ATLANTIC INTERNATIONAL ENTERTAINMENT
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT effective as of the 1st day of May, 1997, by
and between XXXXXX X. XXXXXX, an individual residing at 0000 Xxxxxxx Xxxx, Xxxx
Xxxxx, XX 00000 ("Executive"), and ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD., a
Delaware corporation with its principal offices at 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxx Xxxxx, XX 00000 (the "Company").
W I T N E S S E T H:
WHEREAS, the Company, through its wholly-owned or controlled
subsidiaries, is engaged in a variety of businesses, including gaming, wagering
and internet software development and related telecommunications and financial
advisory and business consulting services; and
WHEREAS, the Company, desires the Executive to serve, and the
Executive is willing to serve, as the Company's Chief Executive Officer on and
subject to the terms set forth in this Agreement;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs the Executive as its Chairman and
Secretary for the Term of this Agreement (as hereinafter defined) subject to and
in accordance with the terms, conditions and provisions of this Agreement. The
Executive shall also serve as an executive officer of such of the Company's
wholly-owned or controlled subsidiaries (the "Subsidiaries") which shall include
any entity existing as of the date hereof or formed or acquired during the Term
hereof, including corporations, partnerships, limited liability companies, joint
ventures or other entities (each an "entity" and collectively, the "Entities"),
owned or controlled by the Company or by any Entity owned or controlled by any
such Entity, to which Executive may be elected by the board of directors of any
such Subsidiary. The Executive shall also serve in such other positions or
capacities, not inconsistent with his position as Chairman and Secretary of the
Company or the provisions of this Agreement, to which he may be elected by the
Board or by the board of directors of any Subsidiary or to which he may be
assigned by the Board from time to time during the Term hereof. The Company
shall, subject to the Executive's consent, cause the Executive to be nominated
and elected to the Board and to the boards of directors of such of the
Subsidiaries as the Board may determine. The Executive hereby accepts such
employment upon and subject to the terms, conditions and provisions of this
Agreement.
2. Executive' s Duties and Responsibilities.
(a) During the Term hereof, the Executive will perform all of the services
customarily associated with the position of Chairman and Secretary including,
without limitation, services on behalf of any Subsidiary of which he may serve
as an officer, subject to the policies established by and at the direction of
the Board.
(b) The Executive will devote substantially all of his business time, attention
and efforts to the performance of his duties under this Agreement during the
Term hereof and shall perform such duties diligently, in good faith and in a
manner consistent with the best interests of the Company. The Executive will use
his best efforts at all times during the Term hereof to preserve, protect,
enhance and maintain the trade, business and goodwill of the Company. Subject to
the provisions of subparagraphs 7(b) and (c) hereof, the Executive will perform
his services wherever his services may reasonably be required, but principally
at the principal offices of the Company, which are currently located at the
address set forth above.
3. Term: Severance.
(a) The term of this Agreement (the "Term") commenced in January 1997 and shall
expire on December 31, 2000, subject to earlier termination as provided in
subparagraph 3(b) below:
(b) This Agreement shall terminate prior to December 31, 2000, upon the
occurrence of any of the following events:
(i) The death of the Executive;
(ii) The Permanent Disability, as hereinafter defined, of the
Executive, subject to the provisions of Paragraph 8 of this Agreement;
(iii) Entry of a final judgment by a court of competent jurisdiction
that there has been a breach or default by the Executive in the performance or
observance of any of the provisions of Paragraph 9 of this Agreement;
(iv) Entry of a final judgment by a court of competent jurisdiction
that there has been repeated and deliberate misconduct by the Executive;
(v) Entry of a final judgment by a court of competent jurisdiction that
there has been a repeated breach of trust or other repeated action by which the
Executive has obtained a material personal gain (other than as provided for in
this Agreement or consented to by the Board) at the material expense or to the
material detriment of the Company;
(vi) Entry of a final judgment by a court of competent jurisdiction
that there has been a failure by the Executive to perform the customary duties
of his position; provided that the Executive is furnished with notice of such
breach from the Company, which notice sets forth with particularity such alleged
failures, and the Executive fails to cure any such breach within thirty (30)
days of such notice. If the alleged breach is of a type that cannot be cured
within thirty (30) days, no breach shall exist under this subparagraph 3(b)(vi)
if the Executive has undertaken and is diligently pursuing such cure;
(vii) Upon notice to the Company by the Executive of the termination of
this Agreement for any breach or default by the Company of any of its
obligations or covenants under this Agreement; provided that any such breach or
default is not cured within thirty (30) days of such notice; or
(viii) In the event of a Change of Control, as hereinafter defined,
during the Term hereof, the Executive may terminate this Agreement upon ninety
(90) days notice to the Company. For purposes of this Agreement, the term
"Change of Control" shall mean the date on which the Company sells all or
substantially all of its assets, sells more than 20% of the outstanding capital
stock of any one or more subsidiaries, the aggregate gross revenues of which
constitute 33-1/3%
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or more of the gross revenues of the Company on a consolidated basis, merges
with or into or consolidates with any Entity, issues to an independent,
non-affiliated third party such number of shares of its outstanding capital
stock (or equity or debt securities convertible into or exchangeable for shares
of the Comp any's capital stock) as shall equal twenty five percent (25%) or
more of its total issued and outstanding shares of capital stock, or Executive
is removed from the Board, without cause, provided, however, that a Change of
Control shall not be deemed to occur as a result of or in connection with any
recapitalization or public offering of the Company's securities or the
occurrence of any of the foregoing transactions which is approved by the
Executive. For the purpose of this subparagraph 3(b)(viii), a merger transaction
shall mean the merger or consolidation of the Company with or into any other
Entity; or
(ix) Upon thirty (30) days notice from Executive if Executive is
removed from the Board without cause; or
(x) Upon seven days notice from Executive in the event of the entry by
a court of competent jurisdiction of a decree or order for relief in respect of
the Company in an involuntary case under any applicable bankruptcy, insolvency,
or similar law then in effect or the appointment of a receiver, liquidator,
assignee, custodian, trustee, or sequestrator of the Company or for any
substantial part of its property or an order by any such court for the wind-up
or liquidation of the Company's affairs; or a petition initiating an involuntary
case under any such bankruptcy, insolvency, or similar law is filed against the
Company and is pending for sixty (60) days without a stay or dismissal; or the
Company commences a voluntary case under any such bankruptcy, insolvency, or
similar law then in effect, or makes any general assignment for the benefit of
its creditors or fails generally to pay its debts as such debts become due or
takes corporate action in furtherance of any of the foregoing.
