EXHIBIT 10.1
EXECUTION COPY
--------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of June 17, 2005 (this "Agreement"),
between SLS International, Inc., a Delaware corporation (the "Employer"), and
Xxxx X. Xxxx (the "Executive").
RECITALS:
Executive desires to be employed by Employer under the terms and conditions
expressed in this Agreement; and
Executive and Employer are entering into this Agreement, which is intended
to supersede all prior written or oral agreements for the employment of
Executive by Employer and its Affiliates, as hereinafter defined (collectively,
the "Employer").
AGREEMENT:
In consideration of the premises and the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Employment. Employer shall employ Executive and Executive accepts
employment with the Employer, upon the terms and conditions set forth in this
Agreement for the period beginning on the date hereof and ending as provided in
Paragraph 4 hereof (the "Employment Period").
2. Position and Duties.
(a) Executive's title shall be Chief Executive Officer of Employer, and he
shall perform the normal duties of such office, subject to the power and
direction of the board of directors (the "Board") of Employer to expand or limit
such duties.
(b) Executive shall devote his best efforts and his full business time and
attention (except for permitted absences, vacation periods and reasonable
periods of illness or other incapacity) to the business and affairs of Employer.
3. Salary and Benefits.
(a) Executive's salary shall be paid at the rate of $180,000 per annum,
which salary shall be payable in regular installments in accordance with the
Employer's general payroll practices. Amounts payable pursuant to this paragraph
3(a) are referred to as "Salary."
(b) Employer shall reimburse Executive for all reasonable expenses incurred
by him in the course of performing his duties under this Agreement which are
consistent with Employer's policies in effect from time to time with respect to
1
travel, entertainment and other business expenses, subject to Employer's
requirements with respect to reporting and documentation of such expenses.
(c) [Intentionally omitted]
(d) In January 2006, subject to stockholder approval of the Employer's 2005
Stock Incentive Plan during 2005, Employer shall make a grant of stock to
Executive in the amount of 500,000 shares of Employer's common stock,
substantially in the form of the stock grant agreement attached hereto as
Exhibit A.
(e) On the later of the date of this Agreement or the date of stockholder
approval of the Employer's 2005 Stock Incentive Plan, and subject to receipt of
stockholder approval of the Employer's 2005 Stock Incentive Plan during 2005,
Employer shall make a grant of options to Executive to purchase 500,000 shares
of Employer's Common Stock, at $2.50 per share, substantially in the form of the
nonstatutory stock option agreement attached hereto as Exhibit B.
(f) Executive shall be eligible to participate in all of Employer's
employee benefit programs and plans which are available to other executive
employees. Notwithstanding the foregoing, (i) Executive agrees that, in 2005 and
2006, he shall not receive any grants of options or stock or other equity
compensation for his services as a director of the Employer, even though such
grants may be provided to all other directors; and (ii) beginning in 2007,
Executive shall once again be eligible to receive equity compensation for his
services as a director, subject to the discretion of the Board.
4. Employment Period.
(a) The Employment Period shall end on the third anniversary of the date
hereof but shall automatically be renewed for one-year periods thereafter unless
Employer or Executive delivers a notice not to renew this Agreement (the
"Nonrenewal Notice") pursuant to the notice provisions of this Agreement at
least one hundred twenty (120) days prior to the termination of the Employment
Period; provided that (i) the Employment Period shall terminate prior to such
date upon Executive's death, permanent disability or incapacity (as determined
by the Board in its good faith judgment) and (ii) the Employment Period may be
terminated by Employer at any time prior to such date for Cause, as defined in
Paragraph 11 herein.
(b) If the Employment Period is terminated for Cause or by reason of
Executive's permanent disability or incapacity (as determined by the Board in
its good faith judgment), or if Employer or Executive issues a Nonrenewal Notice
as provided for in Paragraph 4(a) herein, then Executive shall be entitled to
receive payment of all Salary and benefits through the date of termination.
(c) If the Employment Period is terminated by Employer not for Cause, or
Executive terminates the Employment Period with Good Reason, Employer shall pay
an amount equal to the Executive's then-existing annual salary to Executive for
six consecutive months, as severance and liquidated damages, such payments to be
paid in installments in accordance with Employer's regular payroll practices
(the "Severance Period"). The parties intend and agree that such severance
2
payments shall fully compensate Executive for any losses associated with such
termination, and Executive's receipt of such severance payments shall be
contingent upon Executive's execution of an appropriately worded separation
agreement and release of claims against Employer.
(d) Executive shall be entitled to no severance payments if he terminates
the Employment Period voluntarily prior to the date specified in Paragraph 4(a).
(e) All of Executive's rights to any employee benefits, including medical,
dental, and life insurance, shall continue through the Severance Period set
forth in Paragraph 4(c). Thereafter, Executive's rights to all such employee
benefits shall cease upon termination except for such as may be available
pursuant to COBRA continuation coverage to which Executive is entitled under
applicable law. For purposes hereof, the term "COBRA" means the requirements
imposed by Section 4980B of the Internal Revenue Code of 1986, as amended, and
by Sections 601 through 609 of the Employee Retirement Income Security Act of
1974, as amended, upon group medical plans to provide continuation coverage to
certain persons.
5. Confidential Information. Executive acknowledges that the information,
customer lists, employment rosters, observations and other data obtained by him
while employed by Employer (including those obtained by him while employed by
the Employer prior to the date of this Agreement) concerning the business or
affairs of the Employer ("Confidential Information") are the property of
Employer. Therefore, Executive agrees that he shall not disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions to act.
Executive shall deliver to Employer at the termination of the Employment Period,
or at any other time the Employer may request, all memoranda, notes, plans,
records, reports, computer tapes and software and other documents and data (and
Executive shall not keep any copies thereof) relating to the Confidential
Information, Work Product (as defined below) or the business of Employer which
he may then possess or have under his control.
