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EXHIBIT 10.5
ENTEX INFORMATION SERVICES, INC.
RETENTION AGREEMENT
AGREEMENT, dated as of the 2nd day of October, 1998, by and between ENTEX
Information Services, Inc. ("ENTEX"), a Delaware corporation and Xxxx Xxxxx (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Executive is a key employee who has made and, if continued to be
employed by ENTEX, will continue to make valuable contributions to the
productivity and profitability of ENTEX; and
WHEREAS, ENTEX considers that providing termination benefits will operate as an
incentive for the Executive to remain employed by ENTEX;
NOW, THEREFORE, to induce the Executive to remain employed by ENTEX, and for
other good and valuable consideration, ENTEX and the Executive agree as follows:
1. CIRCUMSTANCES TRIGGERING RECEIPT OF TERMINATION BENEFITS
1.1 Except as set forth in Sections 1.2 and 1.3 below, if Executive's employment
is terminated for any reason, or if there is a "Change of Control Termination"
of the Executive's employment, ENTEX shall provide the Executive with the
benefits set forth in Section 2.
1.2 Termination benefits will not be paid upon:
(a) Termination by reason of the Executive's "Voluntary
Resignation"
(b) Termination of the Executive for "Cause"
(c) Termination upon the Executive's normal retirement at age sixty-five
(65).
1.3. For the purpose of this Agreement, the placement of the Executive on
permanent or long-term disability status as defined by ENTEX's long-term
disability policy covering the Executive or the death of the Executive shall not
be deemed a termination and shall not qualify the Executive for the termination
benefits set forth in this Agreement.
2. TERMINATION BENEFITS
2.1 The amount of termination payment shall be the sum of (i) one year of the
Executive's annual base salary in effect as of the Termination Date, and (ii)
one year of the annual target bonus under the incentive bonus plan in which the
Executive was participating as of the Termination Date, assuming 100%
achievement of all bonus objectives (the "Termination Payment").
Should Change of Control Termination be due to the circumstances set forth
in Section 10.3(ii), the Termination Payment shall be calculated using the base
salary and annual target bonus in effect immediately preceding the Change of
Control Termination.
2.2 The Termination Payment shall be paid at regular intervals on the payroll
dates of ENTEX or any successor to ENTEX. Payments shall be subject to reduction
to the extent required to satisfy withholding tax obligations imposed by law or
authorized by the Executive.
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2.3 The Termination Payment shall be paid beginning with the month following the
month in which the Termination Date occurs. The Executive shall also receive the
full base salary and target bonus for the month in which the Termination Date
occurs.
2.4 Any accrued vacation due but not yet taken at the Termination Date shall be
paid to the Executive on the next payroll date following the Termination Date.
Executive will not continue to accrue vacation after the Termination Date.
2.5 The Executive's participation (including dependent coverage) in ENTEX's
group health, dental and vision plans in effect immediately prior to the
Termination Date shall continue during the Severance Period. The levels of
coverage and the Executive's contributions for such coverage will be those in
effect immediately prior to the Termination Date, subject to such changes to
coverage or employee contributions as made applicable to substantially all ENTEX
employees. If the Executive has not become eligible for health and welfare
benefits under any other plan at the expiration of the Severance Period, s/he
will become eligible for coverage under COBRA, subject to COBRA provisions,
including payment of monthly premiums.
2.6 For purposes of determining the rights of the Executive with respect to
vesting and exercise of any ENTEX stock options which have been granted prior to
the Termination Date, the Executive will be treated as continuing his/her
employment status with ENTEX until 6 months following the Termination Date.
2.7 Executive will be entitled to executive level outplacement services provided
by a mutually acceptable outplacement service provider at a value not to exceed
$30,000.
3. NO ENTITLEMENT OF EMPLOYMENT AND ACKNOWLEDGMENT OF "AT WILL" STATUS
3.1 This Agreement shall not be construed as and does not constitute a promise
or guaranty of continued employment, and Executive acknowledges that his/her
employment with ENTEX is "at will".
