X.X. XXXXXXXX & CO., INC.
000 Xxxxxxxxxx Xxxx., 00xx Xxxxx
Xxxxxx Xxxx, XX 00000
January 14, 2003
Xx. Xxxx X. Xxxxxxxx
000 Xxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Dear Xx. Xxxxxxxx:
The purpose of this letter agreement (the "Letter Agreement") is to set
forth the terms and conditions upon which you will become an employee of and a
lender to X.X. XXXXXXXX & CO., INC. (the "Company").
Concurrently with the execution of this Letter Agreement, you and the
Company are entering into (i) an agreement (the "Employment Agreement")
providing for your employment by the Company as its Chief Executive Officer;
(ii) an Option Agreement providing for the grant of stock options to purchase
375,000 shares of the Company's common stock, par value $.01 per share ("Common
Stock"); and (iii) a Warrant Agreement providing for the issuance of warrants to
purchase 1,000,000 shares of Common Stock. The Agreements referred to in
sub-clauses (i) through (iii) above are collectively referred to as the
"Agreements".
In addition to the arrangements contemplated by the Agreements, you and
the Company have agreed that concurrently with the execution of this Letter
Agreement and the Agreements, the following actions are being taken:
1. The Board of Directors of the Company (the "Board") have voted to
expand the number of directors constituting the entire Board by two (2)
positions. You are being appointed to fill one of the newly-created positions
and also appointed to the Board's Executive Committee. In addition, Xxxxxxx X.
Xxxxxx, your nominee, is being appointed to fill the other newly-created
position. You are being elected Co-Chairman of the Board.
2. The Company shall, if required bearing in mind that the terms of the
directors are staggered, nominate you and Xx. Xxxxxx for re-election as
directors of the Company to serve as such during the Term of Employment (as
defined in the Employment Agreement) when the class of Directors to which you
and Xx. Xxxxxx have been appointed is to be re-elected. Effective January 1,
2004 and, assuming re-election by the shareholders of the Company, if required,
the Company agrees that during the remaining Term of Employment, you will be
elected and serve as Chairman of the Board.
3. Xxxxxx X. Xxxxxxxx will serve as Co-Chairman of the Board through
December 31, 2003. Effective January 1, 2004, Xx. Xxxxxxxx will resign as
Co-Chairman and will be retained as a
consultant to the Company pursuant to a consulting agreement (the "Consulting
Agreement"). The Consulting Agreement shall be for a two (2) year term, provide
for a Ten Thousand Dollars ($10,000) per month fee, reimbursement of health and
life insurance premiums and reimbursement of car, driver and telephone expenses.
During the term of the Consulting Agreement, Xx. Xxxxxxxx shall be Chairman
Emeritus of the Board.
4. Giving effect to your and Xx. Xxxxxx'x appointment to the Board, the
entire Board will consist of ten (10) members. Pursuant to the Company's
Certificate of Incorporation, the entire Board can consist of a maximum of
thirteen (13) members. The Company agrees that the number of directors
constituting the entire Board cannot be expanded beyond ten (10) members without
the vote of seventy-five percent (75%) of the entire Board.
5. The Board agrees to approve and to submit to a vote of the
shareholders of the Company at the next annual meeting, tentatively scheduled
for June 2003 unless other corporate matters need to be brought to a shareholder
vote sooner than June 2003, in which case these matters will be included in the
proxy materials covering such other corporate matters, for the shareholders'
approval of the following matters:
(a) Adoption of a new stock option plan pursuant to which the
Company will issue the Options (as defined in the Employment
Agreement).
(b) Issuance of the Warrants (as defined in the Warrant
Agreement) to you providing for the purchase of 1,000,000 shares of
Common Stock.
6. The Company agrees to file, as promptly as practicable after
shareholder approval of the matters set forth in Section 5 hereof, (i) a
Registration Statement on Form S-8 to cover the shares of Common Stock issuable
upon exercise of the Options, which Registration Statement will contain, if
necessary, a re-sale prospectus naming you as a selling stockholder and (ii) a
Registration Statement on Form S-3 to cover the shares of Common Stock issuable
to you upon exercise of the Warrants issued under the Warrant Agreement referred
to above.
7. To induce you to enter into this Letter Agreement and the
Agreements, the Company hereby represents and warrants to you that as of the
date hereof:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of New Jersey, with all requisite
corporate power and authority to execute, deliver and perform its
obligations under the Letter Agreement and the Agreements.
(b) The Company is a broker-dealer duly registered with the
Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Company is not in
violation of the "net capital" rules promulgated under the Exchange
Act.
