EXHIBIT 10.5
SEVERANCE AGREEMENT
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THIS SEVERANCE AGREEMENT (this "AGREEMENT") is made and entered into as of
November 2, 1996, by and between Interactive Flight Technologies, Inc., a
Delaware corporation (the "COMPANY"), and Xxxxx X. Xxxxxxxx ("EXECUTIVE"), with
reference to the following facts:
RECITALS
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A. Executive has been employed as the Company's Vice President of Sales
and is also the Secretary of the Company. He is resigning from all such
positions, effective as of the date hereof (the "RESIGNATION DATE").
B. The Company and Executive are parties to that certain Employment
Agreement dated as of May 1, 1995 (the "EMPLOYMENT AGREEMENT").
C. In connection with such resignation, the Company has agreed to provide
Executive with certain benefits and consulting compensation, as more fully set
forth herein.
D. Executive desires to continue to render certain consulting services to
the Company, and the Company desires that Executive render such services, under
the terms and conditions hereinafter set forth.
E. In consideration of such benefits and consulting arrangements,
Executive and the Company have each agreed to release the other from any and all
claims, known or unknown, that they may have or could have against each other
arising prior to the execution of this Agreement, including any claims
concerning any subject matter arising out of, related to or connected with
Executive's employment with the Company, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises set forth above and of the
covenants, releases, representations and warranties contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. CERTAIN DEFINITIONS.
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"CLAIMS" means any and all claims, debts, liabilities, demands,
obligations, liens, promises, acts, agreements, costs, and expenses (including,
but not limited to, attorneys' fees), damages, actions, and causes of action, of
whatever kind or nature, including, without limitation, any statutory, civil, or
administrative claim, whether known or unknown, suspected or unsuspected, fixed
or contingent, apparent or concealed, except as provided herein.
"COMPANY GROUP" means the Company and its respective successors, assigns,
officers, directors, agents, employees, representatives, attorneys, shareholders
and persons providing, or planning to provide, financing for the Company.
"CONSULTING TERM" means the period commencing on the date hereof and ending
on October 31, 1997.
"EXECUTIVE GROUP" means Executive and his heirs, assigns, attorneys,
representatives, agents, executors and administrators.
2. RESIGNATION. Executive hereby resigns, effective as of the Resignation
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Date, from his positions with the Company as Secretary and as Vice-President of
Sales, and all other director or officer positions held with any member of the
Company Group. The parties shall, concurrently herewith or promptly hereafter,
cancel the Amended and Restated Shareholders' Agreement dated as of October 6,
1994 (the "SHAREHOLDERS AGREEMENT"), as to Executive, effective upon the
Resignation Date. Executive agrees that, upon execution of the termination
documents regarding the Shareholders' Agreement by the other parties thereto,
the Shareholders' Agreement shall be terminated in all respects as to Executive
without further signature by Executive.
3. CONSULTING SERVICES AND COMPENSATION PACKAGE. As consideration for
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Executive's past service and his resignation, release and promises set forth in
this Agreement, the Company agrees as follows:
3.1 On the next regular payday, the Company shall pay to Executive his
unpaid salary through the Resignation Date.
3.2 The Company hereby engages Executive to perform, and Executive agrees
to perform, consulting services for the benefit of the Company, as and to the
extent requested by the Company from time to time during the Consulting Term
(the "SERVICES"); provided, however, that the Services shall consist solely of
consulting with the Company on a limited basis, not to exceed 5 hours per month,
for the purpose of answering questions on historical matters regarding the
Company.
