EXHIBIT 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of March 31, 2009 between
Latitude Solutions Inc., ("the Company"), a Nevada Corporation with its
principal place of business at 000 XX Xxxxxxx Xxxxx Xxxx. Xxxx Xxxxx, Xxxxxxx
00000, and Xxx Xxxxxxxx, ("Executive") who resides at 000 Xxxxxxxxx Xxxxxx,
Xxxxxxx-Xxx-Xxxxxxx Xxxxxx, Xxxxxx X0X 0X0.
WHEREAS, the Executive has extensive experience as a senior executive in
the areas of GPS technology, accounting, financial, operations, and requirements
applicable to the Company's business;
WHEREAS, the Company has determined that it is in the best interest of the
Company to employ Executive as its Executive Vice President to further the
business purposes of the Company; and
WHEREAS, Executive is desirous of employment with the Company on the terms
provided herein:
WHEREAS, It is the interest of this Agreement to assure Executive's
dedication to the Company by providing Executive with Compensation and benefit
arrangements while Executive fulfills his duties now and during the pendency of
a Change of Control, should such an event occur, which provides Executive with a
measure of security commensurate with Executive's importance to the Company, and
assure the Company of continuity in its services and relationships with
customers and employees;
NOW, THEREFORE, the Company and Executive agree as follows:
1 . EMPLOYMENT.
1.1 TERM. The Company shall employ Executive in an executive position as
its Executive Vice President, or in such comparable management capacity as the
Company may from time to time designate and which the Executive agrees to in
writing. This Agreement shall become effective as of March 31, 2009 and shall
continue to the fifth anniversary date hereof, unless earlier terminated
("Original Term"). Thereafter, the term of employment shall automatically be
extended on the same terms and conditions contained herein for successive
one-year periods (each a "Renewal Term"), except that if one party gives notice
in writing to the other party not less than ninety (90) days prior to the date
in which such term of employment would otherwise be renewed indicating such
parties intent to terminate this Agreement at the end of the period in which
notice is given, then this Agreement shall terminate on the date such period
expires. (The Original Term and all Renewal Term's are hereinafter collectively
referred to as the Term.) Executive acknowledges that, except as set forth in
this Agreement, Executive's employment is "at will".
If, during the Term, a "person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
commences any action that, if consummated, would result in a Change of Control
of the Company or if any person publicly announces an intention or proposal to
commence any such action, Executive agrees that Executive will not leave the
Company's employ (other than as a result of death or Disability) and, Executive
will render the services contemplated in this Agreement for the reasonable
duration of the Company's defense against such action and until such action has
been abandoned or terminated or a Change in Control has occurred, and Executive
will actively promote the Company's interest during such period.
-1-
Any termination of Executive's employment during the Term for reasons other
than Executive's death shall be evidenced by a written notice ("Notice of
Termination"), which shall specify the provision of this Agreement relied upon
for such termination and describe with reasonable detail the facts and
circumstances claimed by the sender of such Notice of Termination to provide the
basis for termination. Any such Notice of Termination shall also specify the
effective date of termination (the "Termination Date"). If Executive dies during
the Term, the Termination Date shall be the date of Executive's death.
1.2 PRESENT AND FUTURE DUTIES. Executive's role in the Company shall be
that of Executive Vice President. Executive shall perform all duties required of
or incidental to Executive's position with the Company, and such specific duties
as may be assigned to Executive by senior management or the Board of Directors
of the Company. Executive's position shall have the powers, duties and
responsibilities set forth in Exhibit A attached hereto and made a part hereof.
Executive agrees to use Executive's best efforts in the business of the Company
and to devote such time, attention and energy to the business of the Company as
Executive deems appropriate to the performance of Executive's duties hereunder.
The Company and Executive agree that Executive may work, on a parttime or
independent contracting or consulting basis, with or without compensation, for
any other business or enterprise during the Term which does not Compete (as
hereinafter defined) with the Company.
1.3 COMPENSATION AND EXPENSES
(a) During the period of Executive's employment hereunder, the Company
shall pay to Executive a minimum base salary at a rate of not less than $30,000
for the first twelve months of the term of this Agreement, in each case payable
in substantially equal installments in accordance with the executive payroll
schedule in effect for executive employees at a similar level from time to time
at the Company's principal executive office. Executive's base salary shall be
reviewed by the Board at intervals not greater than twelve months to determine
what upward adjustment should be made, consideration being given to the scope of
Executive's responsibilities, the performance of Executive's duties and changes
in the cost of living during such interval. Upon such review, Executive's base
salary shall be increased by a percentage at least equal to the percentage
increase in the Consumer Price Index (All Urban Consumers - U.S. City Average -
All Items) published by the Bureau of Labor Statistics of the U.S. Department of
Labor since Executive's last salary increase. In no event shall Executive's base
salary be reduced without Executive's prior written consent.