(c) In the event of a Change of Control of any Subsidiary to which Executive
renders services pursuant to this Agreement, or the occurrence of any event with
respect to any such subsidiary under subparagraphs 3(b)(vii) or 3(b)(ix), the
Executive shall have the right to resign as an officer and/or director of such
Subsidiary; provided, however, that such resignation shall not affect the
compensation or any benefits payable to the Executive, or any rights of the
Executive pursuant to this Agreement.
4. Compensation. In consideration of the performance by the Executive of the
services to be performed by him under this Agreement during the Term hereof, the
Company will pay to the Executive the following compensation:
(a) (i) An annual salary at the rate of One Hundred Forty-four Thousand Dollars
($144,500), plus the increases thereto hereinafter referred to (the "Salary")
from January 1, 1997 through the remainder of the Term hereof. The Salary shall
be paid to the Executive in equal bi-weekly installments (after the deduction of
all applicable withholding and other required payroll deductions), in arrears,
during the Term hereof. The Salary may be increased at any time and from time to
time by the Board during the Term hereof. The term "Salary" shall also include
all such increases as well as all increases pursuant to subparagraph 4(a)(ii)
below.
(ii) Commencing January 1, 1998 and on each January 1 thereafter during the Term
hereof, the Executive shall receive an increase in Salary equal to the greater
of (A) five percent (5%) of the
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Salary in effect for the year prior to such increase, or (B) the increase, if
any, in the Cost of Living Index, as hereinafter defined. The Company will, on
the next payroll date following the publication of such Cost of Living Index,
pay to the Executive all amounts of such increased salary determined in
accordance with the preceding sentence for the period commencing on the 1st day
of January of such year through such payroll date.
(iii) For purposes of this subparagraph-4(a), the increase in the Cost of Living
Index shall be computed as follows:
(A) The Cost of Living Index, as hereinafter defined, for each December,
commencing with December 1996, shall be compared with the Cost of Living Index
for December of the previous year. The increase in the Cost of Living Index
shall mean the percentage increase in the Cost of Living Index from the previous
December to the December as of which the computation is made. Such determination
shall be made as soon as possible after publication of the Cost of Living Index
for the December as of which the computation is being made.
(B) The Cost of Living Index shall mean the "Consumers Price Index for Urban
Wage Earners and Clerical Workers (Revised Series) - Boca Raton Metropolitan
Area," published by the Bureau of Labor Statistics of the United States
Department of Labor. If the said Cost of Living Index in the form in which it is
published as of the date of this Agreement or the calculation basis thereof
shall be revised or discontinued, the parties shall attempt in good faith to
modify the provisions of this subparagraph 4(a)(ii) on a basis which will
provide a method of calculation consistent with the method described herein for
prior years.
(b) (i) A bonus for each calendar year during the Term of this Agreement (the
"Bonus") commencing with the year ending December 31, 1997, equal to Five
percent (5%) of the amount by which the greater of (A) the Company's
consolidated net income before income taxes, determined in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years or (B) the Company's Consolidated Net Cash Flow, as hereinafter
defined, exceeds Six Hundred Thousand Dollars ($600,000). "Consolidated Net Cash
Flow" shall mean (A) consolidated net income, plus (B) depreciation,
amortization and other non-cash items of expense, minus (C) payments of all
principal amounts of then outstanding indebtedness, all determined in accordance
with generally accepted accounting principles applied on a basis consistent with
prior years. The computation of consolidated net income before income taxes and
Consolidated Net Cash Flow shall be made in a manner consistent with the
financial statements included in the Company's Annual Report on Form 10-K for
the year with respect to which the Bonus is computed; provided, however, that
such computation shall be made without any deduction for the Bonus payable to
the Executive pursuant to this subparagraph 4(b). Such computation shall be made
by the Company's independent auditors, whose determination shall be final,
binding and conclusive on the parties (subject to the provisions of subparagraph
4(b)(iii) hereof)
(ii) The Bonus shall be payable to the Executive on or before the later of (A)
thirty (30) days following the completion of the audited consolidated financial
statements of the Company, or (B) May 1 of each such year, or (C) within ten
(10) days after the final resolution of any disagreement
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with respect to the calculation of consolidated net income before income taxes
or Consolidated Net Cash Flow pursuant to subparagraph 4(b)(iii) of this
Agreement. In the event of any termination of this Agreement prior to the end of
any calendar year during the Term hereof, the Company will pay to the Executive
(or, in the case of early termination due to the Executive's death, to his
beneficiary, as hereinafter defined), with respect to the year in which any such
termination occurs, a portion of the Bonus which shall be determined by
calculating the Bonus for the entire year in which such termination occurs and
multiplying such Bonus by a fraction, the numerator of which is the number of
months in such year prior to the month in which such termination occurs and the
denominator of which shall be twelve (12), unless such termination results from
an event or occurrence described in subparagraphs 3(b)(iv) or 3(b)(v) of this
Agreement, in which case, notwithstanding any provision of this Agreement to the
contrary, the Company will have no obligation to make any payment of the Bonus
to the Executive for the year in which such termination occurs. As used in this
Agreement, the term "Beneficiary" shall mean the person designated by the
Executive by an instrument signed by the Executive, acknowledged before a notary
public and delivered to the Company. In the event that the Executive fails to
designate a beneficiary as provided in the previous sentence, his estate shall
be deemed to be his beneficiary.