3.3 As compensation for the Services, the Company shall pay to Executive
an aggregate of One Hundred Thousand Dollars ($100,000). In addition, Executive
shall receive a sum of Three Hundred Thousand Dollars ($300,000) as full payment
of all commissions owed to Executive under the Employment Agreement or otherwise
(including without limitation in connection with Executive's sales efforts to
Swissair). These sums will be paid fifty percent (50%) (the "FIRST PAYMENT) by
wire transfer on Monday, November 4, and the remaining fifty percent (50%) (the
"SECOND PAYMENT") on the earlier of (i) January 31, 1997 or (ii) the closing
date of the Company's contemplated Class B Warrant Exercise Offer, provided that
this offer raises at least $25,000,000. Subject to Section 6.4, the foregoing
payments are in settlement of all salary, bonus, commissions and other
compensation which are or may become due under the Employment Agreement or
otherwise as a result of Executive's employment by the
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Company, and, in light of the foregoing, (i) Executive hereby waives any right
to receive additional severance payments or other compensation from the Company,
including without limitation any sales commissions contemplated by Section 3(b)
of the Employment Agreement or any severance payments contemplated by Section 9
of the Employment Agreement, and (ii) Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment, by self-employment or otherwise; and if Executive obtains
other employment or becomes self-employed any compensation earned by Executive
during such period shall not be applied to mitigate any payment made or to be
made to Executive for such period.
3.4 Subject to the same types of contribution as made by Executive in the
past, the Company shall at its expense provide Executive with family medical
insurance benefits on the same terms and conditions as provided to the Company's
senior executives, until the end of the Consulting Term. Commencing at the end
of the Consulting Term, Executive shall be entitled to such benefits as required
under COBRA regulation.
3.5 All of the employee stock options currently held by Executive (the
"STOCK OPTIONS") shall continue to vest and become exercisable under the terms
and vesting schedules set forth therein and shall continue to be exercisable
through the respective scheduled terms under such options; provided, however,
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that such continued vesting and exercisability of the Stock Options shall not be
effected by the termination of Executive's status as an employee and officer of
the Company as contemplated hereby.
3.6 The Company shall continue to indemnify Executive in accordance with
the standards, terms and limitations of (i) Article IV of the Company's Bylaws
as in effect on the date hereof to the same extent as if Executive had remained
an officer of the Company, (ii) the Indemnification Agreement dated March 7,
1995 between Company and Executive (the "INDEMNIFICATION AGREEMENT"), (iii)
existing Directors and Officers liability insurance to the same extent as if
Executive had remained an officer of the Company and (iv) Articles VII and VIII
of the Company's Amended and Restated Certificate of Incorporation.
4. NO STOCK SALES. Executive shall not, without the prior written consent of
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the Company, directly or indirectly, offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of, any shares of capital stock of the
Company currently held or hereafter acquired by Executive (or any securities
convertible into or exercisable or exchangeable for, or warrants, options or
rights to purchase or acquire) such capital stock, or enter into any agreement
to do any of the foregoing, until January 31, 1997. The foregoing shall not
preclude a mere exercise of Stock Options so long as there is no subsequent sale
or disposition of the underlying shares until January 31, 1997. Executive
agrees that, so long as he holds any capital stock of the Company, he will vote
all of the shares of the capital stock of the Company held by him in favor or
against any matter (including the election of directors) submitted to the
shareholders of the Company in the same proportion as the aggregate vote of the
other shareholders of the Company who actually vote on such matter. Executive
agrees to execute any additional
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documents, including a proxy, which the Company reasonably believes is desirable
to effectuate this provision.
5. RETURN OF COMPANY PROPERTY. Executive shall promptly return all Company
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property and documents in his possession, except that Executive may retain the
telephone/fax machine and the older of two laptop computers currently in his
possession.
6. RELEASE OF CLAIMS.
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6.1 EXECUTIVE RELEASE. Except as provided herein, in consideration of the
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terms and provisions of this Agreement, Executive agrees that he shall and does
hereby forever relieve, release and discharge each person in the Company Group
from any and all Claims arising out of any act or omission occurring before the
execution of this Agreement.
6.2 COMPANY RELEASE. Except as provided herein, in consideration of the
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terms and provisions of this Agreement, the Company agrees that it shall and
does hereby forever relieve, release and discharge each person in the Executive
Group from any and all Claims arising out of any act or omission occurring
before the execution of this Agreement.