(b) Executive shall also receive an auto allowance of $700 per month,
payable on the first of each month from the date of this Agreement.
(c) Executive shall be entitled to receive a Cash Bonus per each year of
this Agreement paid each (DATE) equivalent to 15% of the prior twelve (12)
month's Base Salary (as defined above), contingent on the Company reaching
revenue, and gross profit targets per year as defined in writing with the Board
of Directors before the commencement of each fiscal year "Performance
Criteria").
(d) During the term of this Agreement, the Company shall reimburse
Executive twice each month for all reasonable travel and other business expenses
incurred in the performance of Executive's duties hereunder, including, without
limitation, cellular telephone charges, provided that Executive submits receipts
or other expense records to the Company in accordance with the Company's general
reimbursement policy then in effect for executives of the Company.
(e) Executive shall have the right to immediately participate in any Stock
Option programs instituted by the parent Company.
-2-
1.4 PLACE OF PERFORMANCE. In connection with Executive's employment by the
Company, Executive shall be based at the Company's principal executive offices,
which are currently located in Montreal, Quebec.
1.5 BENEFITS: PERQUISITES. Executive shall be entitled to receive the
benefits and, perquisites provided by the Company from time to time for
executives at the highest level within the Company.
1.6 EMPLOYEE BENEFIT PLANS
(a) During the term of Executive's employment under this Agreement, the
Company shall maintain for the benefit of Executive employee benefit plans,
including, but not limited to, medical, hospitalization, disability, dental and
life insurance:
(i) CORPORATE LIFE INSURANCE, at not less than 4 times annual salary,
with Executive's designation of sole Beneficiary (ies).
(ii) 100% PREMIUM PAID FAMILY MEDICAL, DISABILITY AND DENTAL
INSURANCE, with acceptable-to-Executive carriers.
Executive shall also be entitled to participate in all other
employee benefit plans adopted during the Term of this Agreement by the Company.
(b) During the term of Executive's employment, Executive shall be entitled
to reasonable vacations compatible with Executive's position and
responsibilities and with due regard for the preservation of Executive's health,
aggregating not less than three (3) weeks for the first calendar year and not
less than four (4) weeks for each calendar year thereafter, as well as paid
holidays given by the Company to its employees and five (5) personal days or
such greater amount of paid vacation and paid holidays as may be generally made
available annually to other employees of the company of comparable pay grade
and/or position. In the event that due to the press of business, Executive is
unable to take Executive's full vacation during any calendar year, then the
Company shall, at Executive's request, pay Executive for such foregone vacation
at the rate set forth in Section 1.3(a) hereof; provided, however, that in lieu
thereof, Executive, at Executive's option, may carry over such foregone vacation
for one or more successive years.
2. DEVELOPMENTS AND INTELLECTUAL PROPERTY. Executive acknowledges that all
developments, including but not limited to trade secrets (including strategies,
business plans and customer lists), discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company (the "Developments") which Executive, either alone or in
conjunction with any other person or persons, shall conceive, make, develop,
acquire or acquire knowledge of during the Term are the sole and exclusive
property of the Company. Executive will cooperate with the Company's reasonable
requests to obtain or maintain rights or protections under United States or
foreign law with respect to all Developments. The Company will reimburse
Executive for all reasonable expenses incurred by Executive in order to comply
with this provision of this Agreement, regardless of when such expenses may be
incurred.
3. CONFIDENTIAL INFORMATION. Executive acknowledges that by reason of
Executive's employment by the Company, especially as a senior executive thereof,
Executive may now or will in the future have access to information of the
Company that the Company deems to be confidential and/or proprietary, including
but not limited to, information about the Company's technology, developments,
target markets and customer segments, strategies, plans, products and services,
methods of operation, employees, financial forecasts and results, sales,
profits, expenses, customer lists and the relationships between the Company or a
subsidiary and its customers, suppliers and others who have business dealings
with it which is not in the public domain ("Confidential Information").
