Exhibit 10.7
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
made and entered into as of July 18, 2005, by and between UNIVERSAL SECURITY
INSTRUMENTS, INC., a Maryland corporation (the "Company"), and XXXXXX X.
XXXXXXXXXX (the "Executive").
RECITALS
WHEREAS, the Company is engaged in the business of designing,
manufacturing and marketing security products (the "Business"); and
WHEREAS, the Executive has served as the President and Chief Operating
Officer of the Company and, in August 2004 assumed the additional duties of
Chief Executive Officer of the Company; and
WHEREAS, the Company desires to continue to employ the Executive to
perform services as the President and Chief Executive Officer of the Company,
and to perform other duties which may be assigned from time to time by the Board
of Directors of the Company (the "Board") from time to time at its discretion;
WHEREAS, the Company and Executive entered into an Amended and Restated
Employment Agreement dated as of April 1, 2003 (the "Original Agreement");
WHEREAS, the parties desire to amend certain other provisions of the
Original Agreement to be effective from and after the date hereof, and in
furtherance thereof, the parties have agreed to amend and restate the Original
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree that the
Original Agreement is hereby amended and restated in its entirety as follows:
1. Employment.
(a) Agreement to Employ. Upon the terms and subject to the
conditions of this Agreement, the Company shall hereby employ the Executive and
the Executive hereby agrees to be employed by Company.
(b) Term of Employment. Subject to Section 7, the Company shall
employ the Executive pursuant to the terms hereof for the period commencing as
of the date hereof and ending on July 31, 2008. The period during which the
Executive is employed pursuant to this Agreement, including any renewal thereof
shall be referred to as the "Employment Period."
2. Position and Duties. During the Employment Period, the Executive shall
serve as, and have responsibilities and authority consistent with the position
of, President and Chief Executive Officer of the Company, which shall be subject
to the discretion of the Board. At the request of the Board, the Executive shall
serve as a director, officer or consultant of any subsidiary of the Company, the
Company's 50% owned Hong Kong Joint Venture or its successor (the "Joint
Venture") or of any other entity in which the Company has an interest, provided
that the Executive is indemnified for such service to the same extent as he is
indemnified for serving in his capacities on behalf of the Company. The
Executive shall diligently and conscientiously devote his full and exclusive
business time and attention and best efforts in discharging his duties. Nothing
herein shall restrict the Executive from devoting reasonable time and his
expertise to charitable or communal activities. The Company shall provide
appropriate office space and services to allow the Executive to discharge his
duties, consistent with policies established by the Board from time to time.
3. Compensation.
(a) Salary. The Company shall pay the Executive at the following
minimum rates of annual base salary ("Annual Base Salary") for the following
periods:
The date hereof through July 31, 2006 - $300,000
August 1, 2006 through July 31, 2007 - $325,000
August 1, 2007 through July 31, 2008 - $350,000
The Annual Base Salary for periods subsequent to July 31, 2008 shall be an
amount determined by the Compensation Committee of the Board and approved by the
Board. The Annual Base Salary shall be payable according to the Company's
regular payroll practices and shall be subject to all applicable federal, state
and local withholding taxes.
(b) Bonus.
(i) In addition to the Annual Base Salary, the Executive shall
receive an annual bonus equal to the amount determined pursuant to Exhibit A
attached hereto and incorporated herein by reference ("Bonus"), which shall be
paid by the Company within 30 days following the filing with the United States
Securities and Exchange Commission of the Company's Annual Report on Form 10-K
for the fiscal year with respect to which the Bonus is earned. The Bonus shall
be deemed fully earned by the Executive with respect to any fiscal year of the
Company during which the Executive has been employed by the Company for at least
60 days. The Bonus shall be subject to all applicable federal, state and local
withholding taxes.