6.3 SCOPE. The releases set forth in this Section 6 include, but are not
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limited to, any and all Claims based on, arising out of, or related to
Executive's employment relationship with the Company (or any and all facts in
any manner arising out of, related to or connected with such employment
relationship) or the termination of Executive's employment with the Company
under the terms hereof (except that such releases shall not apply to any Claim
by either party that the other has breached this Agreement). Without limiting
the generality of the foregoing, Claims released by Executive and the Company
shall encompass and include, but are not limited to, any Claims arising from
rights under federal, state, or local laws relating to the prohibition of
discrimination on the basis of race, national origin, sex, religion, age,
marital status, handicap, ancestry, sexual orientation, or any other protected
classification, and any and all Claims arising under common law, including, but
not limited to, common law Claims for breach of contract, breach of the implied
covenant of good faith and fair dealing, wrongful termination, discrimination,
tortious interference with contract or with current or prospective economic
advantage, fraud, deceit, misrepresentation, violation of public policy, breach
of privacy, defamation, infliction of emotional distress, loss of consortium,
breach of fiduciary duty, Claims arising from any alleged breach of the
Employment Agreement, or any other common law Claim of any kind whatsoever.
6.4 EXCEPTION. In the event that the Second Payment contemplated by
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Section 33 above is not made by the Company by the date required by such
Section, then, notwithstanding the mutual releases set forth above, Executive's
rights (if any) to receive compensation or commissions shall be reinstated in
full, except to the extent of the First Payment. In such case, the Company
shall have the right to assert any applicable defenses or counterclaims.
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7. ACKNOWLEDGEMENT AND EFFECT OF WAIVER. Executive understands and
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acknowledges that (a) this Agreement constitutes a voluntary waiver of any and
all Claims he has against the Company and each person in the Company Group as of
the date of his execution of this Agreement, including Claims under the Age
Discrimination in Employment Act of 1967, 29 U.S.C. (S) 621 et seq.; (b) he has
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waived any and all Claims pursuant to this Agreement and in exchange for
consideration, the value of which exceeds payments or remuneration to which he
was already entitled; (c) he has been, and is hereby, advised to consult with an
attorney concerning this Agreement before executing it; (d) he has been, and is
hereby, informed that he has a period of at least twenty-one (21) days to
consider the terms of this Agreement; and (e) he may revoke this Agreement at
any time during the seven (7) days following the date of his execution of this
Agreement, and no provision of this Agreement shall become effective or
enforceable against Executive or the Company until such revocation period has
expired.
8. REPRESENTATIONS AND WARRANTIES. Each party represents and warrants to the
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other that (i) it has full power and authority to enter into this Agreement;
(ii) it is the owner of the Claims that it has released herein; and (iii) it has
not (nor has it purported to have) assigned, conveyed, encumbered, or in any
manner transferred any portion of the Claims released herein. Each party hereby
agrees to indemnify and hold each party released by it hereunder harmless from
any and all claims (including, but not limited to, all attorneys' fees actually
incurred) resulting from any breach of that releasing party's warranties and
representations herein.
9. PUBLIC ANNOUNCEMENTS.
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9.1 ANNOUNCEMENT OF RESIGNATION. Neither party shall make any public
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announcement regarding Executive's resignation other than (i) pursuant to a
mutually satisfactory press release which shall attribute Executive's
resignation hereunder to the restructuring of the Company's approach to sales or
(ii) as may be required pursuant to applicable securities laws and any rules and
regulations thereunder and then only after consultation with the other party to
the maximum extent possible in order to maintain goodwill for the other party.
9.2 THIRD PARTY CONTACTS. Each of the parties hereto agrees not to make
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disparaging or derogatory comments about any of the parties released by it
hereunder (whether to the press, the investment community, shareholders,
customers or potential customers or sales representatives of IFT or otherwise)
and not to take any positions with third parties which are inconsistent with the
above-described press release, except to the extent required by applicable law
and then only after consultation with the other party to the maximum extent
possible in order to maintain goodwill for the other party.