Executive covenants and agrees that during the Term and thereafter, without time
or geographic limitation, Executive will not disclose any such information to
-3-
any person without the prior written authorization of the Chief Executive
Officer of the Company or the Board. The obligations undertaken by Executive
pursuant to this Section 3 shall not apply to any confidential Information which
hereafter shall become published or otherwise generally available to the public,
except in consequence of a willful act or admission by Executive in
contradiction of the obligations set forth in this Section 3.
If Executive's employment ends for any reason other than Executive's death,
Executive agrees to return promptly to Company all such information and any
other tangible product or document which has been produced or received by, or
otherwise submitted to Executive during Executive's employment, and no copies
shall be retained by Executive or made available to any other person or entity.
This provision includes but is not limited to information printed or stored on
paper, magnetic tape, floppy disks, hard drives or other computer storage media.
4. NON-COMPETITION.
4.1 COVENANT. Executive and the Company acknowledge that Executive has
expertise in GPS technolog, accounting, finance and also expertise in management
and marketing, and that in Executive's employment with the Company, Executive
will have continuing access to information about the Company's technology,
developments, target markets, strategies, plans, product or service offerings,
methods of operation, financial and operating expectations and results, customer
base, sales, marketing and pricing strategies, most valued employees, and
customer and supplier relationships. In consideration of the benefits provided
to Executive under this Agreement, which Executive acknowledges are independent
consideration, Executive covenants and agrees that during the Restricted Period
(as defined below), Executive will not, directly or indirectly, without the
Company's prior consent, own, manage, operate, finance, join, control or
participate in the ownership or control of, or be associated as an officer,
director, executive, partner or principal, agent, representative, consultant or
otherwise with, or use or permit Executive's name to be used in connection with,
any enterprise that directly or indirectly competes (as defined below) with any
internet filtering business of the Company in a Restricted Area (as defined
below).
4.2 DEFINITIONS.
4.2.1 "Competes" means the production, marketing, promotion,
distribution or selling of any product, capability, functionality or
service of any person or entity other than the Company which resembles or
competes with a product or service produced, marketed, promoted,
distributed or sold by the Company (or to Executive's knowledge was under
development by the Company) during the period of Executive's employment by
the Company (whether under this Agreement or otherwise). The parties agree
that general employment or consulting in the internet or computer fields
that is not relying on internet filtering as its primary business is not
competition with this Agreement.
4.2.2 "Restricted Area" means:
(a) The Standard Metropolitan Statistical Area (or the
equivalent) of any independent contractor sales office, place of
employment, business address or prior place of business maintained by
the Company
4.2.3 "Restricted Period" means:
(a) The period of Executive's employment by the Company (whether
under this Agreement or otherwise), if Executive's employment is
terminated because of Executive's death or Disability;
-4-
(b) The period of Executive's employment by the Company (whether
under this Agreement or otherwise) and 12 months thereafter, if
Executive's employment is terminated by the Company for Cause or
without Cause (and not by the Company following Change of Control);
(c) The period of Executive's employment by the Company (whether
under this Agreement or otherwise) and, if this Agreement is still in
effect at the Termination Date, the number of months remaining in the
Term at the Termination Date or 12 months, whichever is longer (but in
no event more than 24 months), if Executive terminates Executive's
employment voluntarily (and not for Good Reason); or
(d) The period of Executive's employment by the Company under
this Agreement, if Executive's employment is terminated by Executive
for Good Reason (unless this Agreement ends or is terminated under
Section 1.2 in which event the Restricted Period shall be 12 months)
or by the Company on any basis following Change of Control.
4.2.4 EXCEPTION. This Section shall not be construed to prohibit the
ownership by Executive of not more than 5% of any class of securities of
any corporation which competes with the Company and which has a class of
securities registered pursuant to the Exchange Act, as amended.
4.3 SAVINGS CLAUSE. Executive and the Company specifically agree that this
covenant not to compete and its specific limitations constitute a reasonable
covenant under the circumstances and is supported by the consideration stated
above, and further agree that if, in the opinion of any court of competent
jurisdiction, any of the provisions of this Section 4 are ever determined by a
court to exceed the time, geographic scope or other limitations permitted by
applicable law in any jurisdiction, then such excessive provisions shall be
deemed reduced, in such jurisdiction only, to the maximum time, geographic scope
or other limitation permitted in such jurisdiction, and Executive agree to the
enforcement of the remainder of the covenant as so amended.