(ii) To the extent the Company reports income from both its
domestic operations (currently shown on the Company's annual consolidated
statements of operations as "Operating income") and Hong Kong Joint Venture
(currently shown on the Company's annual consolidated statements of operations
as "Equity in earnings of Hong Kong joint venture"), the Bonus expense shall be
allocated between such two components in the respective proportions as such
components bear to the consolidated Net Income (currently shown on the Company's
annual audited consolidated statements of operations).
(c) Stock Options. In addition to the Annual Base Salary and any
Bonus, the Executive shall be eligible to receive grants of options to acquire
shares of the Company's Common Stock, as may be granted from time to time by the
Board or a committee thereof.
(d) Compensation for Other Services. The Executive shall be entitled
to retain all cash, stock, options or other compensation paid for his services
as a director or officer of the Joint Venture to the same extent such cash,
stock, options or other compensation is paid to all similarly situated officers
or directors (as the case may be) of the Joint Venture.
4. Benefits. During the Employment Period, the Company shall provide the
Executive with the following benefits:
(a) Participation by the Executive, and his wife and dependant
children in any group health plans sponsored or arranged by the Company for its
employees. The full amount of all premiums for such insurance will be paid by
the Company. In the event the Executive declines or is ineligible to participate
in such group health plans, the Company shall pay to the Executive, no less
frequently than quarterly, the amount of such premiums which the Company would
have paid for such period had the Executive accepted such participation for
himself, his wife and dependant children. Nothing herein shall obligate the
Company to continue any health plan currently offered to employees or offered to
employees in the future. The Executive agrees to cooperate with the Company and
to take all steps reasonably necessary to assist the Company in obtaining such
insurance.
(b) Participation in any retirement plans, disability income
insurance and term life insurance policies sponsored or arranged by the Company
for its employees from time to time. Nothing herein shall obligate the Company
to continue any plan or policy currently offered to employees or offered to
employees in the future.
(c) For each calendar year during the Employment Period, the Company
shall contribute the maximum amount permitted by applicable law on behalf of the
Executive to the Company's 401(k) Plan. The Executive shall be entitled to the
full amount of this benefit with respect to any calendar year during which the
Executive has been employed by the Company for at least 60 days.
(d) Three weeks per year of paid vacation time plus sick leave and
personal leave in accordance with the Company's policies for senior executive
officers. The Executive shall be entitled to the full amount of this benefit
with respect to any fiscal year of the Company during which the Executive has
been employed by the Company for 60 days.
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(e) Use of a Company owned or leased automobile or, at the
Executive's option, an automobile payment allowance of $1,000 per month. In
addition, the Company shall pay for the insurance, fuel and service for such
automobile.
(f) All costs and expenses of a mobile phone for the Executive's use
in connection with the performance of his duties, in accordance with the terms
and conditions that the Board shall determine from time to time.
(g) In addition to the benefit provided under Section 4(a),
reimbursement up to a maximum of $30,000 per annum for expenses incurred by the
Executive, his wife and dependant children for medical, dental, optical and
long-term care and prescription drugs, or third-party payor coverage therefor,
which are not reimbursable under any medical coverage for which the premiums are
paid by the Company. This amount shall be increased annually by an amount equal
to the then-current medical expense reimbursement benefit multiplied by the in
the Consumer Price Index for the Greater Baltimore Area (as determined by the
U.S. Bureau of Labor Statistics) for the immediately preceding four calendar
quarters. All requests by the Executive for such reimbursement must be in
writing accompanied by receipts for such amounts.
(h) Participation in the Company's Cafeteria Plan/Flexible Spending
Plan.
(i) Any other group employee benefit plans or programs to the extent
that he is qualified under the requirements relating to participation in any
such plan or program.
(j) All reasonable legal, accounting and financial planning costs
and expenses in connection with estate planning and annual tax return
preparation for the Executive and his wife, not to exceed $10,000 in any three
year period.
5. Business Expenses. The Company shall pay or reimburse the Executive for
business expenses incurred by the Executive during the Employment Period in
connection with his employment.
