Exhibit 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated September 3, 1996 by and
between First Priority Group, Inc., a New York corporation with an address at
000 Xxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx (the "Company"), and XXXXX X. XXXXXXX, an
individual residing at 0000 Xxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000
("Employee").
W I T N E S S E T H
WHEREAS, the Company desires that Employee be employed by it and render
services to it, and Employee is willing to be so employed and to render such
services to the Company, all on the terms and subject to the conditions
contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Employment
Subject to and upon the terms and conditions contained in this Agreement,
the Company hereby employs Employee, for the period set forth in Paragraph 2
(subject to the terms and conditions of this Agreement), to render the services
to the Company, its affiliates and/or subsidiaries described in Paragraph 3.
2. Term
Employee's term of employment under this Agreement shall commence on
September 1, 1996 (the "Commencement Date") and shall continue for a period of
twenty-eight (28) months thereafter, terminating on December 31, 1998 (the
"Expiration Date"), unless earlier terminated under the terms and conditions
herein (the "Employment Term").
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3. Duties
(a) Employee's responsibilities shall be to develop and manage the
affinity group services division of the Company, FPG Affinity Services Division
(the "Division"), with full responsibility for the financial performance of the
Division, and to perform such other duties and services involving sales,
marketing and program development as shall from time to time be designated by
the Board of Directors or the Co-Chief Executive Officers ("CCEO") of the
Company, or such other executives or employees of the Company as may be
designated by the Board of Directors or the CCEO, as the case may be. Employee
shall be based in Nassau or Suffolk counties during the Employment Term and
shall have the title of President, FPG Affinity Services Division.
(b) Employee agrees to abide by all By-Laws and policies of the
Company promulgated from time to time by the Company.
4. Exclusive-Services and Best Efforts
Employee shall devote his entire working time, attention, best efforts and
ability exclusively to the service of the Company, its affiliates and
subsidiaries during the term of this Agreement.
5. Compensation
(a) Base Salary. Commencing on January 1, 1997, the Employee shall
receive an annual salary, payable pursuant to the Company's normal payroll
procedures in place from time to time, during the Employment Term, in the amount
of One Hundred Thousand Dollars ($100,000), subject to all required federal,
state and local payroll deductions.
(b) Incentive Compensation. The Employee shall receive Incentive
Compensation equal to twenty-five percent (25%) of the pre-tax net income of the
Division payable monthly, until the Employee's Base Salary and Incentive
Compensation equals Twenty Thousand and Eight Hundred Thirty-three Dollars and
33/100 Cents ($20,833.33) per month. Once the Employee's Base Salary and
Incentive Compensation exceeds Twenty Thousand and Eight Hundred Thirty-three
Dollars and 33/100 Cents ($20,833.33) per month, any excess Incentive
Compensation shall be paid at the rate of ten percent (10%) of the pre-tax net
income of the Division.
(c) Stock Options. The Employee shall be granted an Incentive Stock
Option (the "Stock Option") under the Company's stock option plan providing the
Employee the right to purchase 500,000 shares of the Company's common stock at
the fair market price of the Company's common stock on the Commencement Date.
The Company will provide the Employee with a stock option contract for his
signature which will set out the terms of the option (the "Stock Option
Contract"). Such Stock Option shall be exercisable as follows:
(i) Definitions for use exclusively in this Paragraph 5:
(A) "Division Profit". The pre-tax net profit of the
Division at the end of each fiscal year ended during the Employment Term.
(B) "Base Profit". The highest Division Profit in the
preceding completed fiscal years attained by the Division during the Employment
Term. The Base Profit for the first fiscal year ended during Employment Term
shall be Zero Dollars ($0).
(C) "Option Profit". The difference resulting in subtracting
the Base Profit from the Division Profit from the most recently completed fiscal
year.
(D) "Division Profit Level 1". One Million and Five Hundred
Thousand Dollars ($1,500,000)
(E) "Division Profit Level 2".Three Million Dollars
($3,000,000).
(ii) The Employee shall be permitted to exercise Stock Options,
for the remaining term of the Stock Option Contract, with the right to purchase
the Company's common stock in the amounts as
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calculated using the following formula:
(A) The Employee shall be able to exercise the Stock Options
equal to 1,000 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit be less than the
Division Profit Level 1.
(B) The Employee shall be able to exercise the Stock Options
equal to 1,250 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Xxxxx 0, but not equal or exceed the Division Profit Level 2.