5. NON-SOLICITATION. Executive also covenants and agrees that during the
Restricted Period set out in Section 4.2.3, and without regard to the activity
or activities in which Executive is engaging, whether it is within or without
the internet filtering industry, Executive will not, directly or through
employees, agents, recruiters, independent contractors or others: (a) offer,
promise, provide or guarantee employment, work for compensation, business
opportunity or other means of financial gain, or solicit, invite an inquiry on
employment or other compensatory relationship, respond to such inquiry with a
promise or grant of an employment or other compensatory relationship, or
otherwise seek to influence any person to leave the Company or to undertake
activities that would be adverse to the Company's interests, where such person
is employed by the Company or is in an independent contractor relationship in
which a majority of their time is spent on Company-related activities, or is a
supplier of services to the Company who would thereafter become unavailable to
provide such services to the Company, or who has been in such an employment or
independent contractor relationship within the 12 months prior to Executive's
contact(s); or (b) solicit from, convert, attempt to convert, divert business
from, or attempt to divert business from any of the Company's customers,
customer accounts or locations, whether such activity is intended to benefit
Executive or any other person or entity, and whether or not such activity is
successful.
6. EQUITABLE RELIEF. Executive specifically acknowledges that the restrictions
contained in each of Sections 2, 3, 4 and 5 of this Agreement are, in view of
the nature of the business of the Company, and Executive's position with it,
reasonable and necessary to protect the legitimate interests of the Company, and
that any violation of the provisions of those Sections will result in
irreparable injury to the Company for which there would be no adequate remedy at
law. Executive also acknowledges that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, and to an equitable accounting of all earnings, profits and
other benefits arising from such violation. These, rights shall be cumulative
and in addition to any other rights or remedies to which the Company may be
-5-
entitled. Executive agrees to submit to the jurisdiction of any (STATE) court
located in Palm Beach County or the United States District Court for the County
or of the state court or the federal court located in or presiding over the
county in which the Company has its corporate headquarters at the applicable
time in any action, suit or proceeding brought by the Company to enforce its
rights under Sections 2, 3, 4 and/or 5 of this Agreement, and that any separate
claim Executive has shall not constitute a defense to the enforcement of the
covenants and agreements in those paragraphs.
7. COMPANY'S OBLIGATIONS UPON TERMINATION. The sole obligations of the Company
upon the termination of Executive's employment are as set forth in this Section
7. Any and all amounts to be paid to Executive in connection with Executive's
termination shall be paid, at Executive's election, either: (a) in a lump sum
promptly after the Termination Date, and not more than 30 days thereafter, or
(b) as salary continuation for a period identified by the number of years'
salary to be paid as severance.
7.1 TERMINATION UPON DISABILITY OR DEATH. If Executive's employment with
the Company ends by reason of Executive's death or Disability (as defined later
in this Agreement), the Company shall pay Executive all amounts earned or
accrued through the Termination Date but not paid as of the Termination Date,
including:
7.1.1 Base compensation;
7.1.2 Reimbursement for reasonable and necessary expenses incurred by
Executive on behalf of the Company during the Term;
7.1.3 Pay for earned but unused vacation and floating holidays;
7.1.4 All compensation Executive previously deferred (if any) to the
extent not yet paid; and
7.1.5 An amount equal to Executive's "Pro Rata Bonus". Executive's Pro
Rata Bonus shall be determined by multiplying the "Bonus Amount" (as
defined below) by a fraction, the numerator of which is the number of days
in the fiscal year through the Termination Date and the denominator of
which is 365. The term "Bonus Amount" means the greater of: (i) Executive's
identified or standard bonus for that part of the bonus year during which
Executive was employed, using the Performance Criteria and the actual
performance metrics of the Company applied to the time period until the
Termination Date occurs, and only to that period; or (ii) the bonus paid or
payable to Executive with respect to the fiscal year preceding the year in
which the Termination Date occurs. No bonus will cover any period after the
date that Executive's employment ends, or use any Performance Criteria or
actual performance metrics of the Company established or achieved after
that date.
The amounts described in Sections 7.1.1 through 7.1.4, inclusive, are called
elsewhere in this Agreement, collectively, the "Accrued Compensation".
Except as otherwise provided in this Section 7. 1, Executive's entitlement to
any other compensation or benefits shall be determined in accordance with the
Company's employee benefit plans and other applicable programs and practices,
including any long term compensation benefits, then in effect.