6. Termination of Employment. Executive's employment will be terminated in
accordance with Sections 6(a) and 6(d), or may be terminated in accordance with
Sections 6(b), (b), (c) and (f), as follows:
(a) The Executive's employment will be terminated upon the last day
of the Employment Period without a renewal.
(b) The Company may terminate the Executive's employment hereunder
for Cause. For purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment hereunder upon (i) the willful and
continued failure by the Executive to substantially perform his duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after
notice of termination given by the Executive pursuant to Section 6(c)), after
written demand for substantial performance is delivered by the Company that
specifically identifies the manner in which the Company believes the Executive
has not substantially performed his duties, which is not cured within 30 days
after notice of such failure has been given to the Executive by the Company, or
(ii) the willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise (including conduct that
constitutes competitive activity pursuant to Section 9 hereof). For purposes of
this paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company.
(c) The Executive may terminate his employment hereunder for Good
Reason for purposes of this Agreement, "Good Reason" shall mean:
(i) A failure by the Company to comply with any material
provision of this Agreement which his not been cured within fifteen (15) days
after written notice of such noncompliance has been given by the Executive to
the Company;
(ii) Any purported termination by the Company of the
Executive's employment other than as permitted under this Agreement (and for
purposes of this Agreement no such purported termination shall be effective);
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(iii) The assignment to the Executive of any duties materially
inconsistent with his status as the Chief Executive Officer of the Company or a
material adverse alteration in the nature or status of his responsibilities in
connection with such offices. For purposes of this Agreement, such alteration of
the Executive's duties shall be deemed to have occurred in connection with any
reorganization, merger, acquisition or other business combination of the Company
unless, in each such instance, the Executive will be the Chief Executive Officer
of (A) the Company if it is the surviving entity in any merger, reorganization,
acquisition or other business combination with the Company, or (B) the successor
entity to the Company in any merger, acquisition or other business combination
with the Company.
(iv) Relocation of the Executive to a location which is not
within Baltimore County or the Baltimore City Metropolitan area, except for
required travel on the Company's business to an extent substantially consistent
with the Executive's duties;
(v) The failure by the Company to continue in effect any
compensation or benefit plan in which the Executive participated as of the date
hereof and which is material to the Executive's aggregate compensation and
benefits hereunder, unless an equitable arrangement (embodied in an on-going
substitute or alternative plan) has been made with respect to such plan, or
failure by the Company to continue the Executive's participation therein (or in
such substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed on the date
hereof.
(d) The employment of the Executive hereunder will terminate upon
his death.
(e) The Company may terminate the Executive's employment hereunder
if the Executive is Permanently Disabled (as hereafter defined). For purposes of
this Agreement, the term "Permanently Disabled" or "Permanent Disability" shall
mean (i) becoming permanently disabled as provided in any permanent disability
income policy provided by the Company under this Agreement insuring the
Executive or (ii) in the absence of any such disability income policy, the
inability for a period of six consecutive months, with reasonable accommodation,
due to a mental or physical injury, illness or disorder, of Executive to provide
substantially all of the services required pursuant to this Agreement to be
provided by Executive. Whether or not Executive is Permanently Disabled under
subsection (ii) shall be determined by a medical doctor agreed to by Company and
Executive. If Company and the Executive cannot agree on such a medical doctor,
they shall each, at their own expense, designate an unrelated medical doctor and
such medical doctors shall in turn designate a third unrelated medical doctor,
whose fee shall be shared equally by Company and Executive. Such medical
doctor(s) shall determine whether Executive is Permanently Disabled and shall
also determine the date of the commencement and termination, if any, of such
Permanent Disability. Such determinations (whether made by unanimous or majority
vote of the medical doctors) shall be binding on the parties hereto. If any
party (the "Second Party") fails to select its medical doctor within 30 days
after written notice from the other party (the "First Party") of the appointment
of the First Party's medical doctor, then the First Party's medical doctor shall
determine whether Executive is Permanently Disabled and shall also determine the
date of the commencement and termination, if any, of such Permanent Disability.