(C) The Employee shall be able to exercise the Stock Options
equal to 1,500 shares for every $10,000 of Option Profit, subject to the terms
of the Stock Option Contract, should the Division Profit equal or exceed
Division Profit Level 2.
(iii) Notwithstanding the above, the Employee shall be able to
exercise his right to purchase up to 25,000 shares of the Company's common stock
on the one year anniversary of the Commencement Date, as long as the Employee is
employed by the Company under this Agreement on such anniversary date (the
Initial Option"). Moreover, as long as the Employee is employed by the Company
under this Agreement on December 31, 1997, the Employee may elect, on that date,
to exchange the Initial Option for a sum of Twenty-five Thousand Dollars
($25,000). Additionally, upon the expiration date of this Agreement, and his
continued employment through this date, the Company guarantees that pursuant to
this paragraph the Employee shall be able to exercise the right to purchase no
less than 25,000 shares of the Company's common stock, in addition to the
Initial Option.
6. Business Expenses
Employee shall be reimbursed for only those business expenses incurred by
him (a) which are reasonable and necessary for Employee to perform his duties
under this Agreement in accordance with policies established from time to time
by the Company, and (b) for which Employee has submitted vouchers and/or
receipts. The Employee shall be issued a Corporate American Express Card that he
shall use solely for business expenses which are reasonable and necessary for
the Employee to perform his duties under this Agreement in accordance with
policies established from time to time by the Company
7. Employee Benefits
During the Employment Term, Employee shall participate, to the extent he is
eligible under the terms and conditions thereof, in any health, life or
disability insurance or other employee benefit plans maintained by Employer (but
nothing herein shall obligate the Company to establish or maintain any such
benefit plan). Employee will not be covered under the Company's health insurance
until the Employee has been employed by the Company for more than ninety (90)
days.
The Employee shall be reimbursed of to $500 per month for a car allowance
upon the Employee submitting supporting documentation.
The Employee shall be reimbursed for his moving expenses from Florida in
the amount not to exceed $5,000. The Employee must submit supporting
documentation with his request for reimbursement.
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8. Vacation and Sick Leave
Employee shall be entitled to three (3) weeks of vacation per annum during
the Employment Term, to be taken at such times as may be mutually agreed upon by
the Company and Employee. The Employee shall be entitled to one (1) week of sick
leave per annum during the Employment Term.
9. Death and Disability
(a) The Employment Term shall terminate on the date of Employee's
death, in which event Employee's salary payable pursuant to Paragraph 5 through
the date of Employee's death shall be paid to his estate. Employee's estate will
not be entitled to any other compensation upon termination of this Agreement
pursuant to this Paragraph 9(a).
(b) If during the Employment Term, Employee, because of physical or
mental illness or incapacity, shall become substantially unable to perform the
duties and services required of him under this Agreement for a period of
forty-five (45) consecutive days or ninety (90) days in the aggregate, the
Company may, upon at least ten (10) days' prior written notice given at any time
after the expiration of such 45 or 90-day period, as the case may be, to
Employee of its intention to do so, terminate this Agreement as of such date as
may be set forth in the notice. In case of such termination, Employee shall be
entitled to receive his salary payable pursuant to Paragraph 5 through the date
of termination. Employee will not be entitled to any other compensation upon
termination of this Agreement pursuant to this Paragraph 9(b).
10. Termination
(a) The Company may terminate the employment of Employee For Cause (as
hereinafter defined). Upon such termination, the Company shall be released from
any and all further obligations under this Agreement, except that the Company
shall be obligated to pay Employee the unpaid prorated salary pursuant to
Paragraph 5 earned or accrued up through the day on which Employee is
terminated.
(b) As used herein, the term "For Cause" shall mean:
(i) any breach of this Agreement by Employee that, in the case of
a breach that may be cured or remedied, is not cured or remedied to the
reasonable satisfaction of the Company within 30 days after notice is given by
the Company to Employee, setting forth in reasonable detail the nature of such
breach;
(ii) Employee's failure to perform his duties and services
hereunder to the satisfaction of the Board of Directors or CCEO of the Company
that, in the case of any such failure that may be cured or remedied, is not
cured or remedied to the reasonable satisfaction of the Company within 30 days
after notice is given by the Company to Employee, setting forth in reasonable
detail the nature of such failure;
(iii) any act, or failure to act, by Employee in bad faith and to
the detriment of the Company; or
(iv) commission by Employee of an act involving moral turpitude,
dishonesty, unethical business conduct, or any other conduct which significantly
impairs the reputation of the Company, its subsidiaries or affiliates.
