Exhibit 10.3
AGREEMENT
AGREEMENT, dated as of March 2, 2007, between Five Star
Products, Inc., a Delaware corporation with principal executive offices at 000
Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000 (the "Company"), and Xxxxxx Xxxxxx,
residing at 0000 Xxxx Xxxxx Xxxxxxxxx, XX 000, Xxxxxx, XX 00000 ("Xxxxxx").
W I T N E S S E T H
WHEREAS, the Company desires to retain the services of Flegel upon the
terms and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual promises,
covenants, and conditions herein contained and for other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto intending to be legally bound hereby agree as follows:
Section 1. Retainer. The Company hereby agrees to retain Xxxxxx, and
Xxxxxx hereby agrees to serve the Company, all upon the terms and subject to
the conditions set forth in this Agreement.
Section 2. Capacity and Duties.
(a) Xxxxxx shall serve as Chairman of the Board of the Company and shall have
the duties, responsibilities, and authorities normally performed by the chairman
of the board of a public company. Xxxxxx shall devote his best efforts and such
of his business time and attention as is necessary to promote and advance the
business of the Company and to perform his duties hereunder.
(b) Xxxxxx shall perform the services at such locations as he reasonably
determines; provided, however, that Xxxxxx agrees to attend, in person, meetings
of the Board of Directors and any committees on which he may serve, as may be
requested.
(c) During the Term (as defined below), Xxxxxx agrees that he will not serve in
an operating capacity as an executive officer or employee performing a senior
operating function of any other entity.
Section 3. Term of Agreement. Unless sooner terminated in accordance with the
provisions of this Agreement, the term (the "Term") of this Agreement shall
commence on the date hereof and end on the third anniversary of the date hereof
(the "Third Anniversary").
Section 4. Compensation.
(a) During the Term, subject to all the terms and conditions of this Agreement
and as compensation for his services to the Company under this Agreement, the
Company shall pay Xxxxxx an annual fee at the rate of $100,000, payable in equal
monthly installments in arrears on the last day of each month.
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(b) On the date hereof, as additional compensation for his services to the
Company under this Agreement, the Company shall issue to Xxxxxx 2,000,000 shares
(the "Shares") of the common stock, par value $0.01 per share (the "Stock"), of
the Company.
(c) As an independent contractor, Xxxxxx understands and agrees that he is not
entitled to any of the benefits, coverages or privileges made available to
employees of the Company, including, without limitation, social security,
unemployment, medical, pension, or insurance benefits. The compensation paid to
Xxxxxx pursuant to this Agreement is not subject to federal, state, or local tax
withholdings and Xxxxxx accepts sole responsibility and liability for the
payment of any and all withholding, Medicare, social security or any other taxes
owing to any governmental authority, with respect to or on account of any
compensation or other fees paid by the Company to him for services rendered
under this Agreement. The Company shall provide Xxxxxx with IRS Form 1099 for
all fees paid for services rendered pursuant to this Agreement.
Section 5. Expenses.
(a) The Company will reimburse Xxxxxx for all travel expenses (such as airline
and car travel, hotel, parking, and meals when traveling on Company business)
incurred in the performance of his services under this Agreement, in accordance
with the policy and practice of the Company regarding senior executives, upon
presentation to the Company of appropriate expense vouchers and accompanying
documentation and the approval of the Company's Chief Executive Officer.
(b) Commencing on November 1, 2007 and continuing through the balance of the
Term, the Company will also reimburse Xxxxxx for the reasonable out-of-pocket
cost of maintaining an office, including rent and normal office related
expenses, and for the services of an administrative assistant, including salary
and benefits; provided, however, that Xxxxxx shall not be entitled to
reimbursement pursuant to this Section 5(b) in excess of $125,000 in any
12-month period.
(c) Except as set forth above, Xxxxxx shall be responsible for all his own
expenses and shall not be entitled to reimbursement from the Company.
Section 6. Non-Competition, Non-Solicitation. Xxxxxx agrees that he will not
during the period he is providing services to the Company under this Agreement
or otherwise and for a period of one year thereafter, directly or indirectly,
(a) solicit the employment of, or encourage to leave the employment of the
Company, any of its subsidiaries, or its parent, National Patent Development
Corporation ("NPDC"), any person who is now employed by the Company, any of its
subsidiaries, or NPDC, (b) hire any employee or former employee of the Company,
any of its subsidiaries, or NPDC, (c) disparage the Company, any of its
subsidiaries, or NPDC to any of their respective clients, employees, service
providers or any third party, or take any action with the intent or probable
effect of injuring the business or reputation of Company, any of its
subsidiaries, or NPDC or (d) compete with or be engaged in the same business as
the Company, any of its subsidiaries, or NPDC, or be employed by, or act as
consultant or lender to, or be a director, officer, employee, owner, or partner
of, any business or organization which, during the period Xxxxxx is providing
services to the Company under this Agreement or otherwise, directly or
indirectly competes with or is engaged in the same business as the Company, any
of its subsidiaries, or NPDC, except that in each case the provisions of this
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Section 6 will not be deemed breached merely because Xxxxxx owns not more than
1% of the outstanding common stock of a corporation, if, at the time of its
acquisition by Xxxxxx, such stock is listed on a national securities exchange or
is regularly traded in the over-the-counter market by a member of a national
securities exchange.
