1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement is made on the 1st day of February, 1999,
between xxxxxxxxxxxxxxxx.xxx corp. ("Employer"), whose principal place of
business at 0000 X. Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, and
XXXXXX X. XXXXX ("Employee").
WHEREAS, Employer is actively engaged in the business of a securities
broker dealer; and,
WHEREAS, Employer wishes to employ Employee and Employee wishes to be
employed pursuant to the terms of this Employment Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained in this Employment Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
Article 1
Employment of Employee
Employer agrees to employ Employee, and Employee accepts employment
with Employer, on and subject to the terms and conditions set forth in this
Employment Agreement.
Article 2
Position of Employee
Employer agrees to employ Employee to act as Employer's Chief Executive
Officer.
Article 3
Place of Employment
Section 3.1. PLACE OF EMPLOYMENT. Employee shall be based at Employer's
principal office at 0000 X. Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000
and shall not be required to travel away from that office on business more than
fourteen (14) days during a calendar year. Employer agrees that during the term
of this Employment Agreement it shall not assign Employee to work at any
location which is more than ten (10) miles from said principal office without
Employee's consent.
Section 3.2. MOVING EXPENSES. If Employer relocates its principal
office more than ten (10) miles from its current principal office, or requests
that Employee relocates to one of its offices which is more than ten (10) miles
from its current principal office, and Employee consents to relocate to that new
location, Employer shall promptly pay or reimburse Employee for all reasonable
moving expenses incurred by Employee in connection with the relocation plus an
amount to reimburse Employee for any federal and state income taxes that it has
to pay on amounts reimbursed. Employer also shall indemnify Employee against any
loss incurred in connection with the sale of Employee's principal residence. The
amount of any loss shall be
2
determined by taking the difference between the average of two appraisal prices
set by two independent appraisers agreed to by Employer and Employee and the
actual sales price of Employee's principal residence.
Article 4
Compensation of Employee
Section 4.1. BASE SALARY. For all services rendered by Employee under
this Employment Agreement, Employer agrees to pay Employee an annual base salary
of $200,000, which shall be payable to Employee in such installments, but not
less frequently than monthly, as are consistent with Employee's practice for its
other Employees. Employee's base salary shall be reviewed at least once a year
by Employer and shall be increased at a minimum by the percentage increase in
the Consumer Price Index for the previous year.
Section 4.2. INCENTIVE COMPENSATION. In addition to the base salary,
Employee shall be entitled to receive incentive compensation, as determined by
Employer in accordance with Employer's Incentive Compensation Plan.
Notwithstanding the foregoing, Employee agrees the Employer will not pay and the
Employee will not receive any bonuses until the earlier of (i) 24 months from
the date of this Agreement and (ii) such time as Employer earns $3,300,000 in
pre-tax earnings in any fiscal year. Thereafter, Employee acknowledges and
agrees that, for the fiscal years ended January 31, 2000, January 31, 2001, and
January 31, 2002, the total amount of bonuses payable to all of Employee,
Xxxxxxx Xxxxxxxxx, Xxxxx zum Xxxxx, Xxxxx Xxxxxxxxx and Xxxxxxxx Xxxxxxx shall
not exceed in the aggregate 5% of pre-tax earnings in each of such fiscal years.
Section 4.3. REIMBURSEMENT FOR BUSINESS EXPENSES. Employer shall
promptly pay or reimburse Employee for all reasonable business expenses incurred
by Employee in performing Employee's duties and obligations under this
Employment Agreement, but only if Employee properly accounts for expenses in
accordance with Employer's policies.
Article 5
Vacations and Other Paid Absences
Section 5.1. VACATION DAYS. Employee shall be entitled to forty-five
(45) paid vacation days each calendar year during the term of this Employment
Agreement. During the first calendar year of this Employment Agreement, Employee
shall be entitled to forty-five (45) paid vacation days.
Section 5.2. HOLIDAYS. Employee shall be entitled to the same paid
holidays as authorized by Employer for its other Employees.
Section 5.3. SICK DAYS AND PERSONAL ABSENCE DAYS. Employee shall be
entitled to the same number of paid sick days and personal absence days
authorized by Employer for its other Employees.
2
3
Article 6
Life Insurance
Employer may, in its sole discretion, maintain in effect during the
term of Employee's employment a life insurance policy on the life of Employee in
such amount as Employer shall in its sole discretion decide to maintain during
the term of this Employment Agreement. Any proceeds payable under the policy
shall be paid to the beneficiary or beneficiaries designated in writing from
time to time by Employee.
Article 7
Fringe Benefits
Section 7.1. EMPLOYER'S EMPLOYEE BENEFIT PLANS. Employee shall be
entitled to participate in and receive benefits from all of Employer's Employee
benefit plans that currently are maintained by Employer for its Employees.
Employee shall be entitled to participate in and receive benefits under any
retirement plan, profit-sharing plan, or other Employee benefit plan that
Employer establishes for the benefit of its Employees after the date of this
Employment Agreement. No amounts paid to Employee from an Employee benefit plan
shall count as compensation due Employee as base salary or incentive
compensation. Nothing in this Employment Agreement shall prohibit Employer from
modifying or terminating any of its Employee benefit plans in a manner that does
not discriminate between Employee and other Employees of Employer.
Section 7.2. MOTOR VEHICLE. Employer may, in its sole discretion,
provide Employee with the use of a motor vehicle to be selected in the
reasonable discretion of Employer considering Employee's position. If Employer
does provide Employee with the use of a motor vehicle, Employer shall procure,
maintain, and pay for appropriate insurance on the motor vehicle, including
liability insurance of at least $100,000.00 per person and $300,000.00 per
occurrence for personal injury and $50,000.00 for property damage.
Article 8
Disability
Section 8.1. COMPENSATION DURING PERIODS OF DISABILITY.
(a) Employee shall receive, or continue to receive, Employee's base
salary and incentive compensation while Employee is unable to work full or part
time unless Employee is actually receiving of disability insurance provided
pursuant to this Employment Agreement. While Employee is receiving the benefits
of disability insurance provided pursuant to this Employment Agreement, and for
so long as such benefits are received, Employer shall pay Employee an amount
sufficient to equal any difference between said disability insurance benefits
and Employee's base salary and incentive compensation, including any increases
in base salary and/or incentive compensation that would have occurred pursuant
to this Employment Agreement.
3
4
(b) While Employee is unable to work full time because of illness or
injury and through the full term of this Employment Agreement, including
extensions, Employer shall maintain for Employee's benefit all Employee benefit
plans in which Employee was participating at the time Employee was replaced. If
Employee is barred from participating in any Employee benefit plan because of
Employee's disability, Employer shall pay Employee an amount equal to what
Employer would have contributed on Employee's behalf to the Employee benefit
plan if Employee's participation had not been barred.
(c) If Employee gives notice that Employee is terminating employment
because Employee's health has become so impaired that continued performance of
Employee's duties under this Employment Agreement would be hazardous to
Employee's physical or mental health, in addition all other compensation and
benefits provided hereunder and any disability insurance benefits provided
pursuant to Section 8.3 below, Employer shall pay Employee an amount equal to
the sum of Employee's then current annual base salary plus the annualized amount
of incentive compensation paid to Employee most recently before the date
Employee's employment was terminated, multiplied by the number of full and
partial years remaining in the term of this Employment Agreement, including any
extensions.
(d) Employee is not required to seek other employment to mitigate any
amounts payable under this Employment Agreement. Nor will amounts due Employee
under this Employment Agreement be reduced by any amounts received by Employee
for other employment.
Section 8.3. DISABILITY INSURANCE. Employer may, in its sole
discretion, purchase and use its best efforts to maintain disability insurance
in force for the benefit of Employee throughout the term of this Employment
Agreement, including extensions. The policy shall provide that if Employer fails
to make a premium payment, Employee shall have the right in Employee's sole
discretion to advance such funds as may be required to maintain the policy in
force and shall thereafter be entitled to recover amounts paid from Employer.
Article 9
Termination of Employment
Section 9.1. TERM OF EMPLOYMENT. Employee's employment shall commence
on the execution of this Employment Agreement and shall continue for five (5)
years ("end-of-employment date"), unless extended or terminated sooner, as
provided by this article of the Employment Agreement. However, no compensation
or benefits described hereunder shall be due or payable unless and until the
settlement of Employer's initial public offering of stock. Should Employer's
initial public offering of stock fail to settle on or before September 30, 1999,
this Employment Agreement shall automatically terminate and become null and void
retroactive to its commencement and Employer shall not be obligated to pay
Employee any compensation or benefits stated herein or continue the same
thereafter.
Section 9.2. EXTENSION OF EMPLOYMENT. On the end-of-employment date and
every five (5) years thereafter, Employee's employment with Employer
automatically shall be extended for an additional five (5) years unless, at
least ninety (90) days prior to the end-of-employment date, or
4
5
successive five (5) year anniversary thereof, Employer or Employee delivers to
the other a written notice that Employee's employment with Employer is not to be
extended.
Section 9.3. TERMINATION AT EMPLOYEE'S DEATH. Employee's employment
with Employer shall terminate at Employee's death.
Section 9.4. TERMINATION BY EMPLOYEE. Employee may, but is not
obligated to, terminate this Employment Agreement at any time under the
following circumstances:
(a) Employee's health becomes so impaired that continued performance of
Employee's duties under this Employment Agreement would be hazardous to
Employee's physical or mental health.
(b) There is a change in control of Employer. There is a change in
control of Employer if someone other than a current owner of Employer becomes
the beneficial owner of 20 percent or more of the voting power of Employer.
(c) Employee is assigned duties that are significantly different than
those described in this Employment Agreement, or duties assigned Employee by
this Employment Agreement are eliminated or transferred to someone else.
(d) Employee is removed from any of the positions described in Section
2.1 of this Employment Agreement (other than by Employer for cause).
(e) Employee's fringe benefits or other compensation are materially
reduced.
(f) Employer requires Employee to travel more frequently than
contemplated by this Employment Agreement.
(g) Employer fails to have a successor assume this Employment
Agreement.
(h) Employer becomes insolvent or files a bankruptcy petition.
Section 9.5. TERMINATION BY EMPLOYER.
(a) TERMINATION FOR CAUSE. Employer may terminate Employee's employment
for cause.
(b) "CAUSE" DEFINED. Employer shall have cause to terminate Employee's
employment if Employee willfully fails to substantially perform any duties
required by this Employment Agreement (unless Employee's failure is due to a
physical or mental incapacity), Employee is consistently, flagrantly, and
grossly negligent in the performance of required duties, Employee engages in
conduct that demonstrably and substantially damages Employer, Employee is
convicted of a felonious act of moral turpitude that demonstrably and
substantially damages Employer, or Employee willfully discloses material
confidential information in violation of Article 10 of this Employment
Agreement. No act or failure to act by Employee may be
5
6
considered "willful" unless Employee acted or failed to act without any
reasonable belief that the act or omission was in Employer's best interests and
without good faith.
Section 9.6. NOTICE OF TERMINATION. Any termination of Employee's
employment by Employer or Employee must be communicated to the other party by a
written notice of termination. The notice must specify the provision of this
Employment Agreement authorizing the termination and must set forth in
reasonable detail the facts and circumstances providing the basis for
termination of Employee's employment.
Section 9.7. DATE TERMINATION IS EFFECTIVE. If Employee's employment
terminates because this Employment Agreement expires, then Employee's employment
will be considered to have terminated on that expiration date. If Employee's
employment terminates because of Employee's death, then Employee's employment
will be considered to have terminated on the date of Employee's death. If
Employee's employment is terminated by Employee, then Employee's employment will
be considered to have terminated on the date that notice of termination is
given. If Employee's employment is terminated by Employer for cause, then
Employee's employment will be considered to have terminated on the date
specified by the notice of termination. If, within thirty (30) days after a
notice of termination is given, the party receiving the notice notifies the
other party that there is a dispute concerning the termination, then Employee's
employment will not be considered to have terminated, and Employer shall
continue to compensate Employee pursuant to this Employment Agreement, until the
dispute is ended by a written agreement between the parties or a final judgment,
order, or decree of a court of competent jurisdiction. A judgment, order, or
decree of a court of competent jurisdiction will be considered final if the time
for appealing the decision has expired and no notice of appeal has been filed.
Section 9.8. COMPENSATION FOLLOWING TERMINATION.
(a) If Employee's employment terminates because of Employee's death,
Employer shall pay a lump sum death benefit to the person or persons designated
in a written notice filed with Employer by Employee or, if no person has been
designated, to Employee's estate. The amount of the lump sum death benefit will
equal the amount of Employee's then current annual base salary plus the
annualized amount of incentive compensation paid Employee most recently prior to
Employee's death, multiplied by the number of full and partial years multiplied
by the number of full and partial years remaining in the term of this Employment
Agreement, including extensions. This lump sum death benefit shall be in
addition to any life insurance payable pursuant to Article 6 and/or any other
amounts that Employee's beneficiaries and estate may be entitled to receive
under any Employee benefit plan maintained by Employer.
(b) If Employee's employment is terminated by Employer for cause,
Employer shall pay Employee/Employee's then current base salary through the date
employment is terminated, and Employer shall have no further obligations to
Employee under this Employment Agreement.
(c) If Employer terminates Employee's employment other than for cause,
Employer shall pay Employee Employee's then current base salary through the date
employment is terminated and any legal fees and expenses incurred by Employee to
enforce Employee's rights
6
7
under this Employment Agreement. In addition, Employer shall pay Employee as
liquidated damages an amount equal to the sum of Employee's then current annual
base salary plus the annualized amount of incentive compensation paid to
Employee most recently before the date Employee's employment was terminated,
multiplied by the number of full and partial years remaining in the term of this
Employment Agreement, including extensions.
(d) If Employee's employment is terminated by Employer or Employee in
accordance with the provisions of this Employment Agreement, in addition to all
other compensation or benefits provided hereunder, Employer shall pay Employee
severance pay in an amount equal to the sum of Employee's then current annual
base salary plus the annualized amount of incentive compensation paid to
Employee most recently before the date Employee's employment was terminated,
multiplied by a fraction, the numerator of which shall be the number of full and
partial years employed pursuant to this Employment Agreement and the denominator
of which shall be ten (10).
Article 10
Confidential Information
Section 10.1. DISCLOSURES WHILE EMPLOYED BY EMPLOYER. While employed by
Employer, Employee shall not disclose any material confidential information
about Employer to anyone, other than an Employee of Employer or someone to whom
disclosure is reasonably necessary to perform Employee's duties, without the
written consent of Employer. The Employer's duly appointed president shall be
the only person authorized by Employer to give such consent. "Confidential
information" does not include any information that is known generally by the
public, other than as a result of unauthorized disclosure by Employee, or
information that is not the type of information considered confidential by
persons engaged in a business that is the same or similar to that conducted by
Employer. Confidential information is material if its disclosure would be
materially damaging to Employer.
Section 10.2. DISCLOSURES AFTER EMPLOYMENT TERMINATES. For three (3)
years after Employee's employment with Employer terminates or, if longer, the
period of time remaining in the term of this Employment Agreement, Employee
shall not disclose any material confidential information (as described in
Section 10.1) except as required in connection with any judicial or
administrative proceeding or inquiry.
Article 11
Noncompetition Agreement
Section 11.1. AGREEMENT NOT TO COMPETE. For two (2) years after
Employee's employment with Employer terminates, Employee agrees not to directly
or indirectly own, manage, control, or operate; serve as an officer, director,
partner, or Employee of; have any direct or indirect financial interest in; or
assist in any way; any person or entity that competes with any business
conducted by Employer or any of Employer's affiliates or subsidiaries in any
geographic region in which Employer conducts business.
7
8
Section 11.2 COMPETITIVE BUSINESS. For purposes of this Article 11, a
competitive business shall be any person or entity which operates as a
securities broker dealer whose primarily business is to provide its clients with
the ability to buy, sell, or trade securities via the internet or world wide
web, or via some similar system, network, method, or service.
Section 11.3. OWNERSHIP OF PUBLIC CORPORATION NO VIOLATION. Employee
will not be considered to have violated this provision merely because Employee
owns no more than twenty percent (20%) of the stock of any publicly held
corporation.
Article 12
Notices
Any notice given under this Employment Agreement to either party shall
be made in writing. Notices shall be deemed given when delivered by hand or when
mailed by registered or certified mail, return receipt requested, postage
prepaid, and addressed to the party at the address set forth below.
Employee's address: 0000 X.X. 00xx Xxxxx
Xxxx Xxxxx, XX 00000
Employer's address: 0000 X. Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Each party may designate a different address for receiving notices by giving
written notice of the different address to the other party. The written notice
of the different address will be deemed given when it is received by the other
party.
Article 13
Binding Agreement
Section 13.1. EMPLOYER'S SUCCESSORS.
(a) The rights and obligations of Employer under this Employment
Agreement shall inure to the benefit of and shall be binding in all respects
upon the successors and assigns of Employer.
(b) Employer shall require any direct or indirect successor (by
purchase, merger, consolidation, or otherwise) of all or substantially all of
Employer's stock, business and/or assets to expressly agree to assume Employer's
obligations under this Employment Agreement and perform them in the same manner
and to the same extent as Employer would have been required to do if no
succession had occurred. The agreement must be in a form and substance
satisfactory to Employee.
(c) If Employer fails to obtain such an agreement before the effective
date of the succession, Employer's failure will be considered a breach of this
Employment Agreement, and Employee shall be entitled to the same amount of money
that Employee would have been
8
9
entitled to if Employee had terminated Employee's employment in accordance with
the terms of this Employment Agreement, calculated as though Employee's
employment had terminated on the effective date of the succession. However,
Employer's failure to obtain such agreement shall not affect said successor's
obligations pursuant to paragraph 13.1(a) above.
Section 13.2. EMPLOYEE'S SUCCESSORS. This Employment Agreement shall
inure to the benefit and be enforceable by Employee's personal representatives,
legatees, and heirs. If Employee dies while amounts are still owed, such amounts
shall be paid to Employee's legatees or, if no such person or persons have been
designated, to Employee's estate.
Article 14
Waivers
The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of any
subsequent breach.
Article 15
Entire Agreement
Section 15.1. NO OTHER AGREEMENTS. This instrument contains the entire
agreement of the parties. The parties have not made any agreements or
representations, oral or otherwise, express or implied, pertaining to the
subject matter of this Employment Agreement other than those specifically
included in this Employment Agreement.
Section 15.2. PRIOR AGREEMENTS. This Employment Agreement supersedes
any prior agreements pertaining to or connected with or arising in any manner
out of the employment of Employee by Employer. All such prior agreements are
terminated and are of no force or effect whatsoever.
Article 16
Amendment of Agreement
No change or modification of this Employment Agreement shall be valid
unless it is in writing and signed by the party against whom the change or
modification is sought to be enforced. No change or modification by Employer
shall be effective unless it is approved by Employer's Board of Directors and
signed by an officer specifically authorized to sign such documents.
Article 17
Severability of Provisions
If any provision of this Employment Agreement is invalidated or held
unenforceable, the invalidity or unenforceability of that provision or
provisions shall be deemed modified or severed only to the minimum extent
necessary to make said provision(s) valid and
9
10
enforceable while maintaining the intent of said provision(s). No such
modification shall affect the validity or enforceability of any other provision
of this Employment Agreement.
Article 18
Assignment of Agreement
Employer shall not assign this Employment Agreement without Employee's
prior written consent, but failure to obtain such consent shall not affect said
assignee's obligations pursuant to paragraph 13.1(a) above, which consent shall
not be unreasonably withheld.
Article 19
Governing Law, Venue & Attorneys Fees
This Employment Agreement shall be governed by, construed, and enforced
in all respects in accordance with the laws of the State of Florida. Venue for
any action arising in any manner out of the Employee's employment, this
Employment Agreement, or any of the terms contained herein shall be the Federal
and or State courts located in Palm Beach County, Florida, regardless of where
this Employment Agreement is to be performed. In the event either party engages
legal counsel to enforce any provision contained in this Employment Agreement,
the prevailing party shall be entitled to all reasonable attorneys fees,
investigative expenses, costs, and court costs, whether or not a suit is
actually filed, but including all levels of appeal.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
in duplicate on the date and year first above written.
EMPLOYEE:
----------------------------------------
Xxxxxx X. Xxxxx
EMPLOYER:
xxxxxxxxxxxxxxxx.xxx corp.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
10
11
ADDENDUM
This Addendum, entered into as of the 1st day of February, 1999 by and
between xxxxxxxxxxxxxxxx.xxx corp. ("Employer"), whose principal place of
business at 0000 X. Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000, and
XXXXXX X. XXXXX ("Employee").
Recitals
A. Employer is contemplating becoming a publicly held company. Employer
considers it essential to the best interests of its shareholders to xxxxxx the
continuous employment of key management personnel. In this connection, Employer
recognizes that, as is the case with many publicly held companies, the
possibility of a change in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of Employer
and its shareholders.
B. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of Employee to
his assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of Employer.
C. In order to induce Employee to remain in the employ of Employer and
in consideration of Employee's agreement set forth below, Employer agrees that
Employee shall receive the severance benefits set forth in this Agreement.
NOW THEREFORE, in consideration of Employee's continued employment, the
mutual covenants and agreements contained in this Addendum, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties, intending to be legally bound, agree as follows:
1. PURPOSE OF ADDENDUM. This Addendum shall supplement that certain
Employment Agreement entered between Employer and Employee dated the 1st day of
February, 1999 (the "Employment Agreement") and where inconsistent with said
Employment Agreement, this Addendum shall control. In the event Employee's
employment with Employer is terminated subsequent to a "change in control of
Employer" (as defined in Section 2 below) under the circumstances described
below, Employer agrees that, in addition to all compensation and benefits
payable to Employee pursuant to the Employment Agreement, Employee shall receive
the additional severance benefits set forth in this Addendum.
2. CHANGE IN CONTROL. No benefits shall be payable under this Addendum
unless there shall have been a change in control of Employer, as set forth
below. For purposes of this Addendum, a "change in control of Employer" shall
mean a change of control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
Employer is in fact required to comply with that regulation, provided that,
without limitation, such a change in control shall be deemed to have occurred
if:
12
(A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary
holding securities under an Employee benefit plan of Employer or an
Employer owned, directly or indirectly, by the shareholders of Employer
in substantially the same proportions as their ownership of stock of
Employer, is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
Employer representing 20% or more of the combined voting power of
Employer's then outstanding securities; or
(B) during any period of two consecutive years (not including
any period prior to the execution of this Addendum), individuals who at
the beginning of such period constitute Employer's board of directors
and any new director (other than a director designated by a person who
has entered into an agreement with Employer to effect a transaction
described in clauses (A), (D) or (E) of this Section) whose election by
the Board or nomination for election by Employer's shareholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority; or
(C) Employer enters into any agreement, the consummation of
which would result in the occurrence of a change in control of
Employer; or
(D) the shareholders of Employer approve a plan of complete
liquidation of Employer or an agreement for the sale or disposition by
Employer of all or substantially all Employer's assets; or
(E) the shareholders of Employer approve a merger or
consolidation of Employer with any other entity (other than a merger or
consolidation which would result in the voting securities of Employer
outstanding immediately prior to it continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity) greater than 80% of the combined voting power of
the voting securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation).
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 above constituting a change in control of Employer shall
have occurred, and the Employee is terminated by Employer for any reason,
including termination due to Employer's failure to extend the Employment
Agreement pursuant to its terms, or if Employee terminates the Employment
Agreement for Good Reason (as defined below), Employee shall be entitled to the
benefits provided in Subsection 4(ii) below upon the subsequent termination of
Employee's employment during the term of this Addendum, unless such termination
is because of Employee's death or for "Cause" (as defined in the Employment
Agreement).
2
13
(i) GOOD REASON. Employee shall be entitled to terminate employment for
Good Reason. For purposes of this Addendum, "Good Reason" shall mean, without
Employee's express written consent, the occurrence after a change in control of
Employer of any of the following circumstances unless, in the case of paragraph
(A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the
Date of Termination specified in the Notice of Termination, as defined in
Subsections 3(iii) and 3(ii), respectively, given in respect of them:
(A) the assignment to Employee of any duties inconsistent with
Employee's status and position as it exists immediately prior to the
change in control of Employer or a substantial adverse alteration in
the nature or status of Employee's responsibilities from those in
effect immediately prior to the change in control of Employer;
(B) a reduction by Employer in Employee's annual base salary
and/or incentive compensation in effect immediately prior to the change
in control of Employer or as the same may be increased from time to
time pursuant to the Employment Agreement except for across-the-board
salary reductions similarly affecting all key Employees of Employer and
all key Employees of any person or entity in control of Employer;
(C) Employee's relocation to a location not within ten (10)
miles of Employee's present office or job location, except for required
travel on Employer's business pursuant to the Employment Agreement;
(D) the failure by Employer, without Employee's consent, to
pay to Employee any portion of Employee's current compensation, or to
pay to Employee any portion of an installment of deferred compensation
under any deferred compensation program of Employer, within seven days
of the date such compensation is due;
(E) the failure by Employer to continue in effect any bonus to
which Employee were entitled, or any compensation or benefit plan set
forth in the Employment Agreement or in which Employee participated
immediately prior to the change in control of Employer which is
material to Employee's total compensation and/or benefits, including
but not limited to Employer's Stock Option Plans, 401(k) Pre-Tax
Retirement Savings Plan, and Flexible Benefit Plan, or any substitute
plans adopted prior to the change of control in Employer, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by
Employer to continue Employee's participation in it (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the
level of Employee's participation relative to other participants, as
existed at the time of the change in control;
(F) the failure by Employer to continue to provide Employee
with benefits substantially similar to those enjoyed by Employee under
any of Employer's life insurance, medical, health and accident, or
disability plans in which Employee were participating at the time of
the change in control of Employer, the failure to continue to
3
14
provide Employee with an automobile or allowance in lieu of it, if
Employee were provided with such an automobile or allowance in lieu of
it at the time of the change of control of Employer, the taking of any
action by Employer which would directly or indirectly materially reduce
any of such benefits or deprive Employee of any material fringe benefit
enjoyed by Employee at the time of the change in control of Employer,
or the failure by Employer to provide Employee with the number of paid
vacation days to which Employee are entitled on the basis of years of
service with Employer in accordance with Employer's normal vacation
policy in effect at the time of the change in control of Employer;
(G) the failure of Employer to obtain a satisfactory agreement
from any successor to assume and agree to perform the Employment
Agreement or this Addendum, as contemplated in Section 5 of this
Addendum; or
(H) any purported termination of Employee's employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (ii) below; for purposes of this Addendum,
no such purported termination shall be effective.
Employee's rights to terminate Employee's employment pursuant to this
Subsection shall not be affected by Employee's incapacity due to physical or
mental illness. Employee's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting Good Reason
under this Addendum. In the event Employee delivers Notice of Termination based
upon circumstances set forth in Paragraph (A), (E), (F), (G) or (H) above, which
are fully corrected prior to the Date of Termination set forth in Employee's
Notice of Termination, such Notice of Termination shall be deemed withdrawn and
of no further force or effect.
(ii) NOTICE OF TERMINATION. Any purported termination of Employee's
employment by Employer or by Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Article 12 of the
Employment Agreement. For purposes of this Addendum, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Addendum relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Employee's
employment under the provision so indicated.
(iii) DATE OF TERMINATION. "Date of Termination" shall be determined
pursuant to Section 9.7 of the Employment Agreement.
4. COMPENSATION UPON TERMINATION. Following a change in control of
Employer, as defined by Section 2, upon termination of Employee's employment
Employee shall be entitled to the following benefits:
(i) If Employee's employment shall be terminated by Employer for Cause
(as defined in the Employment Agreement) or by Employee other than for Good
Reason (as defined in this Addendum), or death, Employer shall pay Employee
pursuant to the terms of the Employment
4
15
Agreement, plus all other amounts and benefits to which Employee is entitled
under any compensation plan of Employer at the time such payments are due, and
Employer shall have no further obligations to Employee under this Addendum.
(ii) If Employee's employment by Employer is (a) terminated by Employer
other than for Cause (as defined in the Employment Agreement) or (b) terminated
by Employee for Good Reason, then Employee shall be entitled to the benefits
provided below:
(A) Employer shall pay Employee's full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts and benefits to which
Employee are entitled under any compensation plan of Employer, at the
time such payments are due, except as otherwise provided below.
(B) In lieu of any further salary payments to Employee for
periods subsequent to the Date of Termination, Employer shall pay as
severance pay to Employee a lump sum severance payment (together with
the payments provided in paragraphs (C) and (D), below, the "Severance
Payments") equal to 2.99 times the sum of Employee's annual base salary
in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination given in respect of them.
(C) Employer shall pay to Employee any deferred compensation,
including, but not limited to deferred salary, incentive and/or
bonuses, allocated or credited to Employee or Employee's account as of
the Date of Termination.
(D) At Employee's sole discretion, in lieu of shares of common
stock of Employer (the "Employer's Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to Employee under
Employer's Stock Option Plans (which Options shall be cancelled upon
the making of the payment referred to below) Employee shall receive an
amount in cash equal to the product of (i) the excess of the closing
price of Employer's Shares as reported by the exchange currently
trading said stock (or, if not so reported, on the basis of the average
of the lowest asked and highest bid prices on or nearest the Date of
Termination), over the per share exercise price of each Option held by
Employee (whether or not then fully exercisable) plus the amount of any
applicable cash appreciation rights, times (ii) the number of
Employer's Shares covered by each such Option.
(E) Employer shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by the Employment Agreement, this
Addendum, or in connection with any tax audit or proceeding to the
extent attributable to the application of Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") to any payment or benefit
provided under this Addendum)).
(F) The payments provided for in paragraphs (B), (C), and (D)
above, shall be made no later than the fifth day following the Date of
Termination, provided, however,
5
16
that if the amounts of such payments cannot be finally determined on or
before such day, Employer shall pay to Employee on such day an
estimate, as determined in good faith by Employer, of the minimum
amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code) as soon as the amount can be determined but in no event
later than the 30th day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by Employer to Employee payable on or before the 30th day after
demand by Employer (together with interest from the date of the
Employer's demand at the rate provided in Section 1274(b)(2)(B) of the
Code).
(iii) In the event that Employee is a "disqualified individual" within
the meaning of Section 280G of the Code, the parties expressly agree that the
payments described in this Section 4 and all other payments to Employee under
any other agreements or arrangements with any persons which constitute
"parachute payments" within the meaning of Section 280G of the Code are
collectively subject to an overall maximum limit. Such maximum limit shall be $1
less than the aggregate amount which would otherwise cause any such payments to
be considered a "parachute payment" within the meaning of Section 280G of the
Code, as determined by Employer. Accordingly, to the extent that such payments
would be considered a "parachute payment" with respect to Employee, then the
portions of such payments shall be reduced or eliminated in the following order
until the remaining change of control termination payments with respect to
Employee is within the maximum described in this subsection (iii):
(A) First, any cash payment to Employee;
(B) Second, any change of control termination payments not
described herein; and
(C) Third, any forgiveness of indebtedness of Employee to
Employer.
Employee expressly and irrevocably waives any and all rights to receive
any change of control termination payments, which exceed the maximum limit
described in this subsection (iii).
(iv) Employee shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by Employee as the result of employment by
another Employer, by retirement benefits, by offset against any amount claimed
to be owed by Employee to Employer, or otherwise except as specifically provided
in this Section 4.
(v) In addition to all other amounts payable to Employee under this
Section 4, Employee shall be entitled to receive all benefits payable to
Employee under Employer's 401(k) Pre-Tax Retirement Savings Plan and any other
plan or agreement relating to retirement benefits.
6
17
5. SUCCESSORS; BINDING AGREEMENT
(i) Employer will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Employer to expressly assume and agree to perform the
Employment Agreement and this Addendum in the same manner and to the same extent
that Employer would be required to perform it if no such succession had taken
place. Failure of Employer to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of the Employment
Agreement and this Addendum and shall entitle Employee to compensation from
Employer in the same amount and on the same terms as Employee would be entitled
to under this Addendum if Employee terminate Employee's employment for Good
Reason following a change in control of Employer, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. However, Employer's failure
to obtain such agreement shall not affect said successor's obligations pursuant
to this Addendum. As used in this Addendum, "Employer" shall mean Employer as
defined above and any successor to its business and/or assets as which assumes
and agrees to perform this Addendum by operation of law, or otherwise.
(ii) This Addendum shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators, heirs,
distributees, and legatees. If Employee should die while any amount would still
be payable to Employee if Employee had continued to live, all such amounts,
unless otherwise provided in this Addendum, shall be paid in accordance with the
terms of this Addendum to Employee's legatee or other designee or, if there is
no such designee, to Employee's estate.
6. MISCELLANEOUS. No provision of this Addendum may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by Employee and such officer as may be specifically
designated by the Board. No waiver by either party to the Employment Agreement
or this Addendum at any time of any breach by the other party of, or compliance
with, any condition or provision of the Employment Agreement or this Addendum to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. All references to sections of the Exchange Act or the Code shall be deemed
also to refer to any successor provisions to such sections. Any payments
provided for shall be paid net of any applicable withholding or deduction
required under federal, state or local law. The obligations of Employer under
Section 4 shall survive the expiration of the term the Employment Agreement and
this Addendum.
7. VALIDITY. The invalidity or unenforceability of any provision of the
Employment Agreement or of this Addendum shall not affect the validity or
enforceability of any other provision of this Addendum, which shall remain in
full force and effect.
8. COUNTERPARTS. This Addendum may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
9. ENTIRE ADDENDUM. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Addendum have been made by either party which are not expressly set forth in the
Employment Agreement or this Addendum.
7
18
IN WITNESS WHEREOF, the parties have executed this Addendum on the date
and year first above written.
xxxxxxxxxxxxxxxx.xxx corp.
By:
----------------------------- ---------------------------------
Xxxxxx X. Xxxxx Name:
-------------------------------
Title:
------------------------------
8