(iii) The Company shall deliver to the Executive with each Bonus payment a
report setting forth the calculation of consolidated net income before income
taxes and Consolidated Net Cash Flow for the year with respect to which such
Bonus is computed in accordance with subparagraph 4(b)(i) of this Agreement.
Unless the Executive notifies the Company within fifteen (15) business days
after receipt of said calculations of his disagreement therewith (which notice
shall state with reasonable specificity the reasons for any such disagreement
and the amounts in dispute), such calculations will be final, binding and
conclusive on the Executive. If there is a disagreement of which the Company is
so notified by the Executive, and the disagreement cannot be resolved by the
Company and the Executive within sixty (60) days following the delivery of such
notice, the items in dispute may be submitted by either the Company or the
Executive to the Company's independent auditors (with a copy being furnished to
the other party). After affording each of the Company and the Executive the
opportunity to present their respective positions (which opportunity shall not
extend for more than ten (10) business days following the submission of such
disputed items to such auditors), the Company's independent auditors shall
determine what changes, if any, are required in the calculations, and such
determination shall be final, binding and conclusive on the Company and the
Executive. The fees, costs and expenses of such independent auditors shall be
borne by the Company.
(iv) The Executive and his duly authorized representatives shall have the right,
at his sole expense, upon reasonable advance notice and during normal business
hours at the Company's offices, to examine and copy the books and records of the
Company relating to its financial statements and/or any sums payable to
Executive under this Agreement.
(c) In the event of a termination of this Agreement pursuant to subparagraphs
3(b)(i), (ii), (vii), (viii), (ix) or (x) of this Agreement, the Executive will
be entitled to receive from the Company, in addition to any Salary and Bonus
payable pursuant to this Paragraph 4, and the Company will pay to the Executive,
severance compensation as follows:
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(i) In the event of any termination of the Term hereof pursuant to subparagraph
3(b)(i) of this Agreement, the Company will pay to the Executive's beneficiary
the face value of the life insurance policy to be maintained by the Company
pursuant to subparagraph 5(b) of this Agreement. In the event that the Company
fails to maintain such insurance, unless such failure results from the Company
having a lack of sufficient funds to pay the premiums therefor, the Executive's
failure to pass an insurance physical or the Executive being otherwise
uninsurable, the Company will pay such amount in forty-eight (48) equal
consecutive monthly installments, the first of which shall be due and payable on
the first day of the first month following the month in which the Executive's
death occurs.
(ii) In the event of the termination of this Agreement pursuant to subparagraph
3(b)(ii) of this Agreement, the Executive will be entitled to receive the
payments provided for in subparagraph 8(b) of this Agreement.
(iii) In the event of the termination of this Agreement pursuant to
subparagraphs 3(b)(vii), (viii), (ix) or (x) of this Agreement, the Executive,
his legal representative or his beneficiary, as the case may be, will continue
to receive the Executive's then Salary in equal monthly installments, in
advance, for a period of one hundred twenty (120) months from the date of any
such termination.
(d) In the event of the sale, during the Term hereof, of the stock, business or
assets of the Company or any Subsidiary of the Company, the Executive shall be
entitled to a profitsharing bonus (the "Profit-Sharing Bonus") equal to ten
percent (10%) of the gross profit (determined as provided below), if any,
received by the seller in such transaction (the "Seller") as a result of such
sale. In the event of any such sale in which the purchase price is paid in cash
or marketable securities, or a combination of cash and marketable securities,
the Profit-Sharing Bonus shall be paid by delivery to the Executive by the
Seller of cash and/or marketable securities in the same proportion as received
by the Seller. In all other events, the Profit-Sharing Bonus shall be payable in
cash or in such other manner as to which the Executive and the Company may agree
prior to the consummation of such sale. Each Profit-Sharing Bonus shall be
payable by the Seller to the Executive within twenty (20) days following the
date of any such sale and each such payment shall be accompanied by a document,
signed by the Chief Financial Officer of the Company, showing the Seller's
adjusted cost basis in the stock, business or assets sold, the gross sale price,
the gross profit on such sale, which shall be the Seller's gross sale price less
the Seller's adjusted cost basis in the stock, business or assets sold (the
"Gross Profit"), the amount of the Profit-Sharing Bonus payable and a
description and statement of the value of each kind of property, other than
cash, being delivered in payment of the Profit-Sharing Bonus (the "Bonus
Certificate"). The adjusted cost basis of the Seller in the stock, business or
assets being sold, the value of each kind of property, other than cash, received
by the Seller in such sale, the gross sale price and the amount of the
Profit-Sharing Bonus shall be determined by the Company's independent auditors.
If the Executive shall not have disputed the amount of such payment, the
accuracy or completeness of the Bonus Certificate and/or the information set
forth in such Bonus Certificate within thirty (30) days of the receipt of
payment of any Profit-Sharing Bonus under this subparagraph 4(d) and the related
Bonus Certificate, then the information set forth in the Bonus Certificate shall
be conclusive and binding upon the parties. If the Executive desires to
6
dispute the amount of such payment, the accuracy or completeness of the Bonus
Certificate and/or the information set forth therein, such dispute shall be
conducted and resolved in accordance with the procedures set forth in the third,
fourth and fifth sentences of subparagraph 6(i) of this Agreement. The Bonus
Certificate to which any such dispute relates will be promptly modified
following the resolution of any such dispute to reflect such resolution.
(e) In the event of the Retirement (as hereinafter defined) of the Executive,
the Executive or his legal representative or beneficiary, as the case may be,
will continue to receive, as and for retirement compensation, an amount equal to
one-twelfth of the greater of (i) the Executive's Salary for the year in which
Retirement occurs, or (ii) the average of the Executive's Salary and Bonus for
each of the five (5) years immediately preceding the year in which Retirement
occurs, for a period of twenty (20) months from the date of commencement of such
Retirement. The amount calculated pursuant to the preceding sentence shall be
payable, in equal monthly installments, in arrears. For the purpose of this
subparagraph 4(e), "retirement" shall be deemed to have occurred at the
expiration of the Term or any renewal Term of this Agreement or upon termination
of the employment provided for herein prior to the expiration of the Term by the
mutual consent of the Executive and the Company.
