EMPLOYMENT AGREEMENT
This
Employment Agreement (this “Agreement”) is made effective as of May 13, 2008 between XXXXX XXXXX ("Employee") and
XXXXX-XXXXXXX ELECTRONICS CORPORATION, an Illinois corporation
("Company").
WHEREAS,
the parties desire to enter into this Agreement in order to set forth the terms
of Employee’s employment with the Company;
NOW,
THEREFORE, in consideration of the premises, the parties hereby agree as
follows:
1. Employment and
Duties. The Company hereby employs Employee as its Chief Financial
Officer ("CFO"). Employee shall report to Xxxxxxx Xxxxx, the Chief
Executive Officer of the Company, and from time to time to the board of
directors of the Company (“Board of Directors”).
2. Performance. Employee
agrees to actively devote all of his time and effort during normal business
hours to the performance of his duties hereunder and to use his best efforts and
endeavors to promote the interests and welfare of the Company at all
times.
3. Term. Employee shall
be an employee-at will.
4. Compensation. For all
services rendered by Employee, Company agrees to pay Employee a salary and such
additional compensation as the Board of Directors shall from time to time
determine.
5. Expenses. The Company
shall reimburse Employee for reasonable business expenses incurred by Employee
in the performance of his duties under this Agreement, including expenses for
entertainment, travel and similar items consistent with its then-current
practices.
6. Vacation and
Benefits. During the period of his employment under this Agreement,
Employee shall be entitled to four weeks' annual vacation, insurance, and other
employment benefits customarily provided by the Company, including increased or
changed benefits as are from time to time provided Company's employees
generally, or for any group or class of employees of which Employee shall be a
member.
7. Termination.
a. The
Company may terminate Employee's employment hereunder at any time, either for
"cause," for any other reason or for no reason whatsoever. As used
herein, "cause" means (i) any breach by Employee of any provision of this
Agreement or any violation of any statutory or common law fiduciary duty to the
Company, (ii) gross neglect by Employee of his duties hereunder, (iii) any act
of Employee constituting a felony under the laws of the State of Illinois or
federal law or resulting or intending to result in improper personal gain or
enrichment at the expense of the Company, (iv) fraud, dishonesty or misconduct
in the performance of Employee's duties, or (v) conduct by Employee which is
detrimental to the Company and which continues after the Company has
specifically requested that such conduct be discontinued.
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b. If
the Company shall terminate Employee’s employment for “cause” under paragraph
7(a), the Company shall pay Employee his full base salary through the date of
termination at the rate in effect at the time written notice of termination is
given Employee by the Company, and no other amounts shall be due and payable by
the Company to Employee subsequent to the date of termination. If the
Company shall terminate Employee’s employment for any reason other than for
“cause” then (i) the Company shall pay Employee his full base salary through the
date of termination at the rate in effect at the time written notice of
termination is given Employee by the Company and (ii) in lieu of any further
compensation payments to Employee for periods subsequent to the date of
termination, the Company shall (A) pay to Employee for a period of twelve months
from the date of termination (payable in accordance with the Company’s
then-current payroll practices) his base salary at the rate in effect at the
time written notice of termination is given Employee by the Company (without
bonus compensation) and (B) provide to Employee for a period of twelve months
from the date of termination his standard benefits pursuant to paragraph
6.
c.
Employee may terminate his employment hereunder for any reason, including in the
event of a change in control of the Company. For purposes of this
Agreement, a "change in control of the Company" shall mean a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 ("Exchange Act"); provided that, without limitation, such a change in
control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d)(2) of the Exchange Act) other than Employee or
any other person currently the beneficial owner of 10% or more of the
outstanding common shares of the Company, becomes the beneficial owner, directly
or indirectly, of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company cease for any
reason to constitute at least a majority thereof (unless the election of each
director, who was not a director at the beginning of the period, 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).
d. If
Employee shall terminate his employment in the event of a change in control of
the Company under paragraph 7(c), then (i) the Company shall pay Employee his
full base salary through the date of termination at the rate in effect at the
time written notice of termination is given the Company by Employee; and (ii) if
Employee terminates his employment within five days of such change in control
and does not, within five days of such termination, enter into a new employment
agreement with the Company or its successor, as the case may be, with a term of
one year or more, then, in lieu of any further compensation payments to Employee
for periods subsequent to the date of termination, the Company shall (A) pay to
Employee for a period of twelve months from the date of termination (payable in
accordance with the Company’s then-current payroll practices) his base salary at
the rate in effect at the time written notice of termination is given the
Company by Employee (without bonus compensation) and (B) provide to Employee for
a period of twelve months from the date of termination his standard benefits
pursuant to paragraph 6. If Employee shall terminate his employment
for any reason other than a change in control of the Company, the Company shall
pay Employee his full base salary through the date of termination at the rate in
effect at the time written notice of termination is given the Company by
Employee, and no other amounts shall be due and payable by the Company to
Employee subsequent to the date of termination.
e. For
the avoidance of doubt, upon the termination of Employee’s employment for any
reason or for no reason whatsoever, any unvested common stock or other rights to
equity of the
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Company
granted to Employee pursuant to the Company’s Executive Stock Award Plan (or any
other Company plan) and any Restricted Stock Agreement (or other grant
agreement) entered into thereunder (collectively, the “Unvested Stock”) shall be
deemed forfeited by Employee, and Employee shall have no further rights to or
interests in any such Unvested Stock subsequent to the date of
termination.