10. CONFIDENTIALITY; NON-COMPETITION.
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10.1 The provisions of Section 4 of the Employment Agreement shall
continue in full force and effect for the period specified therein; provided,
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however, that Executive may establish an independent interactive advertising
sales agency, whose clients may
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include airlines (including the Company's customers) and any competitor of the
Company, and in connection therewith Executive may employ either or both of
Xxxxxx Xxxxxxxx or Xxxxxxxx Xxxxx.
10.2 In the event that Executive breaches any provisions of this section or
there is a threatened breach, then, in addition to any other rights which the
Company may have, the Company shall be entitled to seek injunctive relief to
enforce the restrictions contained herein. In the event that an actual
proceeding is brought in equity to enforce the provisions of this paragraph,
Executive shall not urge as a defense that there is an adequate remedy at law
nor shall the Company be prevented from seeking any other remedies which may be
available.
10.3 The existence of any claim or cause of action by the Company against
Executive, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the foregoing
restrictive covenants but shall be litigated separately.
10.4 During the Consulting Term and thereafter, Executive agrees to hold in
strictest confidence, and not to use, except for the benefit of the Company, or
to disclose to any person, firm or corporation, without the prior written
authorization of the Company, any trade secrets, confidential knowledge, data or
other proprietary information of the Company. By way of illustration and not
limitation, such shall include information relating to products, processes,
know-how, designs, formulas, methods, developmental or experimental work,
improvements, discoveries, plans for research, new products, marketing or
selling, business plans, budgets, unpublished financial statements, licenses,
prices and costs, suppliers and customers, and information regarding the skills
and compensation of other employees of the Company.
11. MISCELLANEOUS.
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11.1 DISPUTED RIGHTS. This Agreement represents a settlement of disputed
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rights and claims and, by entering into this Agreement, no party admits or
acknowledges the existence of any liability or wrongdoing, all such liability
being expressly denied. No provision hereof, or of any related document, shall
be construed as any admission or concession of liability or of any wrongdoing.
11.2 AGREEMENT NEGOTIATED. This Agreement was the subject of careful
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negotiation between Executive (a sophisticated businessman represented by
counsel) and the Company. As a consequence, the parties do not believe that the
presumptions of any statutory or common law doctrine relating to the
interpretation of contracts against the drafter of any particular clause should
be applied in this case and therefore waive its effects.
11.3 INDEPENDENT ADVICE. Each of the parties hereto (i) has received
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independent legal advice from its attorneys with respect to the advisability of
executing this Agreement; (ii) has read this Agreement and the releases
contained herein carefully,
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knows and understands the contents hereof, and (iii) has made such investigation
of the facts pertaining to this Agreement and of all matters pertaining hereto
as it deems necessary or desirable. Except as expressly set forth herein, none
of the parties hereto has made any representations or warranties in connection
with this Agreement, and no party has relied upon any oral or written
representation or warranty of any other party in entering into this Agreement.
11.4 NOTICES. Any notice required or desired to be given to the Company or
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to Executive shall be given in writing, and shall be addressed (i) to the
Company at its principal place of business, and (ii) to Executive at his most
recent home address in the records of the Company, or to such other address as
that party may hereafter designate in writing, and shall be sufficiently given
by actual delivery thereof to the Company or Executive, as the case may be, or
by telecopy or certified mail, postage prepaid, return receipt requested,
addressed to the other party as aforesaid, and the date of delivery, mailing or
telecopying shall be the date of the giving of such notice.
11.5 ENTIRE AGREEMENT. Except as set forth in Section 10.1 above, this
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Agreement, together with all documents referred to herein, sets forth the entire
understanding of the parties with respect to Executive's employment relationship
with the Company and the termination thereof, and supersedes any and all prior
agreements or understandings between the parties relating to such subject matter
(including without limitation the Employment Agreement, which is hereby
terminated). No person has any authority to make any representation or promise
on behalf of any of the parties which is inconsistent with the representations
set forth in this Agreement, and this Agreement has not been executed in
reliance on any promise or representation not set forth herein.