(f) The Executive may terminate his employment hereunder on 30 days
advance written notice at any time within 24 months following a Change of
Control, as defined in Exhibit B attached hereto and incorporated herein by
reference (a "Change of Control").
(g) The Executive may terminate his employment hereunder on six
months' advance written notice at any time.
(h) Any termination of the Executive's employment hereunder by the
Company or the Executive (other than termination by reason of the Executive's
death) shall be communicated by written notice to the other party in accordance
with Section 10(f). Each such notice shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. If, within thirty (30)
days following any written notice of termination, the party receiving the notice
notifies the other party in writing that a dispute exists concerning the
termination, which notice sets forth in reasonable detail the basis for such
dispute, the termination will not be effective until the date when the dispute
is finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
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7. Effect of Termination.
(a) In the event that Executive's employment is terminated for any
reason, Executive shall be paid on the payroll date next following the date of
termination, all compensation, and reimbursement of all expenses, for the
Employment Period accruing through the effective date of termination of
employment.
(b) In the event the Company elects to not renew the Executive's
employment hereunder at the end of the Employment Period and the Executive's
employment hereunder is terminated pursuant to Section 6(a), the Executive shall
be entitled to receive (A) a lump sum severance payment in an amount equal to
the previous 12 months' Annual Base Salary and last Bonus, and (B) for a period
of three years following the termination, the benefits set forth in Sections
4(a) and 4(g) and an amount in cash, payable on the first, second and third
anniversaries of the termination, equal to the benefit which would have been
payable under Section 4(c) had such benefit continued.
(c) In the event the Executive's employment hereunder is terminated
pursuant to Section 6(c), the Executive shall be entitled to receive in addition
to the payment under Section 7(a), (A) a lump sum severance payment in an amount
equal to the previous 12 months' Annual Base Salary and last Bonus, and (B) for
a period of three years following the termination, the benefits set forth in
Sections 4(a) and 4(g) and an amount in cash, payable on the first, second and
third anniversaries of the termination, equal to the benefit which would have
been payable under Section 4(c) had such benefit continued.
(d) In the event the Executive's employment is terminated by the
Company or its successor following or in anticipation of a Change of Control, or
in the event the Executive's employment is terminated by the Executive pursuant
to Section 6(f), the Executive shall be entitled to receive, in addition to the
payment under Section 7(a), a lump sum payment in an amount equal to (A) the
Annual Base Salary for the balance of the Employment Period, and (B) the amount
of the last Bonus. For a period of three years following the end of the
Employment Period, the Executive shall also receive the benefits set forth in
Sections 4(a) and 4(g) and an amount in cash, payable on the anniversary of the
termination, equal to the benefit which would have been payable under Section
4(c) had such benefit continued. In addition, the Executive shall be entitled to
receive three times the previous 12 months' Annual Base Salary and last Bonus,
provided, however, the aggregate present value of severance payments pursuant to
this Section 7(d) (plus any payments under any other plan of the Company and its
affiliates which are contingent on a change of control), determined in
accordance with ss.280G of the Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law, may not exceed 2.99 times the
Executive's average annual taxable compensation from the Company or its
affiliates which is included in the Executive's gross income for the five
taxable years of the Company ending before the date on which the change of
control occurs. All amounts to be paid pursuant to this Section 7(d) shall be
payable concurrently with the delivery by the Company or its successor to the
Executive of the written notice of termination or within 30 days following
termination by the Executive, as the case may be.