(v) the conviction of the Employee of a felony, including the
plea of nolo contendere
(c) Following a Change in Control of the Company, should the Employee
be terminated under this Agreement, or should the Employee terminate this
Agreement due to the Employee's refusal to move his office to a location outside
of a fifty mile radius of the Employee's office location at the time that the
Change in Control occurred, then the Employee shall receive a severance payment
of One Hundred Thousand Dollars ($100,000), or the Total Compensation that would
have been payable to the Employee for on the remaining term of this Agreement,
which ever is more. Change in Control shall be defined as one person or entity
acquiring a majority of the voting common stock of the Company, or another
corporation merging into the Company, or the Company merging into another
corporation.
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Should this Agreement be terminated pursuant to Paragraph 10(c) and
such termination date does not coincide with the end of the Company's ownership
fiscal year, then for operation of Paragraph 5(c) the Division Profit for the
fiscal year in which termination shall have occurred shall be calculated using
the following formula:
The Division Profit shall be equal to the quotient found by dividing
the total year-to-date pre-tax net profit of the Division through the most
current fully completed month, just prior to the date of termination, by the
number of fully completed months in the current fiscal year, just prior to the
date of termination, multiplied by twelve (12).
The Employee shall then be eligible for the exercise of additional
stock options as set forth in Paragraph 5(c)(ii) using the Division Profit as
calculated above.
(d) The Company may terminate this Agreement, upon thirty (30) days
written notice should the Division not attain, for three (3) consecutive months,
at least fifty percent (50%) of the pre-tax net income projections as set forth
in the "Affinity Services Division Forecast & Projections Summary" attached to
this Agreement as Exhibit 1 (the "Forecast") and has not attained at least fifty
percent (50%) of the pre-tax net income projections as set forth in the Forecast
for the aggregate period commencing in September, 1996 through the date of such
termination notice. The Company and the Employee acknowledge that the Employee
may not be terminated, pursuant to this Subparagraph 10(d), prior to the
expiration of the sixteen (16) month period following the Commencement Date.
11. Disclosure of Information and Restrictive Covenant
(a) Employee acknowledges that, by his employment, he has been and
will be in a confidential relationship with the Company and will have access to
confidential information and trade secrets of the Company, its subsidiaries and
affiliates, including, but not limited to, confidential information or trade
secrets belonging or relating to the Company, its subsidiaries, affiliates,
customers and/or clients or proprietary processes or procedures of the Company,
its subsidiaries, affiliates, customers and/or clients. Proprietary processes
and procedures shall include, but shall not be limited to, all information which
is known only to employees of the Company, its respective subsidiaries and
affiliates or others in a confidential relationship with the Company or its
respective subsidiaries and affiliates which relates to business matters.
Confidential information and trade secrets include, but are not limited to,
customer and client lists, price lists, marketing and sales strategies and
procedures, operational and equipment techniques, business plans and systems,
quality control procedures and systems, special projects and technological
research, including projects, research and reports for any entity or client or
any project, research, report or the like concerning sales or manufacturing or
new technology, employee compensation plans and any other information relating
thereto, and any other records, files, drawings, inventions, discoveries,
applications or processes which are not in the public domain (all the foregoing
shall be referred to herein as the "Confidential Information"). Employee agrees
that in consideration of the execution of this Agreement by the Company, he will
not use, or disclose to any third party, any of the Confidential Information,
other than as required to perform his services hereunder or as directed or
authorized by the Company's Board of Directors or President.
(b)
(i) Employee will not, at any time prior to the Expiration Date,
or if the Employee's employment shall terminate prior to the Expiration Date,
then for a period of one (1) year after the Employee ceases to be employed by
the Company, engage in or participate in any business activity, including, but
not limited to, acting as a director, officer, employee, agent, independent
contractor, partner, consultant, licensor or licensee, franchiser or franchisee,
proprietor, syndicate member, or shareholder that operates a program similar to
the program of the Division, conducted by the Division during the term of this
Agreement.