Section 7. Confidential Information. All confidential information which Xxxxxx
may now possess, may obtain during or after the Term, or may create prior to the
end of the period he is providing services to the Company under this Agreement
or otherwise relating to the business of the Company, any of its subsidiaries,
or NPDC or of any of their respective customers or suppliers shall not be
published, disclosed, or made accessible by him to any other person, firm, or
corporation either during or after the termination of the period he is providing
such services or used by him except during the Term in the business and for the
benefit of the Company, in each case without prior written permission of the
Company. Xxxxxx shall return all tangible evidence of such confidential
information to the Company or NPDC, as the case may be, prior to or at the
termination of his association.
Section 8. Termination. The Term shall end prior to the Third Anniversary only
if one or more of the following circumstances occur prior to the Third
Anniversary (each, an "Early Termination"):
(a) Death. The death of Xxxxxx shall occur.
(b) Disability. At the election of the Company, if, as a result of Xxxxxx'x
incapacity due to physical or mental illness, Xxxxxx shall have been absent from
his duties hereunder for six months, and within 30 days after a Notice of
Termination (as defined in Section 8(e)) is given shall not have returned to the
performance of his duties hereunder.
(c) Cause. At the election of the Company, for Cause. For purposes of this
Agreement, the Company shall have "Cause" (i) upon the failure by Xxxxxx to
substantially perform his duties or obligations hereunder (other than any such
failure resulting from Xxxxxx'x incapacity due to physical or mental illness),
which is not cured within ten days after demand for substantial performance is
delivered by the Company's board of directors to Xxxxxx that specifically
identifies the manner in which the Company believes Xxxxxx has not substantially
performed his duties or obligations or (ii) if Xxxxxx shall engage in conduct
which is materially monetarily injurious to the Company or its reputation.
(d) Change in Control. A Change in Control of the Company or NPDC shall occur.
For purposes of this Agreement, a "Change in Control" of the Company shall be
deemed to have occurred if (i) NPDC and its affiliates cease to own a majority
of the voting stock of the Company and (ii) within any 12-month period beginning
on or after the date that is three months after the date hereof, the persons who
were directors of the Company immediately before the beginning of such period
(the "Company Incumbent Directors") shall cease (for any reason other than
death) to constitute at least a majority of the Board of Directors of the
Company or the board of directors of any successor to the Company, provided that
any director who was not a director of the Company immediately before the
beginning of such period shall be deemed to be a Company Incumbent Director if
such director was elected to the Board of Directors of the Company by, or on the
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recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Company Incumbent Directors either actually or by prior
operation of this Section 8(d), unless such election, recommendation or approval
was the result of an actual or threatened election contest of the type
contemplated by Regulation 14a-11 promulgated under the Securities Exchange Act
of 1934 or any successor provision (the "Exchange Act"). For purposes of this
Agreement, a "Change in Control" of NPDC shall be deemed to have occurred if (i)
a change in control of NPDC of a nature that would be required to be reported in
response to Item 5.01 of Current Report on Form 8-K pursuant to Section 13 or
15(d) of the Exchange Act, other than a change of control resulting in control
by Xxxxxx or a group including Xxxxxx occurs, (ii) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than Xxxxxx or a
group including Xxxxxx, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of NPDC
representing 20% or more of the combined voting power of NPDC's then outstanding
securities, or (iii) within any 12-month period beginning on or after the date
that is three months after the date hereof, the persons who were directors of
NPDC immediately before the beginning of such period (the "NPDC Incumbent
Directors") shall cease (for any reason other than death) to constitute at least
a majority of the Board of Directors of NPDC or the board of directors of any
successor to NPDC, provided that any director who was not a director of NPDC
immediately before the beginning of such period shall be deemed to be a NPDC
Incumbent Director if such director was elected to the Board of Directors of
NPDC by, or on the recommendation of or with the approval of, at least
two-thirds of the directors who then qualified as NPDC Incumbent Directors
either actually or by prior operation of this Section 8(d), unless such
election, recommendation or approval was the result of an actual or threatened
election contest of the type contemplated by Regulation 14a-11 promulgated under
the Exchange Act of or any successor provision.