8. Restrictions.
a. Employee
agrees that he will not, during the term of his employment with the Company or
for a period of one year after the termination of his employment for any reason
or no reason whatsoever, directly or indirectly, (i) divulge, publish, disclose
or otherwise reveal any trade secrets, or other information acquired by or
disclosed to him about the Company, its customers or its vendors during his
employment by the Company, to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever without the prior written
consent of the Company, or (ii) engage in any activity which is or will be
detrimental or contrary to the best interests of the Company.
b. Employee
also agrees that, upon termination of his employment for any reason or for no
reason whatsoever, he will forthwith return to the Company all books, lists, and
other documents and data and all other property belonging to the Company or
relating to its business.
c. Employee
acknowledges that he has learned and will, during his continued employment by
the Company, learn certain financial information, technical information and
other trade secrets of the Company and that disclosure of such information to
competitors of the Company would be detrimental to the
Company. Employee agrees that during the term hereof and for a period
of one year after the termination of his employment for any reason or for no
reason whatsoever, he will not, directly or indirectly, be in any manner engaged
in, connected with (as a shareholder, employee or otherwise) or employed by any
person, firm or corporation which is engaged in a business competitive with the
Company or a successor or affiliate thereof, anywhere in the world, provided,
however, that this subparagraph shall not be deemed to limit Employee's right to
own less than 1% of the common stock of a publicly-held corporation whose shares
are traded on a recognized stock exchange or over-the counter.
d. In
the event of a breach, violation or attempted breach or violation by Employee of
any of the provisions of this Section 8, the Company shall be entitled to an
injunction or restraining order immediately upon the commencement of any suit
therefore by the Company and without notice. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedy available to
it for any such breach or violation for the recovery of damages, including
punitive damages by reason thereof.
9. Waiver of Breach.
Failure of the Company to take action with respect to any breach or violation of
any provision of this Agreement by Employee, whether or not the Company had
knowledge thereof, shall not operate as a waiver of any subsequent breach or
violation by Employee.
10. Disability or Death of
Employee. In the event Employee shall become unable to perform his duties
hereunder by reason of illness or incapacity for a period of six (6) consecutive
months, and such period commences before the Company has given any notice of
termination under Section 7 of this Agreement, Employee shall be paid, in lieu
of all other compensation payable hereunder, 100% of his salary during such six
(6) months and 60% of his salary during the ensuing six (6) months.
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Notwithstanding
the foregoing, Employee will be included under any long-term disability plan
maintained by the Company for its employees generally. In addition,
during Employee's employment by the Company and without limiting the provisions
of Section 6 of this Agreement, the Company will provide an aggregate of
$500,000 of term life insurance to Employee. In the event of
Employee’s death, Employee’s employment shall terminate immediately, and the
Company shall pay to Employee’s legal representative Employee’s then–current
base salary through the date of termination, and no other amounts shall be due
and payable by the Company to Employee or his representatives subsequent to the
date of termination.
11. Section 280G of the
Code. Notwithstanding anything else herein, if any payment or
benefit, within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986, as amended (the “Code”), to Employee
or for Employee’s benefit paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, Employee’s employment with the Company or a change in control of
the Company or of a substantial portion of its assets, would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by Employee with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise
Tax”), the amounts and benefits provided under this Agreement or
otherwise that are subject to Section 280G of the Code as a result of such
transaction will be automatically reduced to an amount that equals the product
of 2.99 multiplied by Employee’s “base amount” (as determined in accordance with
Sections 280G and 4999 of the Code by the Company’s certified public
accountants, unless the Company and Employee mutually agree to the appointment
of an independent certified public accounting firm (the “Accounting Firm”)),
such that Employee will not be subject to the Excise Tax (the “Payment
Reduction”). Unless Employee otherwise elects, the Payment
Reduction shall first be applied to any severance payments payable to Employee
pursuant to Section 7 of this Agreement. Notwithstanding the
foregoing, the Payment Reduction shall not apply if the Accounting Firm
determines that, on an after-tax basis, Employee would retain a greater amount
of compensation following payment of the Excise Tax on the unreduced amount of
any payments than the amount of compensation retained following the Payment
Reduction as required hereby.
12. Section 409A of the
Code. It is intended that any amounts payable under this
Agreement will comply with Section 409A of the Code and the regulations relating
thereto so as not to subject Employee to the payment of interest, tax, and
penalties which may be imposed under Section 409A of the
Code. Notwithstanding anything in this Agreement to the contrary, if
upon the employment termination date, Employee is a “specified employee” as
defined in Section 409A of the Code, as determined by the Company, any amounts
paid as severance pursuant to Section 7 of this Agreement in excess of the
amount permitted to be paid under Treasury Regulation Section
1.409A-1(b)(9)(iii) shall be delayed until the date that is six (6) months
following Employee’s separation from service with the Company, and the Company
will make all applicable payments that have accrued during such six (6) month
period in a lump sum to Employee following the expiration of such
period. For purposes of Section 409A of the Code, each payment under
this Agreement shall be considered a separate payment. In no event
whatsoever shall the Company or any of its affiliates be liable for any
additional tax, interest or penalties that may be imposed on Employee by Section
409A of the Code or any damages for failing to comply with Section 409A of the
Code other than for withholding obligations under Section 409A of the
Code.
13. Assignment. This
Agreement is based upon the personal services of Employee, and the obligations
of Employee hereunder shall not be assignable by Employee except as herein
expressly provided. The rights and obligations of the Company under
this Agreement
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shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company.
14. Entire Agreement.
This instrument supersedes all prior understandings and agreements with respect
to Employee's employment by the Company and contains the entire agreement of the
parties and may be amended only in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
15. Applicable Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois.
[The
signature page follows this page.]
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IN
WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.
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XXXXX-XXXXXXX
ELECTRONICS CORPORATION
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By:
Xxxxxxx Xxxxx, Chief Executive Officer
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/s/ Xxxxxxx X.
Xxxxx
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Employee:
Xxxxx Xxxxx
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/s/ Xxxxx X.
Xxxxx
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