(ii) Any time during his employment by the Company or after the
Employee ceases to be employed by the Company, divulge to any persons, firms or
corporations, other than the Company (hereinafter referred to collectively as
"third parties"), or use or allow or cause or authorize any third parties
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to use, any such Confidential Information; and
(iii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited, for or on
behalf of the Employee or third parties, any business from persons, firms,
corporations or other entities who were at any time within one (1) year prior to
the cessation of his employment hereunder, customers of the Company; and
(iv) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
accept or cause or authorize directly or indirectly to be accepted, for or on
behalf of the Employee or third parties, any business from any such customers of
this Company; and
(v) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
solicit or cause or authorize directly or indirectly to be solicited for
employment, for or on behalf of the Employee or third parties, any persons who
were at any time within one year prior to the cessation of his employment
hereunder, employees of the Company; and
(vi) At any time during his employment by the Company and for a
period of one year after the Employee ceases to be employed by the Company,
employ or cause or authorize directly or indirectly to be employed, for or on
behalf of the Employee or third parties, any such employees of the Company; and
(vii) At any time during his employment by the Company and for a
period of one (1) year after the Employee ceases to be employed by the Company,
compete with the Company in any fashion or work for, advise, be a consultant to
or an officer, director, agent or employee of or otherwise associate with any
person, firm, corporation or other entity which is engaged in or plans to engage
in a business or activity which competes with any business or activity engaged
in by the Company, or which is under development or in a planning stage by the
Company.
(viii) Notwithstanding the above, should this Agreement expire on
the Expiration Date and the Employee's employment shall have terminated on that
Expiration Date, or should the Employee be terminated by the Company for reasons
other than For Cause, then the restrictions upon the Employee's activities as
set forth in Subparagraphs 11(b)(i), 11(b)(iii), 11(b)(iv) and 11(b)(vii) shall
not be operative for the one (1) year period following the Employee's cessation
of employment by the Company, so long as the Employee and/or any organization
with which he becomes associated does not engage in any business or activity
which competes or interferes with any business or activity engaged in by the
Company, or which is under development or is in a planning stage by the Company.
(c) Employee will not induce or persuade other employees of the
Company to join him in any activity prohibited by Paragraph 11 or 12.
(d) This Paragraph 11 and Paragraph 12, 13 and 14 shall survive the
expiration or termination of the Employment Term for any reason.
(e) It is expressly agreed by Employee that the nature and scope of
each of the provisions set forth in Paragraphs 11 and 12 are reasonable and
necessary. If, for any reason, any aspect of these provisions as they apply to
Employee is determined by a court of competent jurisdiction to be unreasonable
or unenforceable, the provisions shall only be modified to the minimum extent
required to make the provisions reasonable and/or enforceable, as the case may
be. Employee acknowledges and agrees that his services are of a unique character
and expressly grants to the Company or any subsidiary, successor or assignee of
the Company, the right to enforce the provisions above through the use of all
remedies available at law or in equity, including, but not limited to,
injunctive relief.
12. Company Property
(a) Any patents, inventions, discoveries, applications, processes or
designs, devised, planned, applied, created, discovered or invented by Employee
in the course of Employee's employment under this Agreement and which pertain to
any aspect of the Company's or its respective subsidiaries' or affiliates'
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businesses shall be the sole and absolute property of the Company, and Employee
shall make prompt report thereof to the Company and promptly execute any and all
documents reasonably requested to assure the Company the full and complete
ownership thereof.
(b) All records, files, lists, including computer generated lists,
drawings, documents, equipment and similar items relating to the Company's
business which Employee shall prepare or receive from the Company shall remain
the Company's sole and exclusive property. Upon termination of the Employment
Term, or, if earlier, upon demand by the Company, Employee shall promptly return
to the Company all property of the Company in his possession. Employee further
represents that he will not copy or cause to be copied, print out or cause to be
printed out any software, documents or other materials originating with or
belonging to the Company. Employee covenants that, upon termination of his
employment with the Company, he will not retain in his possession any such
software, documents or other materials.
13. Remedy
It is mutually understood and agreed that Employee's services are special,
unique, unusual, extraordinary and of an intellectual character giving them a
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law. Accordingly, in the event of any breach of this
Agreement by Employee, including, but not limited to, the breach of the
nondisclosure, non- solicitation and non-compete clauses under Paragraphs 11 and
12 hereof, the Company shall be entitled to equitable relief by way of
injunction or otherwise in addition to damages the Company may be entitled to
recover. Nothing herein shall be deemed to restrict any remedy available to
Employee for breach of the Agreement by the Company.
