EXHIBIT 10.6
EMPLOYMENT AGREEMENT - XXXX XXXXXX
This Agreement, made effective as of November 30, 2004, is entered
into by and between Integrated Performance Systems, Inc., a New York
corporation (the "Company"), and Xxxx Xxxxxx (the "Employee").
WHEREAS, Employee is a key employee of the Company and Company
wishes to continue to retain Employee's services;
WHEREAS, the Company desires to employ the Employee as its Chief
Financial Officer in accordance with the following terms, conditions and
provisions; and
WHEREAS, the Employee desires to perform such services for the
Company, all in accordance with the following terms, conditions and
provisions; and
WHEREAS, at some time the Employee may contemplate retiring, with
the approval of the Company's Board of Directors (the "Board"), upon the
completion of his services under this Agreement, whether at the end of the
term hereof or at the end of or during any extension term hereof, and the
parties wish to set forth an agreement relating to such an approved
retirement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. EMPLOYMENT AND DUTIES.
The Company hereby employs Employee, and Employee hereby accepts and
agrees to serve the Company as Chief Financial Officer, consistent with
the job description for this position, and with duties subject to review
and modification from time to time at the direction of the Company's
Board. The Employee shall apply his best efforts and devote
substantially all of his working time and attention to the Company's
affairs.
2. TERM.
The term of this Agreement and Employee's employment under this
Agreement shall commence on December 1, 2004, and shall continue
thereafter for a period of two years. Upon the expiration of the
original term of this Agreement, this Agreement shall automatically
renew for successive one-year terms, subject to termination as provided
in Section 7 below.
During the term of this Agreement, including any extension term thereof,
the Employee or the Board may initiate discussions regarding Employee's
retirement from his position as Chief Financial Officer of the Company.
When either party wishes to discuss Employee's retirement, they shall
provide sufficient advance notice to the other party so as to
accommodate both Employee's and the Company's requirements for planning
and transition. In any event, Employee shall give the Board at least 60
days advance notice of a date on which Employee would like to retire. In
discussions regarding Employee's retirement, Employee and the Board
shall discuss and attempt to agree upon various matters relating to
Employee's retirement, including transition arrangements for the benefit
of Employee and the Company, consulting or other services, if any, from
the Employee after retirement, and the proposed date for Employee's
retirement. (Hereinafter, Employee's retirement that has been agreed
upon by the Board and Employee is referred to as the "Retirement", and
the date which has been agreed upon by the Company and Employee for his
Retirement is referred to as the "Retirement Date").
3. COMPENSATION.
The Company shall compensate the Employee for his services as an
employee hereunder at the following salary, bonus, and benefits:
A. Base Salary.
The Employee shall be paid a base salary of $85,000 per year,
payable on the Company's normal payroll cycle. This base salary is
the minimum salary during the term of this Agreement, and may be
increased from time to time at the discretion of the Board.
Employee shall receive an annual performance review, and, contingent
upon satisfactory review results, shall be eligible for increase of
such base salary at the direction of the Board.
B. Stock Options.
The Employee shall have the opportunity to obtain stock options over
the term of this Agreement. Employee shall be eligible for a grant
of up to one hundred thousand options (100,000) on Company shares.
Fifty percent (50%) of such options shall vest at the expiration of
one year from the effective date noted above, unless Employee
voluntarily resigns his position with the Company or is dismissed
for cause prior to that time. The remaining fifty percent (50%)
shall vest at the expiration of the term of this original Agreement
two years from the effective date noted above, unless Employee
voluntarily resigns his position with the Company or is dismissed
for cause prior to that time. Such options shall be cashless
exercise options.
The merger transaction between the Company and LSC, which will take
place immediately prior to execution of this Agreement, involves the
transfer of control to the Company to Xxxx Xxxxxx ("Xxxxxx"). Under
no circumstances shall any exercise of options pursuant to this
Agreement or pursuant to similar agreements made with other key
employees contemporaneously with the execution of this Agreement,
leave Xxxxxx with less than 51% control of all shares issued and
outstanding of the Company. To the extent the exercise of options
granted under this Agreement creates such a situation, such exercise
shall be void ab initio to the extent it violates the above-
referenced control requirement.
C. Employee Benefits Plans.
For the term of this Agreement, Company shall pay for health care
coverage for Employee and his family in accordance with the terms of
the health care coverage provided to all employees.
The Employee shall be entitled to participate in any and all Company
employee benefit plans, in accordance with the eligibility
requirements and other terms and provisions of such plan or plans.