5. Executive Benefits. In addition to the Salary, Bonus and severance
compensation, the Executive will receive the following benefits:
(a) The Executive will be entitled to four (4) weeks paid vacation and fifteen
(15) paid sick days during each calendar year of the Term hereof commencing with
1997. The Executive will take such vacation at such times as will not
unreasonably interfere with significant activities of the Company and upon
reasonable advance notice to the Company. Any unused vacation or sick days shall
be paid to the Executive by the Company at the end of each year of the Term
hereof based upon Executive's then Salary.
(b) The Company will pay for and maintain for the Executive during the Term of
this Agreement, disability insurance providing for the payment to the Executive
of a minimum of sixty percent (60%) of his Salary for any "disability" as
defined in such disability insurance policy. The Company will also pay and
maintain for the Executive during the Term hereof, major medical,
hospitalization, dental and vision insurance (which insurance will cover the
Executive and members of his immediate family, as defined in the applicable
insurance policies) and life insurance upon the life of the Executive having a
face value of not less than One Million Dollars ($1,000,000), the proceeds of
which shall be payable to such beneficiary(ies) as shall be designated by the
Executive from time to time during the Term hereof, or, in the absence thereof,
Executive's estate. The Company will maintain such disability, medical, dental,
and vision insurance in effect, at the Company's cost, for a period of one
hundred twenty (120) months after the expiration or termination of the Term
hereof unless this Agreement shall be terminated pursuant to subparagraphs
3(b)(iii), (iv), (v) or (vi) of this Agreement, in which case the Company will
not be obligated to maintain such insurance. During the Term hereof, any such
life insurance policy which the Company is obligated hereby to maintain will
remain the property of the Company; provided, however, upon the expiration of
the Term hereof, the Executive will have the right to have such life insurance
policy assigned to him and the Company shall continue to pay or
7
reimburse the Executive for all costs therefor. The Company may, at its election
at any time during the Term hereof, obtain and maintain at its cost, a key man
life insurance policy on the Executive's life with the Company as the
beneficiary thereof, and the Executive will cooperate with the Company and its
insurer with respect to obtaining and maintaining in force such insurance
policy.
(c) The Company will provide the Executive with a late model luxury automobile
during the Term of this Agreement (and/or reimburse the Executive for all costs
incurred by him in connection therewith) with a maximum of $750.00 per month. In
addition, the Company will pay or reimburse the Executive for the cost of
insurance, gasoline, service and maintenance of such automobile upon
presentation of bills or other evidences of payment therefor.
(d) The Company agrees that nothing contained in this Agreement is intended to,
or shall be deemed to be a grant to the Executive in lieu of, or as a limitation
upon, any rights and privileges to which the Executive may otherwise be entitled
as an executive employee of the Company or any Subsidiary under any retirement,
pension, profit sharing, insurance, hospitalization or other employee benefit
plan of any type (including, without limitation, any incentive, profit sharing,
bonus or stock option plan), which may now be in effect or which may hereafter
be adopted or instituted by the Company or any Subsidiary during the Term hereof
of which the Executive is an officer or director, it being understood that the
Executive shall have the same rights and privileges to participate in such
Company and Subsidiary benefit plans as any other officer or executive employee
of the Company or any such Subsidiary.
6. Executive's Right to Participate in Future Expansion of the Company.
(a) From and after January 1997, and through the expiration or earlier
termination of the Term hereof, the\ Executive or his designees (who or which,
for the purposes\of this Paragraph 6, shall be deemed to be included in the
definition of and referred to as the "Executive"), shall have the right to and
benefit of participating in the future growth and expansion of the Company, as
hereinafter provided in this Paragraph 6.
(b) If the Company or its wholly-owned subsidiaries, or any subsidiary of the
Company shall propose to acquire, or enters into any agreement or other
understanding to acquire, by purchase, merger, consolidation or by or as a
result of any other form of business arrangement (including the establishment of
a new business) or combination (an "Acquisition"), all or any part of any
corporation, partnership, joint venture, proprietorship or other operating
business, or any equity interest in any such business (other than for investment
purposes only, for services rendered or as a fee, as provided for in
subparagraph 6(e) hereof), including, but not limited to, the acquisition of
common or preferred stock of any class or series, or options, warrants, rights
or other securities convertible into or exchangeable for common or preferred
stock of any class or series (each a "Security" or collectively, the
"Securities"), the Executive shall have the right to form or cause to be formed,
at his sole cost and expense, the subsidiary or subsidiaries to be used by the
Parent for such purpose (the "Purchaser") and, in consideration of the Executive
bearing such cost and expense, the Executive shall receive, as of the date of
the formation of any such Purchaser, 5% of the Securities of each class and
series of such Purchaser which are issued at that time (the
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"Founder's Securities") Whether or not the Founder's Securities of any Purchaser
are physically issued on the date of the formation of any such Parent, the
Executive shall be deemed to have equitable and beneficial ownership of 5% of
such securities as of the date of formation of any such Purchaser.
(c) If, subsequent to the formation of any such Purchaser, such Purchaser
issues, or agrees to issue, any Securities (other than as a dividend or in
respect of any Securities of such Purchaser then held by the Parent or
Executive), Executive shall, simultaneously and on the date of such issuance (or
on the date of such agreement to issue, if earlier), receive five (5%) percent
of such subsequently issued securities (the ~Subsequently Issued Securities"),
free and clear of all liens, charges and encumbrances. The purchase price
payable by Executive for any such Subsequently Issued Securities shall be the
same as provided for in subparagraph 6(g) with respect to the Investment
Securities referred to therein (except that the Purchase Date, for purposes of
this subparagraph (c), shall be the date on which the Subsequently Issued
Securities are approved for issuance by the Purchaser's Board of Directors) and
the payment terms therefor shall be the same as provided for in subparagraph
6(j) with respect to the Investment Securities referred to therein. Whether or
not the Subsequently Issued Securities of any Purchaser are physically issued,
the Executive shall be deemed to have equitable and beneficial ownership of five
(5%) percent of such securities as of the first date on which any recipient of
such securities became entitled to receive the same.