14. Representations and Warranties of Employee and the Company
(a) In order to induce the Company to enter into this Agreement,
Employee hereby represents and warrants to the Company as follows: (i) Employee
has the legal capacity and unrestricted right to execute and deliver this
Agreement once to perform all of his obligations hereunder: (ii) the execution
and delivery of this Agreement by Employee and the performance of his
obligations hereunder will not violate or be in conflict with any fiduciary or
other duty, instrument, agreement, document, arrangement or other understanding
to which Employee is a party or by which he is or may be bound or subject; and
(iii) Employee is not a party to any instrument, agreement, document,
arrangement or other understanding with any person (other than the Company)
requiring or restricting the use or disclosure of any confidential information
or the provision of any employment, consulting or other services.
(b) The Company hereby represents and warrants to Employee, as
follows: (i) the execution, delivery, and performance of this Agreement has been
duly authorized by all necessary corporate action of the Company; and (ii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except that such enforcement may be
subject to any bankruptcy, insolvency, reorganization, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting creditors'
rights generally.
15. Notices
All notices given hereunder shall be in writing and shall be deemed
effectively given when mailed, if sent by registered or certified mail, return
receipt requested, addressed to Employee at his address set forth on the first
page of this Agreement, and to the Company at its address set forth on the first
page of this Agreement, Attention: Xxxxx Xxxxxx, Co-Chairman of the Board, with
a copy to Xxxxx & Meritz, P.C., Xxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxx Xxxx 00000,
Attention: Xxxxxxxx X. Xxxxx, or at such address as such party shall have
designated by a notice given in accordance with this Paragraph 15, or when
actually received by the party for whom intended, if sent by any other means.
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16. Entire Agreement
This Agreement constitutes the entire understanding of the parties with
respect to its subject matter and no change, alteration or modification hereof
may be made except in writing signed by the parties hereto. Any prior or other
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
17. Severability
If any provision of this Agreement shall be unenforceable under any
applicable law, then notwithstanding such unenforceability, the remainder of
this Agreement shall continue in full force and effect.
18. Waivers, Modifications, Etc.
No amendment, modification or waiver of any provision of this Agreement
shall be effective unless the same shall be in writing and signed by each of the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
19. Assignment
Neither this Agreement. nor any of Employee's rights, powers, duties or
obligations hereunder, may be assigned by Employee. This Agreement shall be
binding upon and inure to the benefit of Employee and his heirs and legal
representatives and the Company and its successors and assigns. Successors of
the Company shall include, without limitation, any corporation or corporations
acquiring, directly or indirectly, all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase, lease or otherwise, and
such successor shall thereafter be deemed "the Company" for the purpose hereof.
20. Applicable Law
This Agreement shall be deemed to have been made, drafted, negotiated and
the transactions contemplated hereby consummated and fully performed in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law rules
thereof. Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and whenever there is any conflict
between any provision of this Agreement and any statute, law, ordinance, order
or regulation, contrary to which the parties hereto have no legal right to
contract, the latter shall prevail, but in such event any provision of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements.
21. Jurisdiction and Venue
It is hereby irrevocably agreed that all actions, suits or proceedings
between the Company and Employee arising out of, in connection with or relating
to this Agreement shall be exclusively heard and determined in, and the parties
do hereby irrevocably submit to the exclusive jurisdiction of, the Supreme Court
of the State of New York for Nassau or Suffolk County or the United States
District Court for the Eastern District of New York. The parties also agree that
a final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The parties hereby unconditionally waive any objection
which either of them may now or hereafter have to the venue of any such action,
suit or proceeding brought in any of the aforesaid courts, and waive any claim
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
22. Full Understanding
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Employee represents and agrees that he fully understands his right to
discuss all aspects of this Agreement with his private attorney, that to the
extent, if any, that he desired, he availed himself of this right, that he has
carefully read and fully understands all of the provisions of this Agreement,
that he is competent to execute this Agreement. that his agreement to execute
this Agreement has not been obtained by any duress and that he freely and
voluntarily enters into it, and that he has read this document in its entirety
and fully understands the meaning, intent and consequences of this document
which is that it constitutes an agreement of employment.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST PRIORITY GROUP, INC.
By: /s/ Xxxxx Xxxxxx Dated:
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Title: Co-Chairman of the Board
Xxxxx X. Xxxxxxx
By: /s/ Xxxxx X. Xxxxxxx Dated:
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