D. Insurance.
The Employee agrees that the Company, at the discretion of its
Board, may apply for and procure on its own behalf, life insurance
on the life of the Employee, for the purpose of protecting the
Company against loss caused by the death of the Employee (commonly
referred to as "Key" insurance). Employee agrees to cooperate and
submit to medical examinations, and to execute or deliver any
documentation reasonably required by the Company's insurer in order
to effectuate such insurance.
4. VACATIONS AND TIME OFF.
The Employee shall be entitled to three weeks of paid vacation in each
year of employment under the terms of this Agreement, without reduction
of salary. Unused vacation time may be carried over to future years of
employment, consistent with Company policy affecting use by executive
employees of employee vacation time. In addition, Employee shall be
entitled to such additional time off from work, without loss of
compensation, for attendance at professional meetings, conventions,
approved "other business activities", as per Section 12, and educational
courses in accordance with the Company's general policies in this
regard, and as from time to time determined by its Board. This three
weeks will accrue as of January 1, 2005, and renew on a calendar-year
basis every January 1 during the term of this Agreement, or as extended
under Section 2 above.
5. EXPENSES.
The Company will reimburse Employee for reasonable expenses incurred by
the Employee in connection with the business of the Company, according
to policies promulgated from time to time by the Board, and upon
presentation by Employee of appropriate substantiation for such
expenses.
6. DISABILITY.
For purposes of this Section 6, "Disability Leave of Absence" shall mean
the period during which Employee is disabled prior to termination of his
employment under the terms of this Agreement. The Company agrees that,
if Employee's employment is terminated during a Disability Leave of
Absence, Employee may continue to receive Employer's group insurance
health plan coverage by compliance with and as provided under the
provisions of the Consolidated Omnibus Budget Reconciliation Act
("COBRA").
For purposes of this Agreement, Employee shall be considered to be
totally disabled when he is considered to be as such by any insurance
company used by the Company to provide disability benefits for the
Employee, and Employee shall continue to be considered totally disabled
until such insurance company ceases to recognize him as totally disabled
for purposes of disability benefits. If no such disability policies are
in effect for the benefit of the Employee or for any reason an insurance
company fails to make a determination of the question of whether
Employee is totally disabled, Employee shall be considered to be totally
disabled if, because of mental or physical illness or other cause, he is
unable to perform the majority of his usual duties on behalf of the
Company. The existence of a total disability of the Employee, the date
it commenced, and the date it ceases, shall be determined by the Board
and the Employee, under these circumstances. If the parties cannot agree
on the foregoing questions of disability, then any such determination
shall be made after examination of Employee by medical doctor selected
by the Board, and a medical doctor selected by the Employee. If the
medical doctors so selected cannot agree on the foregoing questions of
disability, a third medical doctor shall be selected by the two and the
opinion of a majority of all three shall be binding.
7. TERMINATION.
A. The employment of Employee by the Company under this Agreement shall
terminate upon the occurrence of any of the following:
1. Mutual agreement, in writing, of the parties to terminate.
2. Employee's death.
3. Upon the expiration of the initial or any renewal term of this
Agreement, following written notice at least 60 days prior to the
date on which renewal would otherwise occur, by one party to the
other indicating such party's intention not to renew.
4. At the Company's option, if Employee shall be totally disabled, as
defined above for a continuous period in excess of nine months. The
Company's option to terminate in such event shall be exercised upon
at least 30 days prior written notice to Employee.
5. Termination by the Company for cause. For purpose of this
provision of this Agreement, "cause" shall be defined as:
a. Willful failure of the Employee to substantially perform any
duties reasonably required by the Company that are consistent with
Employee's position (except as a result of any disabling injury,
for which Employee has been receiving benefits under a short term
or long term disability program), and which is not remedied within
30 days by Employee after receipt of written notice to Employee of
such failure from the Company; or
b. The commission by Employee of any act of fraud or dishonesty
which has a direct, substantial and adverse affect on the Company,
and which is related to or in connection with his Employment by
the Company; or
c. The commission by Employee of any criminal act which is
punishable by sentence exceeding 90 days; or
d. Employee materially breaches Employee's other covenants
contained in this Agreement, and fails to cure such breach
promptly after written notice thereof to Employee from the
Company.
6. Termination by Employee with Good Reason. "Good Reason"
includes any of the following:
a. Company's assignment to Employee of duties inconsistent
with Employee's position;
b. Other action by the Company that results in the material
diminution of Employee's position, authority, duties or
responsibilities;
c. Breach of this Employment Agreement by the Company
(including, but not limited to, reduction in Employee's
salary, bonus, long-term compensation, retirement benefits or
welfare benefits);
d. Requirement that Employee maintain his home or principal
place of business outside the Dallas metropolitan area;
e. Requirement that Employee travel on business to a
substantially greater extent than he has in the past twelve
(12) months;
f. Failure to assign this Employment Agreement to a
successor employer.