7.2 TERMINATION WITHOUT CAUSE. If the Company terminates Executive's
employment without Cause (as defined later in this Agreement), the Company shall
pay Executive:
7.2.1 All Accrued Compensation;
-6-
7.2.2 A Pro Rata Bonus (as defined in Section 7.1.5 above); and
7.2.3 Severance ("Severance") equal to: (a) two year salary plus (b)
the Company contributions which would have been made on Executive's behalf
to the 401 (k) retirement savings plan (if any) maintained by the Company
(b) reduced by the present value (determined as provided in Section
28OG(d)(4) of the Internal Revenue Code of 1986 as amended (the "Code")).
The foregoing shall be in lieu of any other amount of severance relating to
salary or bonus continuation to be received by Executive upon termination
of Executive's employment under any severance plan, policy or arrangement
of the Company.
In addition, the Company shall continue to provide to Executive and
Executive's family at the, Company's expense, for two year following the
Termination Date, the life insurance, medical, dental, vision and
hospitalization benefits provided to Executive and Executive's family
immediately prior to the Termination Date.
Except as otherwise provided in this Section 7.2, Executive's entitlement to any
other compensation or benefits shall be determined in accordance with the
Company's employee benefit plans and other applicable programs and practices
then in effect.
7.3 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. If Executive's
employment is terminated for Cause (as defined later in this Agreement), or if
Executive voluntarily terminates Executive's employment other than for Good
Reason, the Company shall pay-Executive all Accrued Compensation. Except as
otherwise provided in this Section 7.3, Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the Company's
employee benefit plans and other applicable programs and practices then in
effect.
7.4 TERMINATION FOR GOOD REASON OR BY COMPANY FOLLOWING CHANGE OF CONTROL.
If Executive terminates Executive's employment for Good Reason or the Company
terminates Executive's employment following a Change of Control, the Company
shall pay Executive:
7.4.1 All Accrued Compensation;
7.4.2 A Pro Rata Bonus; and
7.4.3 Severance equal to: (a) three times the sum of (i) the annual
base compensation Executive would have received for the entire fiscal year
in which the Termination Date occurs plus (ii) the Bonus Amount plus (iii)
$50,000 (being the agreed cash equivalent of the annual value of the
perquisites provided to Executive under the Company's Executive
Compensation Program), plus (iv) the Company contributions which would have
been made on Executive's behalf to the 401 (k) retirement savings plan
maintained by the Company (if any) (b) reduced by the present value
(determined as provided in Section 280G(d)(4) of the Code). The foregoing
severance shall be in lieu of any other amount of severance relating to
salary or bonus continuation to be received by Executive upon termination
of Executive's employment under any severance plan, policy or arrangement
of the Company.
In addition, the Company shall continue to provide to Executive and
Executive's family at the Company's expense, for 36 months following the
Termination Date, the life insurance, medical, dental, vision and
hospitalization benefits provided to Executive and Executive's family
immediately prior to the Termination Date.
-7-
The Company shall reimburse Executive for all reasonable legal fees and
expenses which Executive may incur following a Change of Control as a result of
the Company's attempts to contest the validity or enforceability of this
Agreement or Executive's attempts to obtain or enforce any right or benefit
provided to Executive under this Agreement, provided any actions Executive has
taken are determined to have been undertaken in good faith and upon a reasonable
basis.
Except as otherwise provided in this Section 7.4, Executive's
entitlement to any other compensation or benefits shall be determined in
accordance with the Company's employee benefit plans and other applicable
programs and practices, including any long term compensation benefits, then in
effect.
8. GROSS-UP PAYMENT. Notwithstanding anything else in this Agreement, if it is
found that any or all of the payments made to Executive, including but not
limited to payments made by the Company, or under any plan or arrangement
maintained by the Company, to Executive or for Executive's benefit (other than
any additional payments required under this Section 8) (the "Payments") would be
subject to the excise tax imposed by Section 4999 of the Code or Executive incur
any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively the "Excise Tax"),
then Executive is entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that, after Executive pays all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive
will retain an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. The procedures for the calculation and contesting of any
claim that such Excise Tax is due are set forth in the Addendum.
9. NO OBLIGATION TO MITIGATE DAMAGES. Executive is not required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, and the amounts to be paid to Executive
under Section 7 of this Agreement shall not be reduced by any compensation
Executive may earn from other sources. However, if, during any period that
Executive would otherwise be entitled to receive any payments or benefits under
this Agreement, Executive breaches Executive's obligations under Section 2, 3 or
4 of this Agreement, the Company may immediately terminate any and all payments
and the provision of benefits (to the extent permitted by law and the terms of
the benefit plans maintained by the Company from time to time) hereunder.