(d) Attached hereto as Schedule A is a Schedule as of the date hereof setting
forth the name, state of incorporation and date of formation of each Purchaser,
the capitalization of each Purchaser as of its date of formation, the Founder's
Securities of such Purchaser issued to the Executive, the costs and expenses
incurred and paid by the Executive in connection with the formation of each such
Purchaser, the Subsequently Issued Securities of each Purchaser, if any, the
Subsequently Issued Securities of each Purchaser owned by Executive, the date of
ownership of same and the purchase price paid by Executive therefor. Each time,
subsequent to the date of this Agreement, that a new Purchaser is formed, the
Executive shall prepare and deliver to the Company a supplement to or an updated
Schedule A which shall set forth the date of such supplement or update and
include the information specified in the preceding sentence with respect to the
new Purchaser. Each such supplement or updated Schedule A shall be signed by the
Executive when delivered to the Company and, upon receipt by the Company, will
be countersigned and returned to the Executive by the Chief Financial Officer of
the Company. Each time, subsequent to the date hereof, that Subsequently Issued
Securities are approved for issuance by the Board of Directors of a Purchaser,
the Company shall prepare and deliver to the Executive a supplement to or an
updated Schedule A which shall include the information specified above with
respect to the Subsequently Issued Securities. The information with respect to
the purchase price to be paid by the Executive for inclusion in such supplement
to or updated Schedule A shall be provided by the Company on the basis of the
terms and procedures provided for in subparagraph 6(g) (subject to Executive's
right to dispute the same in the same manner as provided in subparagraph 6(i)
hereof). Each such supplement to or updated Schedule A shall be signed by the
Chief Financial Officer of the Company when delivered to the Executive and, upon
receipt by the Executive and subject to the provisions relating to dispute
resolution specified in subparagraph 6(i), will be countersigned and returned to
the Chief Financial Officer of the Company by the Executive. Notwithstanding
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any provision in this Agreement to the contrary, Schedule A attached hereto is
binding and conclusive on the parties hereto with respect to the accuracy of the
information set forth therein.
(e) If a Parent shall purchase or acquire any Securities solely for investment
purposes or in exchange for or in consideration of the performance of services
or as a fee, the Executive will purchase from the Parent, and the Parent will
sell to the Executive, simultaneously with and on the same date as the
acquisition of each such Security by the Parent (the "Purchase Date"), free and
clear of all liens, charges and encumbrances, ten (10%) percent of each such
Security (the "Investment Securities"). Notwithstanding the date on which legal
title to any such Security is transferred to the Executive by the Parent, the
Executive shall have equitable and beneficial ownership of such Security
concurrently with the acquisition of such Security by the Parent.
(f) Notwithstanding the provisions of any subparagraph of this Paragraph 6, the
Executive shall have no entitlement to any debt or equity securities of the
Company which are issued to or in any other manner become the property of any
subsidiary of the Company.
(g) The purchase price to be paid by the Executive for each Investment Security
purchased pursuant to subparagraph 6(e) hereof shall be an amount equal to one
hundred ten percent (110%) of the "fair market value" of each such Security on
the Purchase Date (the "Purchase Price"). The fair market value of each such
Security on the aforesaid date shall be determined by the Company's then
independent auditors who, in making such determination shall consider, among
such other criteria as they shall deem relevant, the purchasing Parent's cost to
acquire such Security, the net tangible book value per share of such Security,
the existence or absence of a trading market in such Security, the magnitude of
the public float of such Security, the trading volume, if any, of such Security
over such period of time as they shall deem relevant, any restrictions, legal or
otherwise, on the Executive's ability to freely trade such Security in a public
market, any other restrictions on the free transferability or pledge of such
Security, the value as collateral of such Security, the value of the property or
services delivered in exchange for such Security and the current value and
collectibility of any loans or advances made or debt incurred by the purchasing
Parent in connection with the acquisition of such security.
(h) Attached hereto as Schedule B is a schedule setting forth as of the date
hereof each Investment Security purchased by the Executive prior to the date
hereof, the Purchase Price of each such Security, the date or dates of
acquisition of each such Security by a Parent, and the date of transfer to the
Executive of each such Security. Each time, subsequent to the date hereof that
the Parent acquires or otherwise obtains an Investment Security which is subject
to subparagraph 6(e) of this Agreement, the Company shall prepare and deliver to
the Executive a supplement to or an updated Schedule B which will set forth the
date of such supplement or update, the Investment Security acquired or otherwise
obtained by the Parent (including the type or designation of such Security, the
number of shares of such Security and the date of purchase or acquisition
thereof) the Purchase Price of such Security and the date of transfer to the
Executive of such Security. Each such supplement or updated Schedule B shall be
signed by the Chief Financial Officer of the Company when delivered to the
Executive and, upon receipt by the Executive, will be countersigned and returned
to the Company by the Executive (unless disputed in accordance with the
provisions of subparagraph 6(i) hereof). Notwithstanding any provision in
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this Agreement to the contrary, Schedule B attached hereto is binding and
conclusive on the parties hereto as to the Investment Securities, Purchase
Price, and dates of acquisition and transfer as set forth in such Schedule.
