AGREEMENT
Effective Date: June 23, 1998
Parties:
Sunrise International Leasing Corporation ("Sunrise" or the "Company")
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxx Xxxxxx, Xxxxxxxxx 00000
Xxxxx X. Xxxx ("King")
The King Management Corporation
0000 Xxxxxxx Xxxx., Xxxxx #000
Xxxxxx Xxxxxx, XX 00000
The King Management Corporation ("King Management")
0000 Xxxxxxx Xxxx., Xxxxx #000
Xxxxxx Xxxxxx, XX 00000
Recitals:
A. Sunrise is a public company engaged primarily in the business of
leasing computer equipment.
X. Xxxx has unique experience, skill and expertise in the leasing
business, especially in the development of vendor leasing programs and business
strategies.
X. Xxxx Management is a private corporation doing business in the State
of Minnesota, and is a well-financed company with experience and expertise in
all aspects of the equipment leasing business.
D. Sunrise's 1997 annual report on Form 10-K identified certain
liquidity problems which, if they had materialized, would have placed the
Company in default of its loan agreements and would have severely affected its
ability to borrow funds to support its vendor programs which, in turn, would
have jeopardized its vendor program business.
E. In June 1997, Sunrise appointed King as its Chairman of the Board.
In May 1998, King also was appointed Chief Executive Officer ("CEO") of the
Company.
F. Since June 16, 1997, King Management has provided Sunrise certain
financial and other services pursuant to an agreement dated as of the same date.
X. Xxxx Management has participated with Sunrise in Sunrise's vendor
programs and has provided substantial assistance to Sunrise in financing such
programs.
H. The parties believe it is in the best interests of the Company to
continue their working relationship and are desirous of extending such
relationship through June 30, 2000, and amending their agreement in various
other respects.
Agreement:
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Xxxxx Xxxx
a. Capacity. Xxxxx Xxxx has previously been appointed by the
Sunrise Board of Directors to serve as Sunrise's Chairman of
the Board and CEO, and as such will continue to be an officer
and employee of Sunrise. In his service as Chairman and CEO,
King will report to and be subject to the direction of
Sunrise's Board of Directors.
b. Duties. King's duties will be those duties customarily
performed by a Chairman and CEO. King's responsibilities will
be related to the general management of the day-to-day
business affairs of Sunrise and presiding at all meetings of
the Board of Directors and shareholders of Sunrise.
c. Term. King's employment as CEO will continue until June 30,
2000, and shall continue thereafter subject to the mutual
agreement of both parties. The termination of King's
employment as CEO will not affect King's service as a director
of Sunrise, which is subject to shareholder approval, or his
service as Chairman, which is subject to the discretion of the
Board of Directors.
d. Compensation. Effective April 1, 1998, Xxxxx Xxxx will receive
a salary equal to $200,000 a year, subject to the usual
payroll deductions, payable in accordance with the Company's
normal payroll practices. Xx. Xxxx will receive, in his
discretion, those additional benefits which the Company makes
available to officers. In addition, Xx. Xxxx will be granted,
effective as of June 23, 1998, two separate non-qualified
options to purchase the Company's Common Stock. The first
option is immediately exercisable in full and will cover
250,000 shares and is granted in consideration of Xx. Xxxx'x
willingness to assume the responsibilities and duties as CEO
of the Company. The option term will be ten years and will be
exercisable at a price of $3.25 per share. The second option
will cover 400,000 shares and will be a "cliff-vesting
option." Vesting will be accelerated in increments of 125,000
shares, 125,000 shares and 150,000 shares when the average
closing price of the Company's Common Stock over a period of
ten business days, as determined by reference to the National
Market System, attains $5.00, $6.00 and $7.00, respectively.
The term of this option will be seven years and will be
exercisable at a price of $3.25 per share. The options will be
evidenced by formal option agreements.
2. The King Management Corporation. King Management will continue to
provide the following benefits and services to Sunrise through the term
of this Agreement:
a. provide sufficient subordinated debt to Sunrise to cover any
net worth financial covenant deficiency, if necessary to
obtain funding for its vendor programs;
b. utilize the balance sheet and borrowing resources of King
Management to provide funding for approved Sunrise vendor
programs, including making direct loans, providing certain
subordinations and arranging financing packages by utilizing
King Management's balance sheet, if necessary; and
x. Xxxx Management will work closely with the Company to enhance
the Company's future prospects, including, but not limited to,
generally assisting the Company to finance its vendor business
until June 30, 2000. Direct financing provided to Sunrise will
be at terms at least as favorable as those which could be
obtained from other sources.
3. Access to the Other Party's Employees. King Management has provided
Sunrise access to five of its employees who, since April 1, have
devoted varying amounts of time to Sunrise matters. Two of those
employees, Xxxxxxx Xxxxxxxx and Xxxxx Xxxx, became employees of Sunrise
as of June 23, 1998. The other three employees continue to be King
Management employees working on Sunrise matters with the consent of
Sunrise. King Management employees providing services to Sunrise may be
changed from time to time, but only with the prior approval of Sunrise.
Sunrise retains the ongoing right to discontinue using the services of
any or all King Management employees upon 90 days notice to King
Management.
From time to time, King Management may also seek to use the expertise
and services of Sunrise employees, and Sunrise agrees to permit the
reasonable use of such employees, subject to the condition that the
business of Sunrise is not materially impacted.
4. Allocation of Costs of Employees Working for Both Parties. The Company
will pay to King Management on or about July 1, 1998, the approximate
sum of $125,000 to cover the cost of the services of five King
Management employees rendering serves to the Company in varying amounts
from April 1, 1998 through June 30, 1998. On October 1, 1998, and every
three months thereafter, King Management will xxxx Sunrise for the
reasonable costs related to the agreed services continuing to be
provided to Sunrise by King Management employees in the previous
three-month period.
Without its prior written agreement, Sunrise assumes no responsibility
for the payment of any salary, bonuses, personal insurance, automobile
expenses or other perquisites provided by King Management to its
employees. However, as of June 23, 1998, options covering 110,000
shares of Sunrise Common Stock have been granted to the two King
Management employees who have become Sunrise employees and options
covering 17,000 shares of Sunrise Common Stock have been granted to the
other three King Management employees continuing to provide services to
Sunrise while employed by King Management.
In the event that Sunrise employees provide future services, King
Management will compensate Sunrise on generally the same terms as King
Management is being compensated as described above in this Section 4.
5. Vendor Program Sharing. For the period beginning April 1, 1998,
continuing throughout the remaining term of this Agreement, King
Management will be allocated a specific percentage of the vendor
transactions consummated during the term of this Agreement, as follows:
25% of the Sun program and the Sun Demo program and 25% of other
similar high risk leasing programs and risk pools as agreed upon by the
parties hereto from time to time and 15% of leases from all other
vendor programs. King Management agrees to purchase equipment and take
assignments on vendor lease transactions up to but not over the agreed
percentage levels described above on a non-discriminatory basis and
subject to the terms and conditions of any and all agreements with the
particular vendor, as amended from time to time. Sunrise will
consummate all lease transactions and make the appropriate assignments
to King Management to reflect the agreed sharing percentages. King
Management will pay for the equipment it purchases according to the
terms and conditions of the applicable vendor program and be
responsible for the administration of it own leases.
6. Non-Solicitation. During the term of this Agreement and any extension
of this Agreement, neither King Management nor King will, on behalf of
King Management, without the express written consent of the Company,
conduct any equipment leasing business with current vendor customers of
the Company in the United States or other areas the parties may agree
upon or with customers which the Company is soliciting or has expressed
an interest in soliciting, except as contemplated by this Agreement.
Neither King Management nor King will contact such customers directly
with respect to vendor program business with King Management pursuant
to this Agreement without the consent of the Company. Apart from this
Agreement, King understands that as long as he serves as a director or
an officer of the Company, he has a duty of loyalty to it, which
prevents him from using his position as a director or officer of
Sunrise to directly profit on Sunrise business other than as expressly
agreed pursuant to this Agreement.
During the term of this Agreement and any extension thereof, neither
King Management nor Xxxx, xxxx directly or indirectly, solicit any of
Sunrise's present or future employees for the purpose of hiring them or
inducing them to leave their employment with Sunrise; and King
Management will not hire any Sunrise employees without the consent of
Sunrise nor xxxx Xxxx Management solicit, attempt to solicit, interfere
or attempt to interfere with Sunrise's relationship with its customers
or potential customers.
Notwithstanding the foregoing, this Agreement is not intended to
prohibit and does not prohibit either King Management or King from
engaging in any form of leasing business or any other business. The
intent of this Agreement is to ensure that the parties understand that
while King Management will participate in the Company's vendor leasing
transactions during the term of this Agreement and any extension
thereof, the vendor customers with whom the transactions are negotiated
(as they relate to vendor programs) are the customers of Sunrise and
not King Management or King. The Company understands, however, that
King's relationships with the several Sunrise vendors precedes that of
Sunrise and nothing in this Agreement shall prevent King from
maintaining and/or expanding those relationships so long as the terms
of this Agreement are carried out.
7. Indemnification
a. General. Sunrise shall indemnify and hold harmless King
Management and its directors, officers, employees and agents,
from and against any claims or actions, including all costs
and expenses incident thereto, and judgments or settlements
arising therefrom, by reason of any action taken by King
Management, or its directors, officers, employees and agents
in fulfillment of King Management's or King's obligations
under this Agreement; provided, however, that the
indemnification provided pursuant to the terms of this Section
7a shall not apply in instances in which King Management, its
directors, officers, employees, agents or representatives, are
finally judicially determined (i) not to have reasonably
believed that they were acting in good faith, or (ii) to have
committed an act or omission constituting fraud, gross
negligence or intentional wrongdoing. The Company shall have
no further obligation to King Management or its employees
under the provisions of this Section 7a if the liability or
claim of King Management or its employees has been paid in
full by any insurance maintained by King Management or the
Company or any other party.
If Sunrise employees provide future services to King
Management, King Management will provide the same
indemnification terms to Sunrise as provided by Sunrise to
King Management in the preceding paragraph.
b. Further Agreements. Sunrise further agrees, unless its
obligations hereunder are being fulfilled by an insurance
company under the circumstances contemplated in this Section 7
hereof:
(1) to defend promptly and diligently, at the Company's
expense, any claim, action or proceeding brought
against King Management, or its directors, officers,
employees, agents or representatives, and the
Company, or any of them, arising out of or connection
with any of the occurrences or events referred to in
Section 7a hereof.
(2) That King Management, or its directors, officers,
employees, agents or representatives shall not be
liable to third parties and shall be indemnified and
held harmless by the Company in respect of any debts,
liabilities or obligations incurred pursuant to this
Agreement, or arising in the reasonable and ordinary
course of the Company's business or by virtue of the
management services provided for the Company pursuant
to this Agreement.
(3) That all provisions of this Section 7 shall survive
the expiration or termination of this Agreement.
(4) In the event Sunrise employees provide future
services to King Management, King Management hereby
agrees to the same covenants made by Sunrise in this
Section 7b.
8. Insurance.
a. Insurance to be Maintained by Sunrise. The Company, at its
expense and at all times during the initial term of this
Agreement and any extension thereof, shall procure and
maintain such insurance reasonably requested by King
Management, if any, which is customary or appropriate to cover
risks assumed by King Management or its employees in carrying
out their responsibilities hereunder. Such insurance shall be
written with a reputable insurance company or companies
authorized to conduct business in Minnesota. At King
Management's request, each insurance policy maintained by the
Company shall name King Management as a co-insured, and
contain a provision requiring the insurance company to notify
King Management of any cancellation. The Company assumes all
risks in connection with the adequacy of any insurance or
self-insurance program.
b. Insurance to be Maintained by King Management. King Management
on its own behalf shall maintain such other insurance as King
Management shall deem appropriate for its protection against
claims, liabilities and losses which may be asserted or
incurred, arising in the course of King Management's
performance or the performance of King Management employees of
their duties hereunder; provided, however, that the failure of
King Management to obtain insurance pursuant to this Section
8b shall not be a defense to any claim by King Management for
compensation, reimbursement or indemnification under the
provisions of this Agreement.
c. In the event Sunrise employees provide future services to King
Management, King Management agrees to maintain the insurance
described in Section 8a above, and Sunrise agrees to maintain
the insurance described in Section 8b above.
9. Nondisclosure of Confidential Information and Solicitation -- Sunrise.
King Management markets and has under development certain software and
asset management programs that are not equipment leasing programs.
Because of the proximity and commonality of certain customers and
potential customers that Sunrise does not currently sell to, Sunrise
agrees to keep confidential any information it becomes aware of
relative to King Management's businesses, and agrees not to solicit or
compete with King in the businesses that King offers or interfere with
its business relationships.
10. Nondisclosure of Confidential Information -- King Management and King.
King Management and King agree not to directly or indirectly use or
disclose confidential information for the benefit of anyone other than
the Company, except as permitted by the Software License Agreement
dated February 13, 1995, between the Company and King Holding
Corporation. "Confidential Information" means the information or
compilation of information regarding Sunrise that King or King
Management learns or has learned or develops or has developed during
the course of their relationship with Sunrise.
11. Termination. This Agreement may be terminated pursuant to any of the
following provisions:
a. Mutual Agreement. By mutual written agreement executed by both
parties.
b. Default. By either party, effective immediately upon delivery
of written notice to the other party, if the other party
breaches any of its obligations under this Agreement; provided
that if such breach is curable, such notice shall not be
effective until the breaching party fails to correct such
breach or default within a period of thirty (30) days after
delivery of such written notice. If such breach is not
curable, the Agreement shall terminate immediately upon
delivery of such notice of breach.
c. Death or Disability. By the Company upon the death or total
disability of King. However, a termination of this Agreement
will not, in and of itself, affect the options granted to King
hereunder - King's options rights will be determined by
applicable option agreements - nor will it affect the sharing
rights of King Management so long as King Management fulfills
the financing obligations of this Agreement.
12. General Provisions.
a. Severability and Interpretation. In the event that a provision
of this Agreement is held invalid, the remaining provisions
shall nonetheless be enforced in accordance with their terms.
Further, in the event that any provision is held to be
overbroad as written, such provision shall be deemed amended
to narrow its application to the extent necessary to make the
provision enforceable according to applicable law and shall be
enforced as amended.
b. Notices. Any notice required or permitted to be given under
this Agreement shall be deemed effective when received if
delivered by hand, telecopy, telex or telegram or three (3)
days after depositing if placed in the U.S. mails for delivery
by registered or certified mail, return receipt requested,
postage prepaid and addressed to the appropriate party at the
address set forth on the first page of this Agreement. Such
address may be changed by giving written notice to the other
party of such different address pursuant to the provisions of
this section.
c. Nonassignment. Neither King nor King Management shall assign,
transfer or sell all or any part of his/its rights or
obligations hereunder without the prior consent of Sunrise,
which consent shall not be unreasonably withheld. This
Agreement shall be binding upon and inure to the benefit of
any successor or assignee of Sunrise and of any permitted
successors and assigns of King or King Management as provided
above.
d. Controlling Law. This Agreement shall be deemed to have been
made in the State of Minnesota and shall be governed by and
construed in accordance with the laws of the State of
Minnesota.
e. Entire Agreement. This Agreement constitutes the entire
Agreement between the parties and supersedes any and all prior
and contemporaneous oral or written understandings between the
parties relating to the subject matter hereof, except the
Consulting and Noncompetition Agreement dated February 13,
1995 between Sunrise and King will continue in effect.
The parties have executed this Agreement in the manner appropriate to
each to be effective the day and year entered on the first page hereof.
SUNRISE INTERNATIONAL LEASING CORPORATION
By: /s/ Xxxxx X. Xxxx
Its: Chairman of the Board
THE KING MANAGEMENT CORPORATION
By: /s/ Xxxxx X. Xxxx
Its Chairman of the Board
/s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