(e) In the event the Executive's employment is terminated pursuant
to Section 6(d), the Executive's estate shall be entitled to receive:
(i) A lump sum payment in an amount equal to the sum of (i)
the Executive's then current Annual Base Salary for the
greater of (A) the balance of the Employment Period or (B) one
year, in either case reduced by any individual life insurance
benefits the premiums for which are paid for by the Company,
(ii) the amount of the last Bonus, and (iii) an amount in cash
equal to the benefit under Section 4(c) for the last completed
fiscal year of the Company, payable within 15 days following
receipt by the Company of insurance proceeds on the life of
the Executive or, if there is no such insurance, within 30
days following the date of death. The Company will exercise
its best efforts to promptly collect any such insurance
proceeds.
(ii) The continuation of the benefits set forth in Sections
4(a) and 4(g) for the longer of (A) the balance of the Term,
or (B) three years following the date of the Executive's
death; provided, however, that if the terms of the group
health plans sponsored or arranged by the Company for its
employees limit the length of time during which the benefit
set forth in Section 4(a) may be provided, the Company shall
pay to the Executive's estate with respect to any period
during which such benefit may not be provided, no less
frequently than quarterly, a sum equal to the amount of the
premiums which the Company would have paid for such period had
the benefit set forth in Section 4(a) continued.
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In the event the Executive's employment is terminated pursuant to Sections 6(a)
or (c) and thereafter the Executive dies, the provisions of Sections 7(b) or
7(c), as the case may be, shall control.
(f) In the event the Executive's employment is terminated pursuant
to Section 6(e), the Executive shall be entitled to receive:
(i) The continuation of the payment of the Executive's then
current Annual Base Salary for the balance of the Employment
Period, reduced by any group or individual disability income
insurance benefits the premiums for which are paid for by the
Company and Social Security disability benefits paid to the
Executive. The net amount payable hereunder shall be paid
according to the Company's regular payroll practices; and
(ii) The continuation of the benefits set forth in Sections
4(a) and 4(g), and an amount in cash, payable on the
anniversary of the termination, equal to the benefit which
would have been payable under Section 4(c) had such benefit
continued, for the longer of (A) the balance of the Employment
Period, or (B) three years following the date of the
Executive's Permanent Disability; provided, however, that if
the terms of the group health plans sponsored or arranged by
the Company for its employees limit the length of time during
which the benefit set forth in Section 4(a) may be provided,
the Company shall pay to the Executive with respect to any
period during which such benefit may not be provided, no less
frequently than quarterly, a sum equal to the amount of the
premiums which the Company would have paid for such period had
the benefit set forth in Section 4(a) continued.
(g) All amounts paid under Sections 7(c) or (d) shall be increased
by an amount so that when the total amount paid is reduced by federal, state,
and local income taxes computed at the highest marginal rates applicable to an
individual residing in the state in which the Executive resided at the time of
termination, the net amount is equal to the amount contemplated by Sections 7(c)
or (d), as the case may be.
(h) As a condition, and in consideration, of the payment of any
amounts under Sections 7(b) - (g), the Executive or his estate, as the case may
be, shall execute a release which shall fully, forever, irrevocably and
unconditionally release, remise and discharge the Company, its subsidiaries and
successors-in-interest, and its officers, directors, stockholders, predecessors,
corporate affiliates, agents and employees (each in their individual and
corporate capacities) (hereinafter, the "Released Parties") from any and all
claims, charges, complaints, demands, actions, causes of action, suits, rights,
debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including reasonable attorneys' fees and costs), of
every kind and nature which the Executive or his estate, as the case may be,
ever had or then has against the Released Parties arising out of the Executive's
employment with the Company, including, but not limited to, all employment
discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
ss.2000e, et seq., the Age Discrimination in Employment Act, 29 U.S.C. ss.621 et
seq., the Americans With Disabilities Act of 1990, 42 U.S.C., ss.12101 et seq.,
the Rehabilitation Act of 1973, 29 U.S.C. ss.701 et seq., the Fair Employment
Practices Act, and the Human Rights Act, all as amended and all claims arising
out of the Fair Credit Reporting Act, 15 U.S.C. ss.1681 et seq., and the
Employee Retirement Income Security Act of 1974, 29 U.S.C. ss.1001.