(i) The supplement or updated Schedule B provided for in subparagraph 6(h)
hereof shall be prepared and delivered by the Company to the Executive within
thirty (30) days of the purchase or acquisition by a Parent of any Investment
Security, together with a notice of such purchase or acquisition (the "Purchase
Notice"). If the Executive shall not have disputed the computation of the
Purchase Price or date of acquisition by the Parent and transfer to the
Executive with respect to any Investment Security within thirty (30) days after
receipt of the Purchase Notice, then the information set forth in the Purchase
Notice shall be binding upon the parties and the Purchase Price shall be
immediately due and payable, as provided elsewhere herein. If the Executive
disputes the computation of the Purchase Price, or the date of acquisition by
the Parent or transfer to the Executive as set forth in the Purchase Notice, he
shall be required to give notice of such dispute to the Company within such
thirty (30) day period (the "Dispute Notice"). The Dispute Notice shall set
forth the Executive's computation of the Purchase Price with respect to such
Security (and/or the date of such acquisition and/or transfer), and, if the
Company and Executive shall not have agreed upon a Purchase Price (or such date
of acquisition and/or transfer) within thirty (30) days after the Company's
receipt of the Dispute Notice, the matter shall be submitted to the Company's
then independent auditors for a determination thereof and the decision of such
auditors shall be final, binding and conclusive on the Company, the Parent and
the Executive. Pending the determination by said auditors, payment of the
Purchase Price shall be made, as provided elsewhere herein, based upon the
purchase price set forth by the Executive in the Dispute Notice, subject to
adjustment thereto in the event that the Purchase Price is subsequently
determined by such auditors to be higher than that set forth in the Dispute
Notice. The fees of said auditors shall be paid by the Company. The supplement
or updated Schedule B to which the Dispute Notice relates will be promptly
modified following the resolution of any such dispute to reflect such
resolution.
(j) Payment of the Purchase Price with respect to any Investment Security
subject to the provisions of subparagraph 6(e) hereof shall be made by the
Executive immediately following the thirty (30) day period after Executive's
receipt of a Purchase Notice as referred to in subparagraph 6(i) hereof if
Executive does not dispute the same in accordance with the terms thereof or, if
disputed by Executive as provided therein, within ten (10) days after either any
resolution of the dispute between the Company and the Executive or the
submission of the dispute to the Company's independent auditors (subject to
adjustment, if any, as provided for in subparagraph 6(i) hereof), against
delivery by the purchasing Parent to the Executive of certificates or other
evidences of ownership of the ten (10%) percent of any such Investment Security
purchased by the Executive. Payment of the Purchase Price for any Investment
Security subject to the provisions of subparagraph 6(e) hereof may be made in
cash, by delivery of a five (5) year recourse promissory note of the Executive
(the "Note") bearing interest to be payable annually within forty-five (45) days
after the end of each year of the term of the Note at the lowest rate necessary
to avoid imputed interest under the applicable provisions of the Internal
Revenue Code of 1986, as amended (such rate to be determined as of the Purchase
Date), prepayable, in whole or in time to time, without penalty or of the
Company's Common Stock and/or any publicly traded company (or other a publicly
traded company as described below), including affiliates of the Company or any
such stock to be valued, for these purposes, at the fair market value thereof on
the date such stock is tendered in payment of the Purchase Price. For the
purposes of this subparagraph 6(j), the fair market value of (A) any
unregistered shares of common stock of a publicly traded company shall mean the
fair market value thereof as determined pursuant to subparagraph 6(g) hereof,
and (B) any registered shares of common stock of a publicly traded company shall
mean the closing price on the principal stock exchange on which such shares are
traded (if the shares are traded on the New York or American Stock Exchange or
other nationally recognized exchange) or on The Nasdaq Stock Market or, if there
are no sales on such date or if the shares are not so listed, the average of the
closing bid and ask prices as reported by Nasdaq, the National Quotation Bureau,
11
Inc. or similar entity selected by the Board of Directors of the Company. In
addition, fair market value, for the purposes of this subparagraph 6(j), shall
not include or reflect any discount or reduction for any other restriction of
any kind relating or applicable to the securities tendered in payment of the
Purchase Price. In the event that the Executive tenders securities which are not
publicly traded but which are convertible into securities which are publicly
traded, the tendered securities shall be valued in the same manner as if they
were fully converted on the date tendered, even if, on the date tendered, the
securities are not then convertible. Payment of the principal and/or interest of
any Note delivered as payment for all or any part of the Purchase Price, may be
made, in whole or in part, at the election of the Executive, in shares of the
Company's Common Stock and/or shares of common stock of any publicly traded
company (or any such convertible securities) in accordance with the provisions
set forth in this subparagraph 6(j).
7. Expense Reimbursement.
(a) The Company will reimburse the Executive for all ordinary and necessary
expenses incurred by him in connection with the performance of his services
under this Agreement, subject to and upon receipt by the Company of invoices or
other supporting documentation in accordance with the Company's expense
reimbursement policies as in effect from time to time.
(b) In the event that the Company moves its corporate headquarters from the New
York metropolitan area, the Company will, if the Executive elects to relocate,
pay the Executive's reasonable moving expenses, including temporary living
accommodations for up to six months; provided. that the Company may not require
the Executive to relocate. In the event the Company so relocates its corporate
headquarters and the Executive elects not to relocate, the Company will provide
the Executive, at the Company's cost, with such offices and staff in a location
in the Boca Raton area as to which the Company and the Executive may agree.
(c) In the event that the Company establishes multiple offices and the Executive
is required to spend any significant part of his time at more than one Company
office, the Company shall pay to the Executive a housing allowance of Three
Thousand Five Hundred Dollars ($3,500) per month for as long as more than one
Company office is maintained; provided, however, that following the closing of
any such office, the Company will reimburse the Executive for any costs incurred
by him in moving and in terminating any lease obligations and similar expenses.
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8. Disability.
(a) In the event the Executive suffers any temporary disability during the Term
hereof, he shall continue to receive one hundred (100%) percent of the Salary
and Bonus to which he was entitled at the time he became so disabled for any
period of disability not in excess of six (6) consecutive calendar months. The
term "Permanent Disability" as used in this Agreement shall mean any disability
of the Executive for a period in excess of six (6) consecutive calendar months.
For the purpose of this subparagraph 8(a). the terms "Disabled" and "disability"
shall mean (i) any physical or mental illness, injury or other incapacity which,
in the opinion of a doctor reasonably satisfactory to the Company and the
Executive or his legal representative, renders the Executive unable to perform
substantially all of his duties under this Agreement, or (ii) a judicial
determination of incompetence. The date that any such disability shall be deemed
to have commenced shall be the date the Executive first absents himself from
work during a continuous period of disability as determined by the doctor
referred to in this subparagraph 8(a) or the date of judicial determination of
incompetence, as the case may be.