(e) Notice of Termination. Any Early Termination pursuant to Section 8(b), 8(c),
or 8(d) shall be communicated by a Notice of Termination from the Company to
Xxxxxx. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances that provide a basis for the Early Termination.
(f) Date of Termination. If there is an Early Termination, the Term shall end on
the Date of Termination. For purposes of this Agreement, the "Date of
Termination" shall mean (i) if the Early Termination occurs as a result of
Xxxxxx'x death or a Change in Control of the Company, the date of his death or
the Change in Control, as the case may be, (ii) if the Early Termination occurs
pursuant to Section 8(b), 30 days after Notice of Termination is given (provided
that Xxxxxx shall not have returned to the performance of his duties hereunder
during such 30 day period), and (iii) if the Early Termination occurs pursuant
to Section 8(c), the date specified in the Notice of Termination, which shall
not be earlier than the date on which the Notice of Termination is given.
(g) No Further Compensation Upon Termination.(h) If there is an Early
Termination, the Company shall pay Xxxxxx his full compensation only through the
Date of Termination at the rate in effect at the time Notice of Termination is
given and reimburse him for any expenses incurred through the Date of
Termination.
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Section 9. Lock-Up.
(a) Lock-Up Period. Xxxxxx agrees that until the expiration of the Lock-Up
Period (as defined below), he will not, without the prior written consent of
Board of Directors of the Company, directly or indirectly, (i) offer, pledge,
hypothecate, sell, contract to sell, enter any agreement to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any Shares, or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of any Shares, whether any such transaction is to be
settled by delivery of the Shares or other securities, in cash or otherwise. For
purposes of this Agreement, the Lock-Up Period shall mean the Term; provided,
however, that in the event of an Early Termination pursuant to Section 8(c), the
Lock-Up Period shall end on the Third Anniversary. Upon Xxxxxx'x request, at the
end of the Lock-Up Period, the Company agrees to cause the legend relating to
the lock-up to be promptly removed from any certificates representing the
Shares.
(b) Registration Rights. Notwithstanding the provisions of Section 9(a), the
Company agrees to grant to Xxxxxx certain registration rights pursuant to the
registration rights agreement, dated as of the date hereof.
(c) Restrictive Legend. Each certificate for the Shares, and any shares of
capital stock received in respect thereof, whether by reason of a stock split or
share reclassification thereof, a stock dividend thereon or otherwise, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP
AGREEMENT BETWEEN THE HOLDER AND THE CORPORATION.
Section 10. Miscellaneous
(a) Successors; Binding Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
assigns and the Xxxxxx and his assigns, heirs, and personal representative.
(b) Availability of Equitable Remedies. Since a breach of the provisions of this
Agreement could not adequately be compensated by money damages, either party
shall be entitled, either during or after the Term, in addition to any other
right or remedy available to it, to an injunction restraining such breach or a
threatened breach and to specific performance of any such provision of this
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Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to the issuance of such an
injunction and to the ordering of specific performance.
(c) Modification. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by each party.
(d) Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be given by Federal Express, Express
Mail, or similar overnight delivery or courier service or delivered (in person
or by telecopy, telex, or similar telecommunications equipment) against receipt
to the party to whom it is to be given at the address of such party set forth
below (or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 10(d)). Any notice or other
communication shall be deemed given at the time of receipt thereof.
If to Xxxxxx: Xxxxxx Xxxxxx
0000 Xxxx Xxxxx Xxxxxxxxx
XX 000
Xxxxxx, XX 00000
Fax: (000) 000-0000
If to the Company: Five Star Products, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax: (914) _____________
Attn: President
(e) Waiver. Any waiver by any party of a breach of any term of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
term or of any breach of any other term of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions will 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. Any waiver must be in writing.
(f) No Third Party Beneficiaries. This Agreement does not create, and shall not
be construed as creating, any rights enforceable by any person not a party to
this Agreement, other than NPDC.
(i) Separability. If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
(g) Headings. The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
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(h) Counterparts; Governing Law. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument. It shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws. Any action, suit, or proceeding arising out of, based on, or
in connection with this Agreement or the transactions contemplated hereby may be
brought only in the United States District Court for the Southern District of
New York or any court of the State of New York located in the Borough of
Manhattan of the City of New York, and each party covenants and agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit,
or proceeding, any claim that it or he is not subject personally to the
jurisdiction of such court, that its or his property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
(i) Representations and Warranties of Xxxxxx. Xxxxxx represents and warrants to
the Company that (i) Xxxxxx is under no contractual or other restriction or
obligation which is inconsistent with the execution of this Agreement, the
performance of his duties hereunder, or the other rights of the Company
hereunder and (ii) Xxxxxx is under no physical or mental disability that would
hinder his performance of duties under this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
FIVE STAR PRODUCTS, INC.
By:
-----------------------------------------
Name:
Title:
Xxxxxx Xxxxxx
