AGREEMENT
Effective Date:
June 16, 1997
Parties:
Sunrise Resources, Inc. ("Sunrise" or "Company")
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Xxxxx X. Xxxx ("King")
The King Management Corporation
950 Xxxxx Xxxxxxx Plaza
000 Xxxxx Xxxxxx
Xx. Xxxx, XX 00000-0000
The King Management Corporation ("King Management")
950 Xxxxx Xxxxxxx Plaza
000 Xxxxx Xxxxxx
Xx. Xxxx, XX 00000-0000
Recitals:
A. Sunrise is a public company engaged primarily in the business of leasing
computer equipment;
X. Xxxx has unique experience, skill and expertise in the leasing business,
especially in the development of vendor leasing programs and business
strategies; and
C. Sunrise's 1997 annual report on Form 10-K report identified certain
liquidity problems which, if they materialize, would place the Company in
default of its loan agreements and severely affect it ability to borrow funds to
support its vendor programs which, in turn, would jeopardize its vendor program
business.
D. Sunrise is desirous of appointing King as its Chairman of the Board and
an officer/employee of the Company and having King provide certain services, and
King is desirous of serving as the Company's Chairman of the Board and providing
such services to Sunrise, subject to the terms and conditions set forth herein.
In addition, the parties have asked that King Management provide certain
services to Sunrise and participate with Sunrise in its vendor programs.
Agreement:
In consideration of the mutual covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Chairmanship. On the assumption that the terms and conditions of this
Agreement are acceptable to King and the Agreement has been signed by the
parties hereto, the Board of Directors will appoint King to serve as the
Company's Chairman of the Board and to serve on certain Board committees. King's
duties as Chairman will include, but not be limited to, determining the agenda
for meetings of directors, interfacing with the Chief Executive Officer and
generally ensuring that the directors are well-informed, board meetings are
productive and well run and the Company and the Company's management are
adhering to policies set by the Board. King will be an officer and employee of
the Company, and in that capacity will provide additional services described in
Section 2 below and he will cause his affiliate, King Management, to perform the
services described in Section 3 below.
2. Officer and Employee.
a. Services. King shall assist Sunrise as follows:
(1) analyze its current business and business opportunities;
(2) assist the development and implementation of fiscal 1998 and
1999 plans;
(3) analyze personnel needs;
(4) work with Xxxxx Xxxxxxxxx on current and prospective vendor
relationships;
(5) monitor problem leases and loans;
(6) assess desirability of continuing non-vendor side of leasing
business;
(7) work with management on financing requirements and bank
relationships; and,
(8) as may be otherwise directed by the Board of Directors.
In performing such services, King will be responsible to and
report to Sunrise's Board of Directors.
b. Term. Subject to the termination provisions of Section 9 of
this Agreement, King's service as an employee shall commence
as of June 16, 1997, and shall continue through June 30,
1999. The continuation of the employment of King after June
30, 1999, is subject to the mutual written agreement of both
parties. If either party should desire to renew this
relationship, such party shall give the other party written
notice of such desire at least thirty (30) days prior to the
end of the term of this Agreement. The termination of this
Agreement will not affect King's service as a Director of
the Company or his position as a Chairman of the Board. King
will continue in his position as a director of the Company
until his successor has been elected by the shareholders of
the Company, and he will serve as its Chairman at the
discretion of the Directors of the Company.
c. Time. There is no specific time commitment required of King
in the fulfillment of his duties and responsibilities
hereunder.
d. Company Policies. King shall abide by all policies of
Sunrise as such policies may be amended from time to time by
Sunrise.
3. The King Management Corporation. King Management and/or King will, in
addition to the services described in Section 2a above, provide the following
during the period beginning on July 1, 1997 and ending on June 30, 1997 or until
such earlier time as the Board determines such financing commitment is no longer
necessary:
a. sufficient subordinated debt to Sunrise to cover its net
worth financial covenant deficiency, if necessary to obtain
funding for its vendor programs;
b. utilize the balance sheet and borrowing resources of King
Management to provide funding for approved vendor programs,
including making direct loans, providing certain
subordinations and arranging financing packages by utilizing
King Management's balance sheet, if necessary; and
x. Xxxx will work closely with the Company to enhance the
Company's future prospects, including but not limited to,
assisting the Company's efforts to finance its vendor
business in fiscal 1998 and fiscal 1999. Direct financing
provided to Sunrise will be at terms at least as attractive
as the financing provided by the Xxxxxxxxx Xxxxxxx program,
or any other financing vehicle utilized by Sunrise in
accordance with the vendor program being financed.