(b) In the event of a Permanent Disability, the shall pay to the Executive, as
disability benefits, one twenty (120) monthly payments each in an amount equal
to percent (60%) of Executive's then Salary divided by twelve first of such
payments to commence on the first day of month following any such termination of
this Agreement as a result of a Permanent Disability. In the event that such
date is a date subsequent to the date such Permanent Disability is determined,
payments for all prior months in which the Executive was entitled to such
payments will be made together with the first payment made. Such payments shall
be reduced by the amount of all payments which the Executive receives under any
disability policy maintained by the Company.
9. Confidentiality and Non-Disclosure Covenant.
(a) The Executive hereby acknowledges that, in the performance of his duties
pursuant to this Agreement, he may obtain and be entrusted with unpublished
confidential and proprietary information relating to the Company's and its
Subsidiaries' present and proposed businesses and operations, the use or
disclosure of which would materially adversely affect the operations of the
Company or its Subsidiaries, including, without limitation, unpublished material
financial information relating to the Company's and its Subsidiaries' present
and proposed businesses and operations, the cost and pricing of the Company's
and its Subsidiaries' services, the sales and marketing plans and strategies of
the Company and its Subsidiaries, proposed acquisitions by the Company and its
Subsidiaries, and the terms of all material agreements to which the Company or
any Subsidiary is a party. All of such unpublished information that may be
obtained by the Executive shall, for purposes hereof, be referred to as
"Confidential Information". The Executive hereby agrees that, unless the
Confidential Information becomes publicly known other than by reason of any
improper act or omission of the Executive, neither he, nor any entity or person
owned or controlled by him, shall, during or after the Term hereof, use for his
own benefit or for the benefit of others for any purpose and in any manner
whatsoever, divulge to any person, firm, corporation or other entity or
otherwise publish or disclose any Confidential Information, except as necessary
in connection with the performance of the Executive's services under this
Agreement.
13
Notwithstanding the foregoing, the Executive shall not be in breach of this
covenant with respect to any use or disclosure of any Confidential Information
by him which is required as a result of any legal process served upon him in any
judicial or administrative, (provided, if possible, the Company shall be given
notice in time to enable it to object to such disclosure) or which was obtained
by the Executive from a third party without such third party's breach of any
agreement or obligation of trust. The term "entity or person owned or controlled
by" the Executive or words of like import shall not include the Company or any
of its Subsidiaries.
(b) The Executive agrees that his violation or threatened violation of any of
the provisions of this Paragraph 9 may cause immediate and irreparable harm to
the Company. In the event of any breach or threatened breach of said provisions,
the Company shall be entitled to seek all available equitable remedies therefor
including, without limitation, preliminary and permanent injunctions by a court
of competent jurisdiction prohibiting Executive from any violation or threatened
violation of these provisions and compelling the Executive to comply with these
provisions. This Paragraph 9 shall not affect or limit, and the equitable
remedies provided in this subparagraph 9(b) shall be in addition to, any other
remedies available to the Company at law. The provisions of this Paragraph 9
shall survive the termination or expiration of the Term of this Agreement.
10. Representations and Warranties of the Executive. The Executive represents
and warrants to the Company as follows:
(a) All action on the part of the Executive necessary for the authorization,
execution, delivery and performance of this Agreement by him and the
consummation of the transactions contemplated hereby, has been taken and this
Agreement constitutes a valid and legally binding obligation of the Executive,
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization,-moratorium, or other laws affecting
generally enforcement of creditors' rights and by general principles of equity.
(b) The authorization, execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, will not result in
any violation or be in conflict with or constitute, with or-without the passage
of time and giving of notice, a default under any provision of any instrument,
judgment, order, writ, decree or agreement to which the Executive is a party or
by which he is bound.
(c) There is no action, suit, proceeding, or investigation pending, or to the
knowledge of the Executive, currently threatened against the Executive, in any
way relating to the validity of this Agreement or the right of the Executive to
enter into or to consummate this Agreement and the transactions contemplated
hereby.
11. Representations and Warranties of the Company. The Company represents and
warrants to the Executive as follows:
(a) All action on the part of the Company, SISC and each Subsidiary necessary
for the authorization, execution, delivery and performance of this Agreement by
them and the consummation of the transactions contemplated hereby, has been
taken and this Agreement constitutes a valid and
14
legally binding obligation of the Company, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting generally the enforcement of
creditors' rights and by general principles of equity.
(b) The authorization, execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby, will not result in
any violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, a default under any provision of any instrument,
judgment, order, writ, decree or agreement to which the Company, or any
Subsidiary is a party or by which any of them is bound.
(c) There is no action, suit, proceeding, or investigation pending, or to the
knowledge of the Company, currently threatened against the Company or any
Subsidiary, in any way relating to the validity of this Agreement or the right
of the Company to enter into or to consummate this Agreement and the
transactions contemplated hereby.
12. Arbitration. Except for any action under this Agreement for injunctive or
other equitable relief and except . otherwise expressly provided in
subparagraphs 4(b) and 6(i) of this Agreement, all disputes, controversies and
differences between the parties hereto arising under this Agreement which the
parties hereto are unable to settle amicably shall be resolved in Boca Raton,
Florida, by binding arbitration in accordance with the rules then in force of
the American Arbitration Association. The arbitration shall be held before three
arbitrators, one of which shall be selected by each of the Executive and the
Company and one of which shall be selected by the other two arbitrators, and the
decision of such arbitrators shall be deemed to be final. Judgment upon any
award or decision rendered by such arbitrators may be entered or enforced in any
court, domestic or foreign, having jurisdiction thereof. The arbitrators shall
not, except as provided in subparagraph 14(f) of this Agreement, have any
authority to modify or amend any express provisions of this Agreement.