(c) The Company is a member of the National Association of
Securities Dealers, Inc.
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(d) Except as set forth in Schedule A hereto, there is no action,
claim, suit or proceeding pending or, to the Company's Knowledge (as
defined below), threatened against the Company before any court or
governmental entity each involving an amount in excess of $500,000. For
purposes of this Letter Agreement, the term "Knowledge" with respect to
the Company means the actual knowledge of any of the officers and other
employees of the Company identified in Schedule B hereto.
(e) The Company's Annual Report on Form 10-K for the year ended
January 31, 2002 contains an unqualified opinion of the Company's
independent auditors on the Company's financial statements for the
fiscal year ended January 31, 2002.
(f) Except pursuant to the Employment Agreement, no bonus payments
have been promised, are due or owing or will be paid to any employee
for the year ending (x) December 31, 2002 or (y) December 31, 2003.
(g) All compensation to employees for the year ending December 31,
2002 has been paid or adequate reserves have been established to pay
said compensation.
(h) Schedule C to this Letter Agreement sets forth the total
compensation and other amounts due Xxxxxx X. Xxxxxxxx and members of
his family from the Company.
8. Currently with the execution of this Letter Agreement, you or your
nominee are making a $500,000 subordinated loan (NASD Form SL1) to the Company
which loan shall be subject to NASD approval and shall be used for net capital
purposes for the Company (the "Loan"). The proceeds of the Loan shall be
deposited at the Company's clearing firm or in any national financial
institution approved by the NASD. The proceeds of the Loan will be invested for
the same duration and terms as Xxxxxx X. Xxxxxxxx'x or his nominee's
subordinated loan made in December 2002. In the event that your employment by
the Company is terminated, you may, in your discretion, apply to the NASD to
withdraw the subordinated loan made pursuant to this paragraph in accordance
with the guidelines set forth in NASD Form SL1. The Company agrees to reasonably
cooperate in such withdrawal.
Commencing with the date hereof and for one week thereafter there shall
be a transition period (the "Transition Period"). During the Transition Period,
you will determine if any new employees are required and, if so, you will, with
the assistance of the Co-Chairman and the Board, where required, agree upon
employment agreements or arrangements for the new employees.
You acknowledge and agree that the Company has provided you with all
information and materials regarding the Company that you have requested in order
to evaluate the desirability of entering into this Letter Agreement and the
Agreements.
This Letter Agreement shall be governed in all respects, including
validity, construction, interpretation and effect, by New Jersey law, without
giving effect to conflicts of laws. The parties hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Letter
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Agreement shall be determined by arbitration, except for injunction proceedings
brought to enforce the provisions of this Letter Agreement which may be brought
and enforced in the courts of the State of New Jersey or of the United States of
America for New Jersey, and irrevocably submit to such jurisdiction, and waive
any claim that such courts represent an inconvenient forum. Any arbitration
under this Letter Agreement shall be conducted pursuant to the Rules of the
National Association of Securities Dealers, Inc. and before an arbitration panel
appointed by such Association. The award of the arbitrator or a majority of them
shall be final, and judgment on the award may be entered in any state or federal
court having jurisdiction. In this regard, a request by either party for
arbitration shall be binding on the other. Any process or summons to be served
upon either party may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth hereinabove. Such mailing shall be deemed
personal service and shall be legal and binding upon said party in any action,
proceeding or claim.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given in accordance with the notice
provisions of the Employment Agreement.
This Letter Agreement, the Agreements and the agreements referred to
herein and therein set forth the entire understanding of, and supersede and
revoke all prior agreements between, the parties relating to the subject matter
contained herein and merges all prior discussions between them.
If any provision of this Letter Agreement shall be held invalid under
applicable law, the remaining provisions shall remain in full force and effect.
This Letter Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by you and an authorized representative of the Company or, in the case of
a waiver, by you or an authorized representative of the Company waiving
compliance, as the case may be. No such written instrument shall be effective
unless it expressly recites that it is intended to amend, supersede, cancel,
renew or extend this Letter Agreement or to waive compliance with one or more of
the terms hereof, as the case may be. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege, or any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies that any party may
otherwise have at law or in equity.
Kindly indicate your agreement with the above by signing the enclosed
copy of this letter and returning it to the undersigned.
Sincerely yours,
X.X. XXXXXXXX & CO., INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
Chairman
ACKNOWLEDGED AND AGREED
TO AS OF THE DATE FIRST SET
FORTH ABOVE:
/s/ Xxxx X. Xxxxxxxx
--------------------
Xxxx X. Xxxxxxxx
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