11.6 MODIFICATION AND WAIVER. None of the terms or provisions hereof shall
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be modified or waived, and this Agreement may not be amended or terminated,
except by a written instrument signed by the party against which any
modification, waiver, amendment or termination is to be enforced. No waiver of
any one provision shall be considered a waiver of any other provision, and the
fact that an obligation or right is waived for a period of time or in one
instance shall not be considered to be a continuing waiver.
11.7 GOVERNING LAW. All questions with respect to this Agreement and the
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rights and liabilities of the parties shall be governed by the laws of Delaware,
regardless of the choice of laws provisions of Delaware or any other
jurisdiction.
11.8 ASSIGNMENT. This Agreement shall not be assignable by Executive or
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the Company, except that this Agreement may be assigned by the Company to any
corporation or other business entity which succeeds to all or substantially all
of the business of the Company through merger, consolidation, corporate
reorganization or by acquisition of all or substantially all of the assets of
the Company and which assumes the Company's obligations under this Agreement (a
"SUCCESSOR"). The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon any Successor that has so assumed this Agreement.
Furthermore, in the event that such an assignment to a
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Successor is deemed ineffective with respect to Section 3.2 hereof by virtue of
the personal services contemplated thereby, the remaining provisions hereof
shall nonetheless inure to the benefit of such Successor; provided that the
compensation payable to Executive as set forth in Section 3.2 and the Stock
Option commitments set forth in Section 3.5 are fulfilled by the Successor.
11.9 ARBITRATION OF DISPUTES. If Executive and the Company cannot resolve
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a dispute (whether arising in contract or tort or any other legal theory,
whether based on federal, state or local statute or common law and regardless of
the identities of any other defendants) that in any way relates to or arises out
of this Agreement, the termination of Executive's employment relationship with
the Company, or (without limiting the generality of any other Section herein)
Executive's past employment relationship with the Company, or termination of any
of the agreements referred to herein, then such dispute shall be settled by
arbitration in New York, New York, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association.
11.10 ATTORNEYS' FEES. In the event that either party should bring any
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action, suit or other proceeding against the other party hereunder concerning
any matter released herein, or contesting the validity of this Agreement or any
provision hereof, or attempting to rescind, negate, modify or reform this
Agreement or any of the terms or provisions thereof, or in the event that any
action, suit, or other proceeding is instituted to remedy, prevent, or obtain
relief from a breach of this Agreement, or arising out of a breach of this
Agreement, the prevailing party shall be entitled to recover all of such party's
costs and expenses, including reasonable attorneys' fees and disbursements,
incurred in each and every such action, suit, or other proceeding, including any
and all appeals or petitions therefrom.
11.11 INDEPENDENT CONTRACTOR. The Company and Executive agree that
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Executive will act as an independent contractor in the performance of his duties
under this Agreement. Accordingly, Executive shall be responsible for payment
of all taxes including Federal, State and local taxes arising out of Executive's
activities in accordance with this Agreement, including, by way of illustration
but not limitation, Federal and State income tax, Social Security tax,
Unemployment Insurance taxes and any other taxes or business license fees as
required.
11.12 OBLIGATION TO PAY COMPENSATION. The Company's obligation to pay
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Executive the compensation and to provide the benefits provided herein shall be
absolute and unconditional and shall not be affected by any circumstance,
including without limitation (i) the termination by the Company of Executive's
consulting obligations hereunder and (ii) any setoff, counterclaim, recoupment,
defense or other right which the Company may have against Executive (including
without limitation as a result of breaches of Section 9.2) or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or demand.
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11.13 COUNTERPARTS. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.14 NO RESCISSION. Except as expressly provided herein, each party
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waives all rights it may now have or may hereafter have conferred upon him or
it, by statute or otherwise, to terminate, cancel or rescind this Agreement in
whole or in part.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date and year set forth below.
"Company" "Executive"
Interactive Flight Technologies, Inc.
By:____________________________ ________________________________
Xxxxxxx Xxxxx Xxxxx X. Xxxxxxxx
Chief Executive Officer
Date:__________________________ Date:___________________________
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