Exhibit 10.2
AGREEMENT
This Agreement is made February 28, 1997, to be effective as of
October 1, 1996, between KMS Industries, Inc., a Delaware corporation
("Company") and Xxxxxxx X. Xxxxx ("Executive").
BACKGROUND
A. Company is engaged in protracted litigation with the United States
Government to recover substantial amounts due the Company. As a result of
the litigation, Company is in difficult financial circumstances and lacks
funds with which to carry on its activities.
B. Executive and Company are parties to an Employment Agreement dated
December 29, 1995 ("Employment Agreement") providing for Executive's
employment with Company through December 31, 1996.
C. Effective October 1, 1996, Company was unable to meet its salary
obligations to Executive under the Employment Agreement, triggering a
severance obligation to Executive under the Employment Agreement.
D. In order to permit the Company to be able to press its claims
against the Government and otherwise continue operations, Executive has
continued to provide services to Company without compensation, and has also
advanced the sum of $27,500 to the Company.
E. The parties wish to enter in arrangements which will provide
financial relief to Company, and which will induce Executive to continue to
perform services on behalf of Company.
THEREFORE, it is hereby agreed as follows:
1. Cash Advances. Company acknowledges receipt of the following cash
advances from Executive as of the dates indicated:
$10,000 December 6, 1996
$10,000 January 7, 1997
$7,500 January 27, 1997
Executive is not obligated to provide any further cash advances to
Company, but in the event of such advances, the amount and date thereof
shall be endorsed on an attachment to this Agreement. All amounts advanced
under this Section are referred to as "Cash Advances." Cash Advances shall
bear interest at the rate of 12% per annum from the date of advance to the
date of payment.
2. Temporary Waiver of Contractual Payments Due Executive. Company
acknowledges the following obligations to Executive, and Executive agrees to
defer payment thereon as set forth in Section 3:
An obligation in the amount of $90,000 which became due October 1, 1996
pursuant to Section 8 of the Employment Agreement.
Unpaid salary for the period commencing October 1, 1996 until
termination of Executive's employment, at the rate of $5,625 per month.
The amounts accrued or accruing under this Section, and the estimated
tax withholdings which will accrue if and when the amounts are paid to
Executive shall be recorded as liabilities on the Company's books. Such
amounts, net of tax withholdings, are referred to as the "Deferred
Obligations." Deferred Obligations shall bear interest at the rate of 12%
per annum from the date the obligation was due until the date of payment.
3. Repayment of Cash Advances and Deferred Obligations. Cash Advances
and Deferred Obligations, together with accrued interest, will be paid to
Executive as soon as practicable after Company has the resources with which
to make the payments. Partial payments shall be applied first to interest,
then to principal of the Cash Advances, and then to principal of the
Deferred Obligations. In any event, the Cash Advances and Deferred
Obligations, together with accrued interest, shall become fully due and
payable on December 31, 1997.
Provided further that upon any default or violation of the terms of
this Agreement by Company, all or any part of the indebtedness owed by
Company hereunder shall, at the option of Executive, become immediately due
and payable without notice or demand. If a voluntary or involuntary case in
bankruptcy, receivership, or insolvency is at any time by or against
Company, or if any levy, writ of attachment, garnishment, execution, or
similar process is issued or placed on any property of Company, then all
such indebtedness shall automatically become immediately due and payable,
without notice or demand.
4. Security for Repayments.
(a) Company hereby grants to Executive a security interest in all
of its assets, tangible and intangible, in favor of Executive to secure
Company's obligations hereunder.
(b) Company and another senior executive are entering into a
corresponding agreement containing the same substantive terms and
conditions. The security interests created under such other agreement and
under this Agreement shall be in pari passu in all respects and shall be
enforced concurrently.
5. Adjustment to Options and Warrants. As an inducement to Executive
to continue to agree to the provisions hereof and continue to perform
services for Company, Company agrees that the exercise price of all existing
options and warrants held by Executive to purchase Company Common Stock is
hereby changed to $.07 per share, the estimated current market price of
Company Common Stock.
6. Stock Purchase. In accordance with the terms of the Stock Purchase
Agreement attached as Exhibit A, Company shall issue to Executive, and
Executive agrees to purchase, 100,000 shares of Company Common Stock at a
price of $.07 per share.
7. Continued Services. In consideration of the foregoing, Executive
agrees to continue to perform services for the Company until March 31, 1997.
Thereafter Executive may serve as an at-will employee on a month to month
basis on mutually agreeable terms. The term of the Employment Agreement
shall be deemed extended until March 31, 1997, subject to the arrangements
set forth in this Agreement.
Notwithstanding the foregoing provision, the Company acknowledges its
obligations under Section 4 of the Employment Agreement, and agrees that
such obligations shall continue beyond the term of this Agreement and the
payment of such obligations will not be subject to any of the conditions set
forth in Section 4 of the Employment Agreement regarding the termination of
Executive's employment.
8. Board of Directors Approval. The foregoing arrangements have been
approved by the Board of Directors and determined to be in the Company's
best interests at this time.
Executed as of the date first written above.
KMS INDUSTRIES, INC.
/s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxx
XXXXXXX X. XXXXX XXXXXXX X