8. Company Obligations. The amounts payable to the Executive pursuant to
Section 7 following termination of his employment shall be in addition to any
rights the Executive may have with respect to previously granted stock options
and any rights the Executive may have arising from claims of breaches by the
Company of the terms of this Agreement.
9. Restrictive Covenants.
(a) Non-competition. During the Employment Period and any additional
period during which the Executive receives compensation from the Company
pursuant to Section 7, the Executive will not directly or indirectly, either as
principal, agent, employee, or in any other capacity, enter into or engage in
any business in which the Company is engaged during the Employment Period.
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(b) CONFIDENTIALITY. DURING THE EMPLOYMENT PERIOD AND AT ALL TIMES
AFTER THE TERMINATION OF THIS AGREEMENT FOR ANY REASON, PROVIDED THE COMPANY
FULFILLS ITS POST TERMINATION OBLIGATIONS TO THE EXECUTIVE AS SET FORTH HEREIN,
THE EXECUTIVE WILL NOT DISCLOSE TO ANY THIRD PARTY ANY TRADE SECRETS, CUSTOMER
LISTS OR OTHER CONFIDENTIAL INFORMATION PERTAINING TO THE BUSINESS OF THE
COMPANY.
(c) Company Property. Promptly following the Executive's termination
of employment for any reason, the Executive shall return to the Company all
property of such entity, and originals and any copies thereof in the Executive's
possession or under his control, including all confidential information and
trade secrets, in whatever media or in whatever form.
(d) Non-solicitation of Employees. During the Employment Period and
any additional period during which the Executive receives compensation from the
Company pursuant to Section 7, the Executive shall not directly or indirectly
induce any management or supervisor-level employee of the Company or any of its
affiliates to terminate employment with such entity, and will not directly or
indirectly, either individually or as owner, agent, employee, consultant or
otherwise, employ or offer employment to any person who is or was employed by
the Company or a subsidiary thereof as a management or supervisor-level employee
unless such person shall have ceased to be employed by such entity for a period
of at least three months.
(e) INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. THE EXECUTIVE
ACKNOWLEDGES AND AGREES THAT THE COVENANTS AND OBLIGATIONS OF THE EXECUTIVE WITH
RESPECT TO NON-COMPETITION, NON-SOLICITATION, CONFIDENTIALITY AND COMPANY
PROPERTY RELATE TO SPECIAL, UNIQUE AND EXTRAORDINARY MATTERS AND THAT A
VIOLATION OF ANY OF THE TERMS OF SUCH COVENANTS AND OBLIGATIONS WILL CAUSE THE
COMPANY AND ITS SUBSIDIARIES IRREPARABLE INJURY FOR WHICH ADEQUATE REMEDIES ARE
NOT AVAILABLE AT LAW. THEREFORE, THE EXECUTIVE AGREES THAT THE COMPANY AND ITS
SUBSIDIARIES SHALL BE ENTITLED TO AN INJUNCTION, RESTRAINING ORDER OR SUCH OTHER
EQUITABLE RELIEF AS A COURT OF COMPETENT JURISDICTION MAY DEEM NECESSARY OR
APPROPRIATE TO RESTRAIN THE EXECUTIVE FROM COMMITTING ANY VIOLATION OF THE
COVENANTS AND OBLIGATIONS CONTAINED IN THIS SECTION. THESE INJUNCTIVE REMEDIES
ARE CUMULATIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES THE COMPANY
OR ITS SUBSIDIARIES MAY HAVE AT LAW OR IN EQUITY. IN THE EVENT (I) THE
ENFORCEABILITY OF ANY OF THE COVENANTS CONTAINED IN THIS SECTION IS CHALLENGED
BY EXECUTIVE IN ANY JUDICIAL PROCEEDING, (II) EXECUTIVE IS NOT ENJOINED IN SUCH
PROCEEDING FROM BREACHING SUCH COVENANT, AND (III) EXECUTIVE DOES, IN FACT
BREACH SUCH COVENANT, THEN, IF A COURT OF COMPETENT JURISDICTION DETERMINES THAT
THE CHALLENGED COVENANT IS ENFORCEABLE, THE TIME PERIOD SET FORTH IN SUCH
COVENANT SHALL BE DEEMED TOLLED UPON THE INITIATION OF SUCH PROCEEDING UNTIL THE
DISPUTE IS FINALLY RESOLVED AND ALL PERIODS OF APPEAL HAVE EXPIRED.