4. Cash Compensation. For his services as a director and employee of the
Company, King will receive the sum of $10,000 per month which will be subject to
withholding and all other payroll taxes. This payment shall have no affect on
any other obligation of the Company to King arising out of the 1995 merger
between International Leasing Corporation and the Company.
5. Stock Options. To induce King to become an employee of the Company, King
will receive two separate non-qualified stock option grants. The first stock
option grant will be for 270,753 shares of the Company's common stock, at an
exercise price of $3.325 per share, the fair market value on the date of grant.
The option term will be five years and the options will be immediately vested in
full. Neither this option nor the option described below will be granted under
an existing stock option plan. The option will be evidenced by a stock option
agreement in the form of the agreement attached hereto as Exhibit B.
The second option grant will be for 270,753 shares of the Company's common
stock, at an exercise price of $3.375 per share. The option term will be fully
vested after four years, assuming that King continues to be an employee of the
Company as of the vesting date. The right to exercise the options will be
accelerated to two years if there has been no interruption of the Company's
ability to obtain funding for its vendor programs through King Management or
through conventional funding sources, or prior to two years if the financial
affairs of Sunrise improve to a point where the Board of Directors determines
that the King and King Management commitments are no longer required. If the
conditions for acceleration are met, the options will be exercisable by King or
his representative even if King is no longer living or has voluntarily retired
from the Company with the approval of the Company's Board of Directors. The
stock option will be evidenced by a stock option agreement in the form of the
agreement attached hereto as Exhibit C.
6. Vendor Program Sharing. For two year period, King Management will be
allocated a specific percentage of the vendor transactions consummated during
the term of this Agreement as follows: 25% of the Sun 1% H.P. type program and
of other similar high risk leasing programs and risk pools as described in the
attached Exhibit A and 15% of leases from all other vendor programs. King
Management agrees to purchase equipment and take assignments on vendor lease
transactions up to but not over the agreed percentage levels described above on
a non-discriminatory basis and subject to the terms and conditions of any and
all agreements with the particular vendor, as amended from time to time. Sunrise
will consummate all lease transactions and make the appropriate assignments to
King Management. King Management will pay for the equipment it purchases
according to the terms and conditions of the applicable vendor program and be
responsible for the administration of it own lease. The parties agree to review
the additional costs of operating the vendor business on a shared basis and to
arrive at a fair rate of compensation if the parties agree that Sunrise has
assumed more of the overhead burden than is appropriate after taking into
consideration other services which may be provided by King and King Management.
7. Non Solicitation. During the term of this Agreement and any extension of
this Agreement, neither King Management nor King will, without the express
written consent of the Company, conduct any equipment leasing business with
current vendor customers of the Company in the United States or other areas the
parties may agree upon or with customers which the Company is soliciting or has
expressed an interest in soliciting, except as contemplated by this Agreement.
Neither King Management nor King will contact such customers directly with
respect to vendor program business pursuant to this Agreement without the
consent of the Company. Apart from this Agreement, King understands that as long
as he serves as a director of the Company, he has a duty of loyalty to it, which
prevents him from using his position as a director of Sunrise to make personal
profit or gain.
During the term of this Agreement and any extension thereof, neither King
Management nor King will directly or indirectly, solicit any of Sunrise's
present or future employees for the purpose of hiring them or inducing them to
leave their employment with Sunrise; or solicit, attempt to solicit, interfere
or attempt to interfere with Sunrise's relationship with its customers or
potential customers.
Notwithstanding the foregoing, this Agreement is not intended to prohibit
and does not prohibit either King Management or king from engaging in any form
of leasing business or any other business. The intent of this Agreement is to
ensure that the parties understand that while King Management will participate
in the Company's vendor leasing transactions during the term of this Agreement
and any extension thereof, the vendor customers with whom the transactions are
negotiated (as they relate to vendor programs) are the customers of Sunrise and
not King Management or King. The Company understands, however, that King's
relationships with the several Sunrise vendors precedes that of Sunrise and
nothing in this Agreement shall prevent King from maintaining and/or expanding
those relationships so long as the terms of this Agreement are carried out.
8. Nondisclosure of Confidential Information -- King Management and King.
King Management and King agree not to directly or indirectly use or disclose
confidential information for the benefit of anyone other than the Company,
except as permitted by the Software License Agreement dated February 13, 1995,
between the Company and King Holding Corporation. "Confidential Information"
means the information or compilation of information regarding Sunrise that King
or King Management learns or has learned or develops or has developed during the
course of his employment or as a director of the Company that derives economic
value from not being generally known, or readily ascertainable by proper means
by other persons who can obtain economic value from its disclosure or use.
9. Nondisclosure of Confidential Information and Solicitation -- Sunrise.
King Management markets and has under development certain software and asset
management programs that are not equipment leasing programs. Because of the
proximity and commonality of certain customers and potential customers that
Sunrise does not currently sell to, Sunrise agrees to keep confidential any
information it becomes aware of relative to King Management's businesses, and
agrees not to solicit or compete with King in the businesses that King offers or
interfere with its business relationships.
10. Termination. This Agreement may be terminated pursuant to any of the
following provisions:
a. Mutual Agreement. By mutual written agreement executed by both
parties.
b. Default. By either party, effective immediately upon delivery of
written notice to the other party, if the other party breaches
any of its obligations under this Agreement; provided that if
such breach is curable, such notice shall not be effective until
the breaching party fails to correct such breach or default
within a period of thirty (30) days after delivery of such
written notice. If such breach is not curable, the Agreement
shall terminate immediately upon delivery of such notice of
breach.
c. Death or Disability. By the Company upon the death or total
disability of King. A termination of this Agreement will not, in
and of itself, affect the options granted to King hereunder -
King's options rights will be determined by applicable option
agreements - nor will it affect the sharing right so long as King
and/or King Management fulfills the financing obligations of this
Agreement.
11. General Provisions.
a. Severability and Interpretation. In the event that a provision of
this Agreement is held invalid, the remaining provisions shall
nonetheless be enforced in accordance with their terms. Further,
in the event that any provision is held to be overbroad as
written, such provision shall be deemed amended to narrow its
application to the extent necessary to make the provision
enforceable according to applicable law and shall be enforced as
amended.
b. Notices. Any notice required or permitted to be given under this
Agreement shall be deemed effective when received if delivered by
hand, telecopy, telex or telegram or three (3) days after
depositing if placed in the U.S. mails for delivery by registered
or certified mail, return receipt requested, postage prepaid and
addressed to the appropriate party at the address set forth on
the first page of this Agreement. Such address may be changed by
giving written notice to the other party of such different
address pursuant to the provisions of this section.
c. Nonassignment. Neither King nor King Management shall assign,
transfer or sell all or any part of his/its rights or obligations
hereunder without the prior consent of Sunrise, which consent
shall not be unreasonably withheld. However, the options granted
in Section 5 hereof may be exercised by his representative in the
event of his death or disability if the terms of the controlling
option agreements are met. This Agreement shall be binding upon
and inure to the benefit of any successor or assignee of Sunrise
and of any permitted successors and assigns of King or King
Management as provided above.
d. Controlling Law. This Agreement shall be deemed to have been made
in the State of Minnesota and shall be governed by and construed
in accordance with the laws of the State of Minnesota.
e. Entire Agreement. This Agreement, together with the exhibits
hereto, constitutes the entire Agreement between the parties and
supersedes any and all prior and contemporaneous oral or written
understandings between the parties relating to the subject matter
hereof, except the Consulting and Noncompetition Agreement dated
February 13, 1995 between Sunrise and King will continue in
effect.
The parties have executed this Agreement in the manner appropriate to each
to be effective the day and year entered on the first page hereof.
SUNRISE RESOURCES, INC.
By: /s/ Xxxxx Xxxxxxxxx
Its: CEO
THE KING MANAGEMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
Its: President
/s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
EXHIBIT A
DESCRIPTION OF SUN 1% H.P. PROGRAM AND
HIGH RISK LEASING PROGRAMS AND RISK POOLS
1. The H.P. 1% type program is a vendor program primarily based on substantial
equipment discounts in order to subsidize a rate factor for the end-users.
2. High risk vendor programs are primarily 6 and 12 months leases where the
Company must assume a substantial residual position or other longer-term
programs where residual risks are substantially greater than its usual
level and/or where the renewals beyond the initial term is severely limited
due to the nature of the program. (This excludes the Sun Demo program which
is an established proven program.)
3. Risk pools involve substantial risks in part because the vendor is willing
to provide only limited recourse to Sunrise.