10. SUCCESSOR TO COMPANY. The Company will require any successor or assignee to
all or substantially all of the business and/or assets of the Company, whether
by merger, sale of assets or otherwise, by agreement in form and substance
reasonably satisfactory to Executive, to assume and agree to perform the
Company's obligations under this Agreement in the same manner and to the same
extent that the Company would be required to perform them if such succession or
assignment had not taken place. Such agreement of assumption must be express,
absolute and unconditional. If the Company fails to obtain such an agreement
within three business days prior to the effective date of such succession or
assignment, Executive shall be entitled to terminate Executive's employment
under this Agreement for Good Reason.
11. SURVIVAL. Notwithstanding the expiration or termination of this Agreement,
except as otherwise specifically provided herein, Executive's obligations under
Sections 2, 3 and 4 of this Agreement and the obligations of the Company under
this Agreement shall survive and remain in full force and effect.
This Agreement shall inure to the benefit of, and be enforceable by, Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive dies while any amounts
-8-
are still payable to Executive, all such amounts, unless otherwise provided in
this Agreement, shall be paid in accordance with the terms of this Agreement to
Executive's devisee(s), legatee(s) or other designee(s) or, if there is no such
designee(s), to Executive's estate.
12. DEFINITIONS. Whenever used in this Agreement, the following terms shall have
the meanings below:
12.1 "Cause" means:
12. 1.1 Executive has willfully and continually failed to
substantially perform Executive's duties (other than due to an incapacity
resulting from physical or mental illness or due to any actual or
anticipated failure after Executive have given a Notice of Termination for
Good Reason) after a written demand for substantial performance is
delivered to Executive by the Chief Executive Officer or the Board which
specifically identifies the manner in which it is believed that Executive
has not substantially performed Executive's duties; or
12.1.2 Executive has willfully engaged in conduct which is
demonstrably and materially injurious to the Company (monetarily or
otherwise), including but not limited to a breach of fiduciary duty; or
12.1.3 Executive has willfully engaged in conduct which is illegal or
in violation of the Company's Code of Ethics; or
12.1.4 Executive has been convicted of a felony or a crime involving
moral turpitude; or
12.1.5 Executive has violated the provisions of Section 2 and/or
Section 3 and/or Section 4 and/or Section 5 of this Agreement and, in any
of the events described in Sections 12.1.1 through 12.1.5 above, the Board
adopts a resolution or its minutes reflect a finding that in the good faith
opinion of the Board that Executive was culpable for the conduct set forth
in any of Sections 12.1.1 through 12.1.5 and specifying the particulars
thereof in detail. For the purposes of this Agreement, no act or failure to
act on Executive's part shall be considered willful unless done, or omitted
to be done, by Executive not in good faith and without reasonable belief
that Executive's action or omission was in the best interests of the
Company. Any such resolution of the Board must receive the affirmative vote
of not less than three-quarters of the entire membership of the Board at a
meeting of the Board called and held for the purpose of considering the
issue, and Executive must receive reasonable notice of the meeting and have
an opportunity, with Executive's counsel, to present Executive's case to
the Board.
12.2 "Change of Control" Means:
12.2.1 The consummation of a consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which the shares or units of the Company's common, voting
equity are to be converted into cash, securities or other property. For the
purposes of this Agreement, a consolidation or merger with a corporation
which was a wholly-owned direct or indirect subsidiary of the Company
immediately before the consolidation or merger is not a Change of Control;
or
12.2.2 The sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
Company's assets; or
12.2.3 The approval by the Company's shareowners of any plan or
proposal for the liquidation or dissolution of the Company; or
12.2.4 Any person, as that term is used in Section 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities of the Company under an employee benefit plan of the
Company, a direct or indirect wholly-owned subsidiary of the Company or any
other company owned, directly or indirectly, by the shareowners of the
-9-
Company in substantially the same proportions as their ownership of the
Company's common, voting equity), is or becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, of 30% or more of the Company's then outstanding common, voting
equity; or
12.2.5 During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board, including for this
purpose any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction
described in this Section 12.2.5) whose election or nomination for election
by the Company's shareowners was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning
of the period or whose election or nomination for election was previously
so approved (the "Incumbent Board"), cease for any reason to constitute a
majority of the Board.
12.3 "Disability" means:
12.3.1 Executive's absence from Executive's duties with the Company on
a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness; or
12.3.2 A physical or mental condition which prevents Executive from
satisfactorily performing Executive's duties with the Company and such
incapacity or condition is determined to be total and permanent by a
physician selected by the Company or its insurers and reasonably acceptable
to Executive and/or Executive's legal representative.
12.4 "Good Reason" means:
12.4.1 Without Executive's express written consent, after a Change of
Control, a significant reduction in title and authority, or the assignment
to Executive of duties with the Company or with a person, as that term is
used in Section 13(d) and 14(d) of the Exchange Act, in control of the
Company materially diminished from the duties assigned to Executive
immediately prior to a Change of Control; or
12.4.2 Without Executive's express written consent, after a Change of
Control, any reduction by the Company or any person, as that term is used
in Section 13(d) and 14(d) of the Exchange Act, in control of the Company
in Executive's annual base compensation or annual bonus at Standard (or
equivalent) rating from the amounts of such compensation and/or bonus in
effect immediately before and during the fiscal year in which the Change of
Control occurred (except that this Section 12.4.2 shall not apply to
across-the-board salary or bonus reductions similarly affecting all
Executive's of the Company and all Executive's of any person in control of
the Company); or
12.4.3 Without Executive's express written consent, after a Change of
Control, the failure by the Company or any person, as that term is used in
Section 13(d) and 14(d) of the Exchange Act, in, control of the Company to
increase Executive's annual base compensation or annual bonus at Standard
(or equivalent) rating at the times and in comparable amounts as they are
increased for similarly situated senior executive officers of the Company
and of any person, as that term is used in Section 13(d) and 14(d) of the
Exchange Act, in control of the Company; or
12.4.4 Without Executive's express written consent, after a Change of
Control, the failure by the Company or by any person, as that term is used
in Section 13(d) and 14(d) of the Exchange Act, in control of the Company
to continue in effect any benefit or incentive plan or arrangement (except
any benefit plan or arrangement which expires by its own terms then in
-10-
effect upon the occurrence of a Change of Control) in which Executive is
participating at the time of the Change of Control, unless a replacement
plan or arrangement with at least substantially similar terms is provided
to Executive; or
12.4.5 Without Executive's express written consent, after a Change of
Control, the taking of any action by the Company or by any person, as that
term is used in Section 13(d) and 14(d) of the Exchange Act, in control of
the Company which would adversely affect Executive's participation in or
materially reduce Executive's benefits under any benefit plan or
arrangement or deprive Executive of any other material benefit (including
any miscellaneous benefit which is not represented and protected by a
written plan document or trust) enjoyed by Executive at the time of a
Change of Control; or
12.4.6 Executive terminates Executive's employment (other than because
of Executive's death or Disability) by giving the Company a Notice of
Termination with a Termination Date not later than the first anniversary of
the Change of Control; or
12.4.7 Any failure by the Company to comply with any of its material
obligations under this Agreement, after Executive has given notice of such
failure to the Company and the Company has not cured such failure promptly
after its receipt of such notice.
13. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and shall be deemed given when mailed by
certified mail, return receipt requested, or by nationally recognized overnight
courier, receipt requested, when addressed to Executive at Executive's official
business address when employed by the Company or at Executive's home address as
reflected in the Company's records from time to time and when addressed to the
Company at its corporate headquarters, to the attention of the Board, with a
required copy to the Company's highest ranking legal executive or officer.
14. AMENDMENT AND ASSIGNMENT. This Agreement cannot be changed, modified or
terminated except in writing. Executive may not assign Executive's duties with
the Company to any other person. The Company may assign its obligations under
this Agreement to one of its principal subsidiaries for administrative purposes.
15. SEVERABILITY. If any provision of this Agreement or the application of this
Agreement to anyone or under any circumstances is determined by a court to be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provisions or applications of this
Agreement which can be effective without the invalid or unenforceable provision
or application, and such invalidity or unenforceability shall not invalidate or
render unenforceable such provision in any other jurisdiction.
16. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred on Executive or on the
Company by this Agreement is intended to be exclusive of any other remedy, and
each and every remedy shall be cumulative and shall be in addition to any other
remedy given under this Agreement or now or later existing at law or in equity.
No delay or omission by Executive or by the Company in exercising any right,
remedy or power under this Agreement or existing at law or inequity shall be
construed as a waiver of such right, remedy or power, and any such right, remedy
or power may be exercised by Executive or the Company from time to time and as
often as is expedient or necessary.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, without regard to any
applicable conflicts of laws.
-11-
18. COUNTERPARTS. This Agreement may be signed by Executive and on behalf of the
Company in one or more counterparts, each of which shall be one original but all
of which together will constitute one and the same instrument.
19.INDEMNIFICATION. To the fullest extent permitted by applicable law, Executive
shall be indemnified and held harmless by the Company against any loss, cost or
expense incurred by Executive in connection with any claim, proceeding, suit or
action, whether civil, criminal, administrative, investigative or otherwise,
including, without limitation, counsel fees incurred in the defense thereof, any
settlement thereof and/or judgments rendered therein, as to which Executive may
become involved by reason of Executive's employment by the Company, or by reason
of any decision, action or omission by or of Executive made in good faith in the
course of performance by Executive of Executive's duties for the Company
pursuant to this Agreement. If so requested by Executive, the Company shall
advance (within two business days) funds to Executive to pay such expenses.
If this Agreement correctly sets forth our agreement on its subject matter,
please sign and return to me the enclosed copy of this Agreement. Please keep
the other copy for Executive's records.
IN WITNESS WHEREOF, this Agreement has been executed by the Company and
Executives as of the date first written above.
Latitude Solutions, Inc.
By: _________________________________
Name: Xxx Xxxxxxxx, Executive Vice President
ACCEPTED:
By: _________________________________
Name: Xxxxxx Xxxx
Title: Chairman and Chief Executive Officer
Latitude Solutions, Inc.
-12-
ADDENDUM TO LETTER AGREEMENT DATED MARCH 31, 2009
The following provisions shall apply to the calculation and procedures relating
to the Gross-Up Payment in accordance With Section 8 of the Agreement.
1 . The Company's independent auditors in the fiscal year in which the Change of
Control occurs (the "Accounting Firm") shall determine Whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be used in making such determination. The Accounting Firm shall
provide detailed supporting calculations, together with a written opinion with
respect to the accuracy of such calculations, to Executive and the Company
within 15 business days of the receipt of a written request from either
Executive or the Company. If the Accounting Firm is serving (or has served
Within the three years preceding the Change in Control) as accountant or auditor
for the person in control of the Company following the Change of Control or any
affiliate thereof, Executive may appoint another nationally recognized
accounting firm to make the determinations required in connection with the
Gross-Up Payment and the substitute accounting firm shall then be referred to as
the Accounting Firm). The Company shall pay Executive any Gross-Up Payment,
determined in accordance with this Addendum, within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that
Executive will not be liable for any Excise Tax, it shall furnish Executive with
a written opinion that Executive's failure to report the Excise Tax on the
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall be
binding upon Executive and the Company.
2. If there is uncertainty about how Section 4999 is to be applied when the
Accounting Firm makes its initial determination, and as a result the Gross-Up
Payment made to Executive by the Company is determined (after following the
procedures set forth in this Addendum) to be less than it should have been made
(an "Underpayment"), and Executive is thereafter required to pay any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment and any such
Underpayment shall be promptly paid by the Company to Executive or for
Executive's benefit.
3. Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the Company to pay Executive
the Gross-Up Payment. Executive's notice shall be given as soon as practicable
but no later than ten business days after Executive has been informed in writing
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. Executive shall not pay such
claim prior to the expiration of the 30 day period following the date on which
Executive gave such notice to the Company (or any shorter period, if the taxes
claimed are due sooner). If the Company notifies Executive in writing prior to
the expiration of such period that it desires to contest such claim, Executive
shall: (a) give the Company any information reasonably requested by it relating
to such claim, (b) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company, (c) cooperate with the Company
in good faith in order effectively to contest such claim, and (d) permit the
Company to participate in any proceedings relating to such claim.
4. The Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
connection with the claim and may, at its sole option, either direct Executive
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and Executive agrees to prosecute the contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts as the Company shall determine.
5. Any extension by the Company of the statute of limitations relating to
payment of taxes for the taxable year for which such contested amounts claimed
to be due shall be limited solely to such contested amount. The Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable under this Agreement and Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
6. If the Company directs Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to Executive, on an
interest-free basis, and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance.
7. If Executive receives a refund of any amount advanced to Executive by the
Company, Executive will promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If the Company advanced to Executive any amounts and a determination
is made that Executive will not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of, refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and Executive will not be
required to be repay it. The amount of such advance shall offset the amount of
the Gross-Up Payment required to be paid.
8. The Company shall pay all fees and expenses of the Accounting Firm. The
Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income tax (including interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and expenses.