10. Arbitration. Any dispute to be submitted to binding arbitration
pursuant to the terms of this Agreement shall be submitted to binding
arbitration in Baltimore, Maryland, in accordance with the rules and procedures
of the American Arbitration Association. The arbitrator's decision will be final
and may be enforced through any court having jurisdiction. All proceedings
before the arbitrator(s) shall be confidential and neither arbitrating party
shall comment to any third party on the arbitration or subject matter of the
arbitration except as required to permit the conduct of the arbitration. The
arbitrator(s) shall award to a prevailing party in the arbitration the cost of
such prevailing party's reasonable attorneys' fees, arbitration expenses and
other expenses reasonably incurred in connection with the dispute or disputes
being reviewed by the arbitrator(s). Furthermore, if a party files a judicial
action alleging claims subject to arbitration under this Agreement, and another
arbitrating party successfully stays the judicial action and/or compels
arbitration of the claims, the party bringing the claims in court will pay the
other party's costs and expenses, including attorneys' fees. THE PARTIES HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT TO
ENFORCE OR OTHERWISE RELATING TO THIS AGREEMENT.
11. Miscellaneous.
(a) Binding Effect. This Agreement shall be binding on the Company
and any person or entity which succeeds to the interest of the Company
(regardless of whether such succession occurs by operation of law, by reason of
the sale of all or a portion of the Company's stock or assets or a merger,
consolidation or reorganization involving the Company). This Agreement shall
also inure to the benefit of the Executive's heirs, executors, administrators
and legal representatives.
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(b) Assignment. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned or delegated by either party hereto
without the prior written consent of the other party.
(c) Entire Agreement. This Agreement supersedes any and all prior
agreements between the parties hereto, and constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein, and
no other agreement, oral or otherwise, shall be binding between the parties
unless it is in writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or statements
between the parties other than those that are expressly contained herein. THE
EXECUTIVE ACKNOWLEDGES THAT HE IS ENTERING INTO THIS AGREEMENT OF HIS OWN FREE
WILL AND ACCORD, AND WITH NO DURESS, THAT HE HAS READ THIS AGREEMENT AND THAT HE
UNDERSTANDS IT AND ITS LEGAL CONSEQUENCES. No parol or other evidence may be
admitted to alter, modify or construe this Agreement, which may be changed only
by a writing signed by the parties hereto.
(d) Severability; Reformation. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event any of
Section 9(a), (b), (c), (d) or (e) is not enforceable in accordance with its
terms, the Executive and the Company agree that such Section, or such portion of
such Section, shall be reformed to make it enforceable in a manner which
provides the Company the maximum rights permitted under applicable law.
(e) Waiver. Waiver by either party hereto of any breach or default
by the other party of any of the terms of this Agreement shall not operate as a
waiver of any other breach or default, whether similar to or different from the
breach or default waived. No waiver of any provision of this Agreement shall be
implied from any course of dealing between the parties hereto or from any
failure by either party hereto to assert its or his rights hereunder on any
occasion or series of occasions.
(f) Notices. Any notice required or desired to be delivered under
this Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon dispatch to the party to whom such notice shall be directed,
and shall be addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
If to the Company: Universal Security Instruments, Inc.