4. NON-COMPETE/CONFIDENTIALITY
4.1 Executive hereby covenants and agrees that during the Severance Period s/he
shall not, directly or indirectly, own, operate, manage, join, control,
participate in the ownership, management, operation or control of, or be paid or
employed by, or acquire any securities of, or otherwise become associated with
or provide assistance to, as an employee, consultant, director, officer,
shareholder, partner, agent, associate, principal, representative or in any
other capacity, any business entity or activity which is directly or indirectly
a "Competitive Business"; provided, however, that the foregoing shall not
prevent Executive from (a) performing services for a Competitive Business if
such Competitive Business is also engaged in other lines of business and if
Executive's services are restricted to such other lines of business; or (b)
acquiring the securities of or an interest in any Competitive Business, provided
such ownership of securities or interests represents at the time of such
acquisition, but including any previously held ownership interests, less than
two percent (2%) of any class or type of securities of, or interest in, such
Competitive Business.
4.2 Executive agrees that s/he will forever keep secret, confidential and
inviolate, will not disclose during his/her employment by ENTEX and will not
disclose or use at any time after termination of employment with ENTEX, any
proprietary or confidential information or business secret of ENTEX including,
without limitation, those relating to: a) the business, conduct, or operations
of ENTEX, or of any of its suppliers, customers, consultants, or licensees; b)
any
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methods, ways of doing business or know-how used in the sale, use or marketing
of ENTEX's product or services; c) the existence or betterment of, or possible
new uses or applications for, any such products or services; or d) any of
ENTEX's customer lists, pricing and purchasing information or policies. Upon
leaving the employ of ENTEX for any reason, the Executive shall promptly return
to ENTEX any and all notes, plans, paper and electronic files, customer lists or
other records, RFP's, account profiles, price sheets, reports, proposals,
technical information, and reproductions thereof, which relate in any way to
ENTEX's plans, operations, business assets, employee files or records, or any of
the foregoing items covered by this paragraph.
4.3 Executive agrees and acknowledges:
(a) that so long as s/he is an employee of ENTEX, s/he will devote his/her
best efforts and all his/her business time, efforts, and attention to furthering
the business interests of ENTEX, and that s/he will not directly or indirectly
engage in any Competitive Business;
(b) that the relationship between ENTEX and its customers and suppliers
are significant and valuable assets of ENTEX;
(c) that the relationships between ENTEX and its employees are significant
and valuable assets of ENTEX deserving protection from solicitation to assist
ENTEX in its interest in maintaining a stable work force, and because of this
interest, Executive agrees that during the term of his/her employment by ENTEX,
and for a period of one (1) year thereafter, s/he will not directly or
indirectly recruit, solicit, divert or employ any person who is an employee of
ENTEX, or any former employee of ENTEX within six (6) months of their leaving
ENTEX;
(d) that for a period of one (1) year following the termination of
Executive's employment with ENTEX for any reason, Executive will not directly or
indirectly solicit, service, have contact with, or divert any entity which is,
as of the Termination Date, or the immediate six month period prior to such
date, a customer of ENTEX with whom Executive had dealings, directly or
indirectly, as an employee of ENTEX.
4.4 Executive acknowledges that a breach of any of the covenants herein
contained would cause irreparable harm to ENTEX's business and that monetary
damages alone will not afford an adequate remedy. Therefore, in the event of any
such breach, or threatened breach, in addition to such other remedies to which
ENTEX may be entitled, ENTEX shall have the right to specific performance of the
covenants herein contained by way of temporary and/or permanent injunctive
relief, all as it elects.
4.5 The parties believe the restrictions in this Section 4 to be reasonable to
protect business activity. However, in the event that a court of competent
jurisdiction deems any provision hereof to be unreasonable, void or
unenforceable, such provision(s) shall be deemed severed from the remainder of
the Agreement, which shall continue in all other respects to be valid and
enforceable. Any such provision(s) of this Agreement declared void, unreasonable
or unenforceable shall be deemed revised to the minimum amount necessary in
order to be valid and enforceable.
5. RELEASE
5.1 In return for the payment and promises made by ENTEX herein, except for the
obligations of ENTEX hereunder, Executive agrees that, effective on the
Termination Date, s/he will unconditionally release and discharge ENTEX from any
and all claims, damages or causes of action, known or unknown, of whatever kind
of nature, which s/he has or may have against ENTEX, including, but not limited
to, any claims for relief, whether injunctive, declaratory, statutory, monetary
or otherwise, arising under any federal, state or local equal opportunity, age
discrimination or other law, ordinance, regulation or order (including, without
limitation, Title VII of
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the Civil Rights Act of 1964, as amended, and the Age Discrimination in
Employment Act of 1973, as amended ("ADEA"), or arising from or in connection
with Executive's employment by or provision of services to ENTEX or the
separation therefrom, whether based in contract, public policy, tort or
otherwise.