6. Inventions and Patents; Power of Attorney. Executive agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports, and all similar or related information which reasonably
relates to Employer's actual or anticipated business, research and development
or existing or future products or services and which are conceived, developed or
made by Executive while employed by the Employer ("Work Product") belong to the
Employer. Executive will promptly disclose such Work Product to the Board and
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments). Executive hereby irrevocably designates, constitutes and appoints
Employer (and all persons designated by Employer in its sole and absolute
discretion) as Executive's true and lawful attorney-in-fact, and authorizes
Employer and any of Employer's designees, in Executive's or Employer's name, to
take any action and execute any instrument which Employer may deem necessary or
advisable to accomplish the purposes of this paragraph. Executive hereby
ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof.
3
7. Non-Solicitation. During the period commencing on the date hereof and
ending on the second anniversary of the termination of Executive's employment
hereunder (the "Covenant Period"), Executive shall not directly or indirectly
through another entity without the prior written consent of Employer, which
consent shall not be unreasonably withheld (a) induce or attempt to induce any
employee of Employer to leave the employ of Employer, or in any way interfere
with the relationship between Employer and any employee hereof; or (b) induce or
attempt to induce any supplier, licensee or other business relation of Employer
to cease or reduce doing business with Employer, or in any way interfere with
the relationship between any such supplier, licensee or business relation and
Employer.
8. Enforcement. If, at the time of enforcement of paragraphs 5, 6, or 7 of
this Agreement, a court holds that the restrictions stated herein are
unreasonable, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein in accordance therewith. Because Executive's
services are unique and because Executive has access to Confidential Information
and Work Product, the parties hereto agree that money damages would be an
inadequate remedy for any breach of paragraph 5, 6, or 7 of this Agreement.
Therefore, in the event a breach or threatened breach of paragraph 5, 6, or 7 of
this Agreement, the Employer or its successors or assigns may, in addition to
other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security).
9. Representations. Executive hereby represents and warrants to Employer
that (a) the execution, delivery and performance of this Agreement by Executive
does not and will not conflict with, breach, violate or cause a default under
any contract, agreement, instrument, order, judgment or decree to which
Executive is a party or by which he is bound; (b) Executive is not a party to or
bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity; and (c) upon the execution and
delivery of this Agreement by Employer, this Agreement shall be the valid and
binding obligation of Executive, enforceable against Executive in accordance
with its terms. Employer hereby represents and warrants to Executive that (i) it
is authorized to enter into this agreement by Employer's Board; (ii) the
execution, delivery and performance of this Agreement does not and will not
conflict with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Employer is bound; and (iii) upon
the execution and delivery of this Agreement by Executive, this Agreement shall
be the valid and binding obligation of Employer, enforceable against the
Employer in accordance with its terms.
10. Definitions.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to control another Person if
such first Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other Person, whether
through ownership of voting securities, by contract or otherwise.
4
"Cause" means (i) a material breach by Executive of paragraph 2(b), 5, 6,
7, or 10 of this Agreement; (ii) a material breach of Executive's duty of
loyalty to Employer or any act of dishonesty or fraud with respect to Employer;
(iii) the commission by Executive of a felony; (iv) repeated and willful
repeated failure to perform duties reasonably directed by the Board; or (v)
gross negligence or willful misconduct with respect to Employer. All
determinations by the Board regarding the existence of Cause shall be made in
its good faith judgment, but no such determination shall be deemed to foreclose
Executive from exercising any remedies under applicable law with respect to any
such determination.
"Good Reason" means that Employer has materially altered the terms and
conditions of Employee's position to Employee's detriment, or materially
breached the terms of this Agreement, which breach (if capable of being cured)
has not been cured within 15 days following receipt of written notice thereof.
"Person" means an individual or a corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or any agency or political subdivision
thereof) or other entity of any kind.
"Territory" means all of the states or countries in which Employer has
conducted business, provided services or shipped products during the term of
this Agreement.
11. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, sent by reputable overnight courier
service (charges prepaid), sent by facsimile (receipt confirmed) or mailed by
certified mail (postage prepaid and return receipt requested) to the recipient
at the address below indicated:
To the Employer:
SLS International, Inc.
0000 X. Xxxxxxx
Xxxxx, Xxxxxxxx 00000
With a copy to:
Xxxx X. Xxxxxxx
Xxxxxxxx & Xxxxxx, LLP
000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
To the Executive's home address, as recorded in Employer's personnel
records;
or to such other address or to the attention of such other person as
the recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement will be deemed to have been given when
delivered personally or by overnight courier; when sent by facsimile, if
confirmation is received; or if mailed by U.S. registered or certified mail,
return receipt requested, five days after deposit in the U.S. Mail.
5
12. Miscellaneous Provisions.
(a) Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(c) Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(d) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by Executive
and Employer and their permitted successors and assigns; provided that the
rights and obligations of Executive under this Agreement shall not be assignable
without the prior written consent of Employer.
(f) Choice of Law. All questions concerning the construction, validity and
interpretation of this Agreement and any exhibits hereto will be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
(g) Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of his Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or other injunctive relief
in order to enforce or prevent any violations of the provisions of this
Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Employer and the
Executive.
(i) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which the Employer's chief executive office is located, the time period shall
be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
[Signature page follows]
6
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement on the date first written above.
SLS INTERNATIONAL, INC.
By:
-------------------------
Its:
-------------------------
------------------------------
XXXX X. XXXX
7
EXHIBIT A
RESTRICTED STOCK AGREEMENT
8
EXHIBIT B
STOCK OPTION AGREEMENT
9
