloses material confidential
information in violation of this Agreement. No act or failure to act by
Executive may be considered "wilful" unless Executive acted or failed to act
without any reasonable belief that the act or omission was in Company's best
interests and without good faith.
(c) Resolution Finding Cause for Termination of Executive's
Employment. Before Executive's employment may be terminated for cause, a
majority of the entire membership of Company's Board of Directors (not including
Executive) must duly adopt a resolution finding in good faith that Company has
cause to terminate Executive's employment and specifying the details of
Executive's misconduct. Before the Board of Directors may adopt such a
resolution, Executive must be given reasonable notice and opportunity to be
heard by the Board of Directors and must be permitted to appear before the Board
of Directors with counsel. The Board of Directors may not adopt a resolution
terminating Executive's employment for cause unless it receives a report from a
firm of independent attorneys (not including counsel for Company) concluding
that the Board of Directors has cause within the meaning of this agreement to
terminate Executive's employment. The firm of independent attorneys must be
selected by a majority of the entire membership of the Board of Directors (not
including Executive) and must be reasonably acceptable to Executive. If this
Agreement is terminated by Company for cause, each party's obligations under
this Agreement shall thereupon cease and terminate except for obligations
accrued but undischarged to and including the date of such event
4.3. Termination by Executive. Executive may (but is not obligated to)
terminate this Agreement at any time under the following circumstances:
(a) Executive's health becomes so impaired that continued performance of
Executive's duties under this Agreement would be hazardous to
Executive's physical or mental health.
(b) Change in control. There is a change in control of Company if someone
other than the subscribers to Company's common stock at the time of
the signing of this Agreement becomes the beneficial owner of common
stock representing 20 percent or more of the voting power of Company
or during any three year period during the term of this Agreement the
individuals who constitute the Board of Directors at the beginning of
the period cease to constitute at least a majority of the Board
members at the end of the three-year period for any reason other than
death or disability. No transaction or event will be deemed to have
caused a change in control if Executive gives prior consent to the
transaction or event.
(c) Executive is assigned duties that are significantly different than
those described in this Agreement, or duties assigned Executive by
this Agreement are eliminated or transferred to someone else.
(d) Executive is removed from any of the positions described in Section 1
of this Agreement (other than by Company for cause).
(e) Executive's fringe benefits or other compensation are materially
reduced.
(f) Company requires Executive to travel more frequently than contemplated
by this Agreement.
(g) Company fails to have a successor assume this Agreement.
(h) Company becomes insolvent or files a bankruptcy petition.
4.4. Notice of Termination. Any termination of Executive's employment by
Company or Executive must be communicated to the other party by a written Notice
of Termination. The notice must specify the provision of this Agreement
authorizing the termination and must set forth in reasonable detail the facts
and circumstances providing the basis for termination of Executive's employment.
4.5. Date Termination Is Effective. If Executive's employment terminates
because this Agreement expires, then Executive's employment will be considered
to have terminated on that expiration date. If Executive's employment terminates
because of Executive's death, then Executive's employment will be considered to
have terminated on the date of Executive's death. If Executive's employment is
terminated by Executive, then Executive's employment will be considered to have
terminated on the date that a Notice of Termination is given. If Executive's
employment is terminated by Company for cause, then Executive's employment will
be considered to have terminated on the date specified by the "Notice of
Termination." If, within 30 days after a Notice of Termination is given, the
party receiving the notice notifies the other party that there is a dispute
concerning the termination, then Executive's employment will not be considered
to have terminated until the dispute is ended by a written agreement between the
parties, a final arbitration award, or a final judgment, order, or decree of a
court of competent jurisdiction. A judgment, order, or decree of a court of
competent jurisdiction will be considered final if the time for appealing the
decision has expired and no appeal has been perfected.
4.6. Compensation Following Termination.
(a) If Executive's employment terminates because of Executive's death, the
Company shall pay a lump sum death benefit to the person or persons
designated in a written notice filed with Company by Executive or, if
no person has been designated, to Executive's estate. The amount of
the lump sum death benefit will equal the amount of Executive's then
current base salary plus the amount of incentive compensation paid
Executive most recently prior to Executive's death, multiplied by the
number of full and partial years that Executive was employed by
Company. This lump sum death benefit shall be in addition to any other
amounts that Executive's beneficiaries and estate may be entitled to
receive under any employee benefit plan maintained by Company.
(b) If Executive's employment is terminated by Company for cause, Company
shall pay to Executive Executive's then current base salary through
the date employment is terminated, and Company shall have no further
obligations to Executive under this Agreement.
(c) If Company terminates Executive's employment other than for cause,
Company shall pay Executive Executive's then current base salary
through the date employment is terminated and any legal fees and
expenses incurred by Executive to enforce Executive's rights under
this Agreement. In addition, Company shall pay Executive as liquidated
damages an amount equal to the sum of Executive's then current base
salary plus the amount of incentive compensation paid to Executive
most recently before the date Executive's employment was terminated,
multiplied by the number of full and partial years remaining in the
term of this Agreement (including extensions), and further multiplied
by 50% percent if Executive's employment terminates during the year
ending December 31, 1998, 75% percent if Executive's employment
terminates during the year ending December 31, 1999, or 100% percent
if Executive's employment terminates during the year ending December
31, 2000 or a subsequent year.
(d) If Executive's employment is terminated by Executive in accordance
with the provisions of this Agreement, Company shall pay Executive
severance pay in an amount equal to the sum of Executive's base salary
plus the amount of incentive compensation paid to Executive most
recently before the date Executive's employment was terminated,
multiplied by fifty percent (50%).
(e) Company and Executive intend that no portion of the payments to
Executive contingent on a change in control of Company be deemed a
parachute payment, as that term is defined by Section 28OG(b)(2) of
the Internal Revenue Code. Company and Executive agree that the
present value (as that term is defined by Section 28OG(d)(4) of the
Internal Revenue Code) of the termination payments contingent on a
change in control of Company shall not exceed the amount that could
cause the payments to be characterized as a parachute payment. If the
present value of the payments to be made to Executive exceed the
amount; that could cause the payments to be characterized as a
parachute payment, then the amount of those payments shall be reduced
so that their present value equals one dollar less than the amount
that would cause the payments to be characterized as a parachute
payment.
4.7. Health insurance upon termination. In the event the Company
terminates this Agreement with Executive for reasons other than those in
Sections 4.1, and 4.2(a), the Executive shall be entitled to receive continuing
benefits of health insurance coverage for a six month period.
Section 5. Disability.
5.1. Replacement Because of Disability. If, because of illness or
injury, Executive becomes unable to work full time for the Company for a period
of more than 90 days, Company may, in its sole discretion at any time after that
period give Executive 30 days written notice that it will replace Executive if
Executive is unable to return to work full time before the date specified in the
written notice. Replacement of Executive shall not be considered a termination
of Executive's employment under this Agreement.
5.2. Compensation During Periods of Disability.
(a) Executive shall continue to receive Executive's base salary and
incentive compensation while Executive is unable to work full time
until Executive is replaced or until Executive terminates Executive's
employment with Company because Executive's health becomes so impaired
that continued performances of Executive's duties under this Agreement
would be hazardous to Executive's physical or mental health.
(b) While Executive is unable to work full time because of illness or
injury and through the full term of this Agreement, including
extensions, Company shall maintain for Executive's benefit all
employee benefit plans in which Executive was participating at the
time Executive was replaced. If Executive is barred from participating
in any employee benefit plan because of Executive's disability,
Company shall pay Executive an amount equal to what Company would have
contributed on Executive's behalf to the employee benefit plan if
Executive's participation had not been barred.
(c) After Executive is replaced or receives notice that Executive is
terminating employment because Executive's health has become so
impaired that continued performance of Executive's duties under this
Agreement would be hazardous to Executive's physical or mental health,
Company shall pay Executive an amount equal to the sum of Executive's
base salary plus the amount of incentive compensation paid to
Executive most recently before the date Executive's employment was
terminated, multiplied by fifty percent (50%)
(d) Executive is not required to seek other employment to mitigate any
amounts payable under this Agreement. Nor will amounts due Executive
under this Agreement be reduced by any amounts received by Executive
for other employment.
5.3. Disability Insurance. Company shall purchase and use its best efforts
to maintain disability insurance in force for the benefit of Executive
throughout the term of this Agreement (including extensions). The policy shall
replace fifty percent of Executive's Base Salary, start paying benefits after
Executive has been unable to work full-time for 90 days, continue paying
benefits until Executive reaches age 65, and waive premium payments while
Executive is disabled. If Company fails to make a premium payment, Executive
shall have the right in Executive's sole discretion to advance such funds as may
be required to maintain the policy in force and shall thereafter be entitled to
recover amounts paid from Company.
Section 6. Business Properties.
6.1. Business Properties Other than as required to perform his duties in
accordance with this Agreement and for purpose of furthering the business of the
Company, Executive shall not use or cause to be used Company's trade secrets or
any other confidential business information by him as a result of his employment
or relationship to the Company or any affiliate of the Company.
6.2. Revealing Trade Secret, etc. Executive acknowledges the interest of
the Company in maintaining the confidentiality of information related to its
business and shall not at any time during the Employment Term or thereafter,
directly or indirectly, reveal or cause to be revealed to any person or entity
the production processes, inventions, formulae, trade secrets, customer lists or
any other confidential information obtained by him as a result of his employment
or relationship with the Company or any affiliate of the Company, except when
authorized in writing to do so by the Company, provided, however, that it is not
the intent of this Section 5.2 to include within the subject matter information
not proprietary to the Company or information which is in the public domain.
Confidential information does not include any information that is known
generally by the public (other than as a result of unauthorized disclosure by
Executive) or information that is not the type of information considered
confidential by persons engaged in a business that is the same of similar to
that conducted by the company. Confidential information is material if its
disclosure would be materially damaging to the Company.
Section 7. Non-Competition.
7.1. Non-Competition. During the Employment Term and for a period of one
(1) year thereafter, Executive shall not (a) compete, engage, or participate,
directly or indirectly, in the business or business substantially similar to the
business as conducted by the Company or as may thereafter be conducted by the
Company at any time during the Employment Term, (b) solicit or cause to be
solicited any customers of the Company, or (c) recruit or cause any other person
to recruit any employee of the Company to any of said business or businesses.
7.2. Prior Notice. Prior to engaging in any activity or accepting
employment with another company any time within one (1) year after Executive
leaves the employment of the Company, which activity or employment is in the
same or related industry in which the Company is engaged, Executive agrees to
provide at least thirty (30) days prior written notice (by certified mail) to
the Company, stating the description of the activities or position sought to be
undertaken by Executive, together with such further information as the Company
may request in connection therewith (including, but not limited to, location
where the services would be performed, the present or former customers of the
Company who may be anticipated to receive such services, etc.). Upon receipt of
such information from Executive, the Company shall, within fifteen (15) days of
the receipt of all of the requested information, notify Executive whether the
Company objects to the otherwise prohibited services of activities by Executive.
If the Company does not object or does not respond, the restrictions set forth
in Section 6 shall have no force and effect. The Company shall be free to object
or not to object in unfettered discretion, and parties agree that any actions
taken or not taken by the Company with respect to any other employees or former
employees shall have no bearing whatsoever on the Company's decision or on any
question regarding the enforceability of this restraint with respect to
Executive.
7.3. Limitations. It is also agreed that if for any reason the area or time
restrictions set forth above are too broad so as to be unenforceable by law,
then they, or either one of them, shall be reduced to such area or time as shall
be legally enforceable. If it is judicially determined that this agreement not
to compete, or any potion thereof, is illegal or offensive under any applicable
law (statute, common law or otherwise), then it is hereby agreed by Executive
and the Company that the non-competition covenant shall be in full force and
effect to the full extent permitted by law. By this agreement, the parties
intend to have this agreement not to compete to be in full force and effect to
the greatest extent permitted.
Section 8. Inventions.
8.1. Assignment. Without further consideration Executive shall fully and
promptly report to the Company all ideas, concept, inventions, discoveries,
formulae and designs conceived or produced by Executive at any time during the
Employment Term, whether alone or with others and whether patentable or
unpatentable (collectively, "Inventions") pertaining, directly or indirectly, to
the business of the Company as conducted at any time during the Employment Term,
and shall assign and hereby does assign to the Company or its nominee
Executive's entire right, title and interest in and to all such Inventions.
8.2. Cooperation. Executive shall take all reasonable action requested by
the Company to protect or obtain title to any and all United States and/or
foreign patents on any such Inventions, including execution and delivery of all
applications. assignments and other documents deemed necessary or desirable by
the Company, provided Executive is reimbursed for reasonable expenses incurred
by Executive in connection with such execution and delivery.
Section 9. Miscellaneous.
9.1. Remedies. The parties acknowledge that any breach or violation by
Executive of the terms of this Agreement will result in immediate and
irreparable injury and harm to the Company, and will do damage to the Company in
amounts difficult to ascertain. Accordingly, the company shall be entitled to
remedies of injunction, as well as to all other legal or equitable remedies to
which the Company may be entitled, including, without limitation termination of
the Employment Term and this Agreement.
9.2. Certain definitions. For the purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Engage in or participate in any business" referred to in Section 7
hereof shall be deemed to mean engaging in or participating in any business or
businesses, directly or indirectly, whether for his own account or for that of
any other person, firm, or corporation, and whether as a stockholder (except as
a stockholder in a publicly-held corporation with more than 500 holders of
common stock of which Executive owns less than 1 % of the outstanding securities
of any class), principal, agent, proprietor, partner, officer, director,
employee or consultant, or in any other capacity;
9.3. Notices. Any notice or other communications required or permitted to
be given to the parties hereto shall be deemed to have been given when received,
addressed as follows (or at such other address as the party addressed may have
substituted by notice pursuant to this Section 8.3.
(a) If to the Company: NetWolves Corporation
33 Xxxx Xxxxxxx Dr., Xxxxx 000
Xxxxxxxxxx Xxxxxxx, Xxx Xxxx 00000;
(b) If to Executive: Xxxxxx X. Xxxxxxxx, Xx.
0000 X. Xxxxxxxx Xx.
Xxxxx, Xx 00000
9.4. Heading. The captions set forth in this Agreement are for convenience
only and shall not be considered as part of this Agreement or as in any way
limiting or amplifying the terms and provision hereof.
9.5. Governing Law. The Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the law of the State of
Florida.
9.6. Severability. In case this Agreement or any one or more of the
provisions hereof, shall be held to be invalid, illegal or unenforceable within
any governmental jurisdiction or subdivision thereof, the Agreement or any such
provision or provisions shall not as a consequence thereof be deemed to be
invalid, illegal or unenforceable in any other governmental jurisdiction or
subdivision thereof. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any other respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein and there shall be deemed substituted such other provision as
will most nearly accomplish the intent of the parties to the extent permitted by
applicable law.
9.7. Whole Agreement. This Agreement embodies all the representations,
warrants covenants and agreements of the parties in relation to subject matter
hereof, and no representations, warranties, covenants, understandings or
agreements, or otherwise, in relation thereto exist between the parties except
as herein expressly set forth herein, or in any instrument in writing by the
party to be bound thereby which makes reference to this Agreement.
9.8. No Rights in Third Parties. Nothing herein expressed or implied is
intended to or shall be construed to confer upon or give to any person, firm or
other entity, other than the parties hereto and their respective successors and
assigns or personal representatives, any rights or remedies under or by reason
of this Agreement.
9.9. Amendment. This Agreement may not be amended orally but only by an
instrument in writing duly executed by the parties hereto.
9.10. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
In WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE NetWolves Corporation
_______________________ By:_______________________
Xxxxxx X. Xxxxxxxx, Xx. President