0-X Xxxxxx Xxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxxx 00000
Fax (000) 000-0000
Attention: Chairman of the Compensation Committee
If to the Executive: Xxxxxx X. Xxxxxxxxxx
00 Xxxxxxxxxx Xxx
Xxxxxxxxxxx, Xxxxxxxx 00000
(g) Amendments. This Agreement may not be altered, modified or
amended except by a written instrument signed by each of the parties hereto.
(h) Headings. Headings to sections in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but both of which together shall
constitute one and the same Agreement.
(j) Withholding. Any payments provided for herein shall be reduced
by any amounts required to be withheld by the Company from time to time under
applicable federal, state or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
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(k) Governing Law. This Agreement shall be governed by the laws of
the State of Maryland, without reference to principles of conflicts or choice of
law under which the law of any other jurisdiction would apply.
(l) Context. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, to the singular
include the plural, to the part include the whole, and to the male gender shall
also pertain to the female and neuter genders and vice versa. The term
"including" is not limiting, and the term "or" has the inclusive meaning
represented by the phrase "and/or". The words "hereof," "herein," "hereby",
"hereto", "hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section and Exhibit and clause references are to this Agreement unless otherwise
specified.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer and the Executive has hereunto set his hand as of
the day and year first above written.
WITNESS: THE COMPANY:
UNIVERSAL SECURITY INSTRUMENTS, INC.
____________________________ By: /s/ Xxxxx X. Xxxx
---------------------------------
Xxxxx X. Xxxx
Vice President
THE EXECUTIVE:
____________________________ /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
XXXXXX X. XXXXXXXXXX
9
EXHIBIT A
BONUS FORMULA
For purposes of the Bonus calculation, the Company's "Pre-Tax Net Income"
with respect to any fiscal year means the amount of net income before income
taxes and before Bonus calculation which will be reported by the Company in its
annual audited consolidated financial statements with respect to such fiscal
year, as determined pursuant to Generally Accepted Accounting Principles as in
effect of the date of this Agreement.
With respect to any fiscal year of the Company in which the Company has
achieved Pre-Tax Net Income, the amount of Pre-Tax Net Income equal to 8% of
shareholders' equity as of the start of the fiscal year shall be excluded from
the Bonus calculation (the "Bonus Threshold"). Thereafter, the Executive shall
be entitled to receive as a Bonus an amount equal to the aggregate of the
percentages of such Pre-Tax Net Income in excess of the Bonus Threshold, as
specified below:
On Pre-Tax Net Income up to and including $1 million 3%
On all portions of Pre-Tax Net Income from over $1 million
up to and including $2 million 4%
On all portions of Pre-Tax Net Income from over $2 million
up to and including $3 million 5%
On all portions of Pre-Tax Net Income from over $3 million
up to and including $4 million 6%
On all portions of Pre-Tax Net Income over $4 million 7%
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EXHIBIT B
CHANGE OF CONTROL
For the purposes of this Agreement, a "Change of Control" means the
occurrence of any one or more of the following events:
(i) The direct or indirect acquisition of ownership, holding or
power to vote more than 25% of the Company's voting stock.
(ii) The acquisition of the ability to control the election of a
majority of the Company's directors.
(iii) The acquisition of a controlling influence over the management
or policies of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange Act of 1934).
(iv) During any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute the Board
of Directors of the Company (the "Existing Board") cease for any reason to
constitute at least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. The decision of the Continuing
Directors as to whether or not a Change in Control has occurred shall be
conclusive and binding on all parties.
(v) The sale or other disposition of all or substantially all of the
assets of the Company in one transaction or a series of transactions (other than
financing arrangements).
(vi) A merger, consolidation or share exchange involving the Company
and any other person or entity, including any of the equity owners as of the
date hereof, in which the Company or one of its subsidiaries is not the
surviving entity.
(vii) Any other "business combination" (as defined in Section
3-601(e) of the Maryland General Corporation Law) involving the Company and any
person or entity, including any of the equity owners as of the date hereof,
whether or not such person or entity is an "interested stockholder" under that
statute.
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