For the purposes of this paragraph, "ENTEX" means ENTEX Information
Services, Inc., its subsidiaries, parent and affiliates, and the respective
successors, assigns, agents, shareholders, officers, directors, benefit plans,
and current and former employees of any of them.
With regard to Executive's waiver of his/her rights under the ADEA,
effective on the Termination Date, Executive will agree and acknowledge that
s/he:
(a) does not waive rights or claims that may arise after the
Termination Date;
(b) will waive rights under the ADEA in exchange for consideration as set
forth herein, which Executive acknowledges is in addition to anything of value
to which s/he is already entitled;
(c) was advised to consult with an attorney before entering into this
release and had the opportunity to do so;
(d) had twenty-one (21) days in which to consider and execute this
release. If Executive executed this release at any time prior to the end of the
twenty-one (21) day period, such early execution was a knowing and voluntary
waiver of Executive's right to consider this release for at least twenty-one
(21) days, and to review with an attorney;
(e) was advised that for a period of seven (7) days following the
execution of this release by Executive, Executive may revoke this release by
written notice to: General Counsel, ENTEX.
5.2 If the foregoing release is signed or to be performed or enforced in the
State of California, the provisions set forth in Attachment A shall be
incorporated into the terms of the release.
6. INDEMNIFICATION
6.1 ENTEX acknowledges and agrees that it shall remain subject to the
Indemnification Agreement dated August 29, 1996, between it and the Executive.
7. MITIGATION
7.1 The Executive is not required to mitigate the amount of any Termination
Payment to be made by ENTEX pursuant to this Agreement by seeking other
employment or otherwise, and no amount of the Termination Payment shall be
offset against or reduced by any amount earned by any other employment;
provided, however, that the benefits provided for in Section 2.5 shall terminate
upon the Executive's obtaining other employment and becoming eligible for
comparable benefits. The Executive hereby agrees to notify ENTEX promptly upon
obtaining employment.
8. EXCISE TAX LIMITATION
8.1 Anything in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any payment or
distribution by ENTEX to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (the "Total Payments") would be subject to the excise tax imposed
under Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the
Total Payments shall be reduced (but not below zero) if and to the extent that a
reduction in the Total Payments would result in the Executive retaining a larger
amount, on an after-tax basis (taking into account
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Federal, state and local income taxes and the Excise Tax), than if the Executive
received the entire amount of such Total Payments. Unless the Executive shall
have given prior written notice specifying a different order to ENTEX to
effectuate the foregoing, ENTEX shall reduce or eliminate the Total Payments, by
first reducing or eliminating the portion of the Total Payments which are not
payable in cash and then by reducing or eliminating cash payments, in each case
in reverse order beginning with payments or benefits which are to be paid the
farthest in time from the Determination (as hereinafter defined). Any notice
given by the Executive pursuant to the preceding sentence shall take precedence
over the provisions of any other plan, arrangement or agreement governing the
Executive's rights and entitlements to any benefits or compensation.
8.2 The Determination of whether the Total Payments shall be reduced as provided
in Section 8.1 and the amount of such reduction shall be made at ENTEX's expense
by an accounting firm selected by ENTEX from among the five largest accounting
firms in the United States (the "Accounting Firm"). The Accounting Firm shall
provide its determination (the "Determination"), together with detailed
supporting calculations and documentation to ENTEX and the Executive within 10
days of the Termination Date. If the Accounting Firm determines that no Excise
Tax is payable by the Executive with respect to the Total Payments, it shall
furnish the Executive with an opinion reasonably acceptable to the Executive
that no Excise Tax will be imposed with respect to any such payments and, absent
manifest error, such Determination shall be binding, final and conclusive upon
ENTEX and the Executive. If the Accounting Firm determines that an Excise Tax
would be payable, the Executive shall have the right to accept the Determination
of the Accounting Firm as to the extent of the reductions, if any, pursuant to
Section 8.1, or to have such Determination reviewed by an accounting firm
selected by the Executive, at the expense of ENTEX, in which case the
determination of such second accounting firm shall be binding, final and
conclusive upon ENTEX and the Executive.