B. Termination Payments.
1. In the event that (i) Employee's employment with
the Company is terminated without cause, or (ii) Employee
terminates for Good Reason, or (iii) the Company delivers notice
of non-renewal of this Agreement for any renewal term, then:
a. Employee shall receive regular pay through date of
termination, including pro-rated earned for the partial year,
if any.
b. Employee shall receive payment equal to two (2) months of
Employee's then current annualized salary, payable monthly.
c. Employee shall be entitled to continue participation in
the healthcare coverage, life insurance and general employee
benefit plans of the Company. The Company shall for two months
following the effective date of the termination under this
Section 7.B., or until Employee becomes eligible for such
insurance coverage with another employer, continue to provide
such coverage for Employee and his dependents to the same
extent and cost the Company is then providing for other
employees with comparable coverage during this two-month
period.
2. Termination by Company Without Cause or by Employee With Good
Reason--Within Two Years After a Change in Control. For
purposes of this provision, a change in control will be defined
as follows:
a. When, subsequent to the effective date of this Agreement,
any "person" as defined in Section 3(a)(9) of the Securities
Exchange Act as used in sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the
Securities Exchange Act, but excluding the Company or any
subsidiary or parent or any employee benefit plan sponsored
or maintained by the Company or any subsidiary or parent
(including any trustee of such plan acting as trustee), or
indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act, as amended from
time to time), of securities of the Company representing
greater than 50 (fifty) percent of the combined voting power
the Company's then outstanding securities; or
b. When, subsequent to the effective date of this agreement,
the individuals who, at the end of such period, constitute
the Board ("Incumbent Directors") cease for any reason other
than death to constitute at least a majority thereof;
provided however that a Director who was not a Director at
the beginning of this period will be deemed to have satisfied
the definition of "Incumbent Director" if such Director was
elected by, or with the approval of, at least 60% (sixty
percent) of the Directors who then qualified as Incumbent
Directors; or
c. Any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company or the
approval by the shareholders of the Company of any such
transaction, whichever first occurs, or the adoption of any
plan or proposal for the liquidation or dissolution of the
Company.
If, contemporaneously with any such change in control, or
during a two year period subsequent to a change in control,
Employee is terminated without cause, or Employee terminates
for Good Reason, the Company shall (i) pay Employee regular
pay through the date of termination, including pro-rated
bonus for partial year; (ii) pay Employee a lump sum payment
equal to (A) 24 months of Employee's then current annualized
salary, plus (B) the aggregate annual bonus compensation paid
for preceding two full years or two times the target bonus
for the year of termination, whichever is greater; (iii) vest
all outstanding stock options; and (iv) provide continued
participation in medical, dental, life and disability
insurance benefits at same premium cost in effect for active
employees for two years.
3. Termination by Company With Cause. Upon termination of the
Employee by the Company with cause, regular pay will continue
through the date of termination, including pro-rated bonus for
the partial year.
4. Termination by Employee Without Good Reason. Upon termination
by the Employee without good reason, regular pay will continue
through the date of termination, including pro-rated bonus for
the partial year.
5. Termination by reason of death or disability. Upon
termination due to Employee's death, or upon termination by the
Company under Section 7.A.4. due to Employee's disability, then:
a. Employee (or his designated beneficiaries in the case of
death) shall receive regular pay through the date of
termination, including pro-rated bonus earned for the partial
year, if any.
b. Employee (or his designated beneficiaries in the case of
death) shall receive termination payments in the amount of
two months' base salary.
c. All unvested stock options held by Employee shall
immediately vest.
d. Employee (or his dependents, in the case of death) may
continue to receive insurance coverage under the provisions
of COBRA for the period of time prescribed thereby, upon
payment of the cost thereof.
8. PAYMENT OF "PARACHUTE" TAX.
Company agrees to pay to Employee an amount sufficient (after taking
into account any such tax on such payment) to restore the full amount
payable under the other terms of this Employment Agreement, after
application of excise tax on excess Parachute payments within the
meaning of Code Section 280G, including the excise tax, penalties and
interest.
9. HEALTH BENEFITS AFTER RETIREMENT.
Commencing upon Employee's Retirement, for a period of 24 months, the
Company shall pay Employee each month an amount equal to $1000.00
indexed to adjust for inflation on an annual basis each December 1, with
December 1, 2004, as the base date. These amounts may be used by
Employee to purchase an individual health insurance policy or policies
for himself and his spouse or other dependents, and to pay for other
health and medical benefits.
10. COVENANT NOT TO COMPETE.
For purposes of this Section 10, the "Termination Date" will mean the
date of Employee's termination of employment under this Agreement.
Employee hereby covenants and agrees that during the initial and any
renewal term of employment under this Agreement, and for a period of one
year following the Termination Date (the "Term"), Employee shall not be
engaged within the United States, either directly or indirectly, in any
manner or capacity, whether as an advisor, principal, agent, partner,
officer, director, employee, member of an association, or otherwise, in
any business or activity which is competitive with the business being
conducted by the Company or its subsidiaries or affiliates on the
Termination Date (a "Competitive Business"), or own beneficially or of
record, five percent or more of the outstanding stock of any class of
equity securities in any corporation, other business entity or business
engaged in a Competitive Business.
In addition, during the Term, Employee shall not solicit, directly or
indirectly, any then current employee of the Company for employment or
engagement in any capacity outside of the Company, its subsidiaries or
affiliates, or solicit any customers of the Company to change or reduce
in any way the amount of business that they do with the Company or to do
business with a competitor of the Company, its subsidiaries or
affiliates.
At the option of the Board, the Company may choose to extend the Term
for a period of up to an additional twelve months. In consideration for
such election, the Company agrees to make payment to the Employee for
such extension the annualized salary and bonus equal to that in effect
at the time of termination of Employee's employment.
If Employee should breach the foregoing covenants, the Company may seek
injunctive relief to enforce the covenants as well as remedies at law.
In addition, all payments described in Section 7, Termination, and all
payments for health benefits pursuant to Section 9 shall cease. In
addition the remaining unexercised stock options shall immediately be
cancelled and the benefit plan provisions described in Section 7,
Termination, shall be immediately discontinued except to the extent
required by the provisions of COBRA.
11. CONFIDENTIALITY.
Employee will, in the course of his employment with the Company have
access to confidential and proprietary data or information belonging to
the Company. Employee will not at any time divulge or communicate to any
person (other than to a person bound by confidentiality obligations to
the Company similar to those contained in this Agreement) or use to the
detriment of the Company, or for the benefit of any other person such
data or information. The provisions of this section shall survive
Employee's employment hereunder regardless of the cause of termination
of employment or this Agreement. The phrase "confidential or proprietary
data or information" shall mean information not generally available to
the public, including, but not limited to, personnel information,
financial information, customer lists, supplier lists, trade secrets,
secret processes, computer data and programs, pricing, marketing and
advertising data. Employee acknowledges and agrees that any confidential
or proprietary information that Employee has already acquired was in
fact received in confidence in Employee's fiduciary capacity with
respect to the Company.
All written materials, records and documents made by Employer or coming
into Employee's possession during the term of employment or during the
provision of consulting services by Employee in the course of providing
such services, concerning any product, processes, information or
services used, developed, investigated or considered by the Company, or
otherwise concerning the business or affairs of the Company, shall be
the sole property of the Company and upon termination of Employee's
employment for any reason, or upon request of the Board during
Employee's employment, Employee shall promptly deliver the same to the
Company. In addition, upon termination of Employee's employment for any
reason, or upon request of the Board during Employee's employment,
Employee shall deliver to the Company all of the property of the Company
in Employee's possession or under Employee's control, including, but not
limited to, financial statements, marketing and sales data, computers,
and Company credit cards.
12. OTHER BUSINESS ACTIVITIES.
Employee shall not serve as an officer of another company, whether for
compensation or otherwise, requiring more than nominal duties by the
Employee, during the term of his employment under this Agreement without
the express prior written consent of the Board. During the term of his
employment under this Agreement, Employee may not serve as a Director of
any other organizations without express prior written approval by the
Board, such approval not to be unreasonably withheld. In any event, the
activities of Employee specified on Exhibit A attached hereto are hereby
deemed to be approved and consented to.
13. INVENTIONS AND PATENTS.
During the period of his employment hereunder, Employee agrees to assign
all rights, ownership and related privileges and benefits associated
with inventions and patents to the Company. Employee agrees that any
inventions or patents obtained in association with ideas or concepts
initiated by Employee during his employment hereunder related to the
Company's business are deemed to be Company property. This includes but
is not limited to product ideas, changes or improvements; process ideas,
changes or improvements; pertinent intellectual property, or other
pertinent information.
14. MEDIATION.
The Company and the Employee agree that prior to commencing any legal
action arising out of a dispute over provisions in this Agreement, the
parties shall first negotiate for a period of not less than 30 days in
an effort to resolve the dispute. If these efforts are not successful,
then the parties shall submit to non-binding mediation conducted by an
independent third-party mediator in an effort to resolve the dispute,
provided that such mediation must be completed with in 60 days after the
date on which it commences. Thereafter, if the dispute remains
unresolved, either party may commence legal action to resolve the
dispute, it being understood that, if mutually agreed, the parties may
instead elect to submit the dispute to binding arbitration.
15. COOPERATION IN CLAIMS.
Both during employment and post employment, Employee agrees that in the
event of a legal action against the Company, or legal action initiated
by the Company against another party, in which Employee is deemed by the
Company to be a material witness or affiant, Employee agrees to make
reasonable and best efforts to cooperate with the Company in such
matters. If Employee is no longer employed, Company will reimburse
Employee for time and expenses incurred as a result of cooperation for
this purpose.
16. INDEMNIFICATION.
During and after termination of Employee's employment under this
Employment Agreement, the Company shall indemnify and hold harmless the
Employee from liability incurred as a result of performance of his
duties as an Officer and member of the Board, and as a consultant, if
applicable, to the fullest extent permitted under Texas law. In addition
the Company shall use reasonable efforts to secure coverage for Employee
under appropriate D&O insurance policies, to the extent available at
reasonable cost with appropriate coverage.
17. NOTICES.
All notices, requests, demands and other communications provided for by
this Agreement shall be in writing and shall be deemed to have been
given when mailed at any general or branch United States Post Office
enclosed in a certified postpaid envelope, return receipt requested, and
addressed to the address of the respective party stated below or to such
changed address as the party may have fixed by notice:
If to the Employee:
Xxxx Xxxxxx
If to the Company:
Corporate Counsel
Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxxxxx Xx.
Xxxxxxx, Xxxxx 00000
Any notice of change of address shall only be effective, however, when
received.
18. SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of, and be binding upon, the
Company, its successors and assigns, including, without limitation, any
corporation which may acquire all or substantially all of the Company's
assets and business or into which the Company may be consolidated or
merged, and the Employee, his heirs, executors, administrators and legal
representatives. Then Employee may assign his right to payment, but not
his obligations, under this Agreement.
19. APPLICABLE LAW.
This Agreement shall be governed, enforced and construed under the laws
of the State of Texas.
20. OTHER AGREEMENTS.
This Agreement supersedes all prior understandings and agreements
between the parties. It may not be amended orally, but only by a
writing signed by the parties hereto.
21. NON-WAIVER.
No delay or failure by either party in exercising any right under this
Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right.
22. HEADINGS.
Headings in this Agreement are for convenience only and shall not be
used to interpret or construe its provisions.
23. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
INTEGRATED PERFORMANCE SYSTEMS, INC.
By
/s/ Xxxx Xxxxxx
--------------------------------------
Its: President
EMPLOYEE
/s/ Xxxx Xxxxxx
--------------------------------------
Xxxx Xxxxxx
NOTICE OF EXERCISE
------------------
To: INTEGRATED PERFORMANCE SYSTEMS, INC. (the "Company")
(1) The undersigned ("Holder") hereby elects to exercise its rights to
purchase __________________________ shares of the Common Stock of the
Company (the "Securities") pursuant to the terms of the attached Option, and
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing the
Securities in the name of the undersigned Holder:
_______________________________
(Name)
_______________________________
(Address)
(3) With respect to the Securities being purchased hereunder, the
Holder makes, as of the date hereof, all of the representations and
warranties set forth below:
(a) Holder is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. Holder is purchasing these Securities for its own account for
investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof for purposes of the Securities
Act of 1933, as amended ("Securities Act").
(b) Holder understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of its investment intent as expressed herein. In this connection,
Holder understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be
unavailable if its representation was predicated solely upon a present
intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase
or decrease in the market price of the Securities, or for a period of one
year or any other fixed period in the future.
(c) Holder further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. In addition,
Holder understands that the instruments or certificates evidencing the
Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.
(d) Holder is aware of the provisions of Rule 144, promulgated
under the Securities Act, which in substance, permits limited public resale
of "restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: the availability of certain public information about the Company;
the resale occurring not less than one year after the party has purchased
and paid for the securities to be sold; the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein.
(e) Holder further understands that at the time Holder wishes to
sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists the Company may not
be satisfying the current public information requirements of Rule 144, and
that, in such event, Holder could be precluded from selling the Securities
under Rule 144 even if the one-year minimum holding period had been
satisfied.
(f) Holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144
is not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such persons
and their respective brokers who participate in such transactions do so at
their own risk.
__________________________ ______________________________
(Date) (Signature and Title)
______________________________
(Name printed)