13. Agreements with Affiliates. The Executive may enter into employment
agreements with affiliates of the Company (the "Affiliate Agreements"). To the
extent that, for any year during the Term hereof that the aggregate annual
salary paid to Executive pursuant to the Affiliate Agreements does not exceed
the Salary payable pursuant to this Agreement for such year, such aggregate
salary received by the Executive under such Affiliate Agreements shall reduce
the Salary payable pursuant to this Agreement on a dollar for dollar basis. If,
for any year during the Term hereof that the aggregate annual salary paid to
Executive pursuant to the Affiliate Agreements exceeds the Salary payable
pursuant to this Agreement for such year, no Salary shall be paid by the Company
to the Executive pursuant to this Agreement for such year; provided, however,
that in such event the Executive shall not be required to refund any Salary (or
salary or other compensation received by him pursuant to any Affiliate
Agreement) paid to him during such year. Any bonuses or other non-salary
compensation or benefits paid to Executive pursuant to the Affiliate Agreements
shall not affect in any way the Salary, Bonus, or other benefits payable to
Executive pursuant to this Agreement.
15
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement of the Company and the
Executive with respect to the subject matter hereof and supersedes all prior
written or prior or contemporaneous oral understandings or agreements, including
the Prior Employment Agreements and any other employment agreements or
understandings between the Company and the Executive with respect to the subject
matter covered in this Agreement. This Agreement may not be modified or amended,
nor may any right be waived, except by a writing which expressly refers to this
Agreement, states that it is intended to be a modification, amendment or waiver
and is signed by both parties hereto in the case of a modification or amendment
or by the party granting the waiver. No course of conduct or dealing between the
parties hereto and no custom or trade usage shall be relied upon to vary the
terms of this Agreement. The failure of a party to this Agreement to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(b) Any notice, demand or other communication (collectively, the "Notices")
required or permitted by or with respect to the provisions of this Agreement
shall be given in writing and delivered by hand, overnight courier or messenger
service, against a signed receipt or acknowledgment of receipt, or mailed by
registered or certified mail, return receipt requested, with notice to the
Company being sent to the attention of the individual who executed this
Agreement on behalf of the Company. Either party may, by notice given in
accordance with the terms hereof, change the person, address or telecopier
number to which Notice should be sent. All such Notices shall be deemed given
when personally delivered or transmitted as aforesaid, or, if mailed as
aforesaid, on the fifth (5th) business day after mailing or on the day actually
received, if earlier, except for a notice of a change of person, address or
telecopier number which shall be effective only upon receipt.
(c) Except as specifically set forth in this subparagraph, neither party hereto
may assign this Agreement or his or its rights, benefits or obligations
hereunder without the written consent of the other party; except that the rights
of the Executive set forth in Paragraph 6 hereof may be assigned to designated
purchasers and shall inure to the benefit of the Executive's heirs,
administrators, executives, personal representatives, successors and permitted
assigns. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, administrators,
executors, personal representatives, successors and permitted assigns. Nothing
contained herein is intended to confer upon any person or entity, other than the
parties hereto, and their respective heirs, administrators, executors, personal
representatives, successors or permitted assigns or, in the case of the
Executive, his designated purchasers under Paragraph 6 hereof, any rights,
benefits, obligations, remedies or liabilities under or by reason of this
Agreement.
(d) This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida with respect to contracts made and to be fully
performed therein, without regard to the conflicts of laws principles thereof.
By their execution hereof, the Company and the Executive hereby consent and
irrevocably submit to the in personam jurisdiction of the American Arbitration
Association tribunal located in the City of Boca Raton, County of Palm Beach and
State of Florida or, with respect to Paragraph 9, the Federal or state courts
situated in Palm Beach County, State of Florida, which shall have sole
jurisdiction as to such matters, and agree that any process in any action
commenced in such
16
tribunal or court under this Agreement may be served upon it or him personally,
by certified or registered mail, return receipt requested, or by Federal Express
or other courier service, with the same full force and effect as if personally
served upon it or him in Boca Raton. Each of the parties hereto hereby waives
any claim that the jurisdiction of any such tribunal is not a convenient forum
for any such action and any defense of lack of in personam jurisdiction with
respect thereto. In the event of any arbitration proceeding pursuant to
Paragraph 9 hereof, the arbitrator shall have the right to assess reasonable
counsel fees and disbursements.
(e) The parties hereto hereby agree that, at any time and from time to time
during the Term hereof, upon the reasonable request of the other party hereto,
they shall do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such further acts, deeds, assignments, transfers,
conveyances, other documents and assurances as may be reasonably required to
more effectively consummate this Agreement and the transactions contemplated
thereby or to confirm or otherwise effectuate the provisions of this Agreement.
(f) If any term or provision of this Agreement, or the application thereof to
any person or circumstance, is finally determined by a court or arbitration
tribunal to any extent to be illegal, invalid or unenforceable, the remainder of
this Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held illegal, invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and shall be enforced to the fullest extent permitted
hereunder and by law.
(g) During and after the Term hereof, the Company shall defend, indemnify and
hold the Executive harmless from any and all claims, causes of action,
liabilities, damages, costs or expenses (including, without limitation,
attorneys' fees and disbursements) incurred by the Executive based upon or in
connection with the performance of his services under this Agreement to the
fullest extent permitted by the laws of the State of New York (and, with respect
to indemnification by by a Subsidiary, the laws of the jurisdiction of
incorporation of any such Subsidiary) and of the By-Laws of the Company, or any
such Subsidiary, as the case may be. In the event that, under applicable law,
the Company is not permitted to defend the Executive or pay the costs of defense
as provided in this subparagraph 14(g) unless the Executive undertakes to
reimburse the Company in the event that any such payment is unlawful, then, in
such event, the Company may condition such defense or payment on receipt of an
appropriate reimbursement agreement from the Executive. This provision will
survive the expiration or termination of the Term of this Agreement.
17
(h) The headings in this Agreement are for convenience of reference only and
shall not affect in any way the construction or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the day and year first above written.
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
By: --------------------------------------------
Xxxxxxx X. Xxxxxxx, President & CEO
Attest: ______________________________
Xxxxxx X. Xxxxxx, Secretary
EMPLOYEE:
By:__________________________
Xxxxxx X. Xxxxxx