9. SUCCESSORS
9.1 ENTEX 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 ENTEX to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that ENTEX would be required to
perform it if no such succession has taken place.
10. DEFINITIONS
10.1 "Cause" means (i) a continued and willful failure by the Executive to
substantially perform the Executive's duties, which failure constitutes a gross
neglect of his/her duties, (iii) the commission by the Executive of an act of
fraud or embezzlement or an act which the Executive knew to be in gross
violation of his/her duties to ENTEX, or (iii) a felony conviction, guilty plea
to a felony charge, or plea of nolo contendere to a felony charge by the
Executive.
10.2 "Change of Control" means the transfer of ownership or control of more than
50% of all of the assets or shares of ENTEX, whether by tender offer, merger,
consolidation or sale of assets, or a change in the membership of the Board of
Directors in a contested election, or any combination of the foregoing
transactions.
10.3 "Change of Control Termination" means a Change of Control followed within
twelve (12) months by (i) the termination of the Executive's employment other
than for Cause or as a result of the Executive's death, disability, Voluntary
Resignation, or normal retirement; (ii) voluntary resignation following a
reduction of the Executive's base compensation and target bonus below the base
compensation and target bonus in effect immediately preceding the Change of
Control; (iii) voluntary resignation following a reduction to a level not
materially consistent with that existing immediately preceding the Change of
Control in the level of authority or scope of the responsibilities of the
Executive; or (iv) voluntary resignation following a relocation of the office at
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which the Executive is expected to perform his/her responsibilities greater than
35 miles from the location of the office immediately preceding the Change of
Control.
10.4 "Competitive Business" shall mean and include any business or activity that
is substantially the same as any business or activity then conducted by ENTEX,
regardless of where such Competitive Business is located.
10.5 "Severance Period" means the 12-month period during which termination
benefits are provided under Section 2.
10.6 "Termination Date" means:
(a) the date the Executive is terminated for reasons other than those set
forth in Sections 1.2 or 1.3, or
(b) the date of voluntary resignation of the Executive following Change of
Control for reasons set forth in Sections 10.3(ii), (iii) or (iv), provided,
however, that if ENTEX or any successor requests a period of transition from the
Executive, the Termination Date shall be the day after the expiration of such
transition period, which in no event shall exceed 60 days.
10.7 "Voluntary Resignation" shall mean the voluntary resignation by the
Executive of his/her employment with ENTEX.
11. ENTIRETY
11.1 This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained herein and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment of this Agreement shall be binding
unless referring specifically to this Agreement and executed in writing by the
party against whom the enforcement of such amendment is sought. Any modification
or amendment by ENTEX must be signed by the President or an Executive Vice
President of ENTEX.
12. GOVERNING LAW
12.1 The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York, without regard
to conflict of law principles.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the day and year first set forth above.
ENTEX INFORMATION SERVICES, INC.
By: /s/ Xxxx X. XxXxxxx, Xx.
___________________________________
Xxxx X. XxXxxxx, Xx.
President
By: /s/ Xxxx Xxxxx
___________________________________
Print Name: Xxxx Xxxxx
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ATTACHMENT A
SECTION 1542 RELEASE. Executive understands and expressly agrees that
his/her release hereunder extends to claims against ENTEX of whatever nature and
kind, known or unknown, suspected or unsuspected, vested or contingent, past,
present or future, arising from or attributable to any incident or event,
occurring in whole or in part, on or before the Termination Date, and that any
and all rights granted under any state or federal law or regulation limiting the
effect of his/her release hereunder, including the provisions of Section 1542 of
the California Civil Code, ARE HEREBY EXPRESSLY WAIVED. Section 1542 of the
California Civil Code reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Thus, notwithstanding the provisions of Section 1542, and for the purpose
of implementing a full and complete release and discharge of ENTEX, Executive
expressly acknowledges that his/her release hereunder is intended to include in
its effect, without limitation, all claims which Executive does not know or
suspect to exist in his/her favor at the date of termination, and that this
release contemplates the extinguishment of any such claim or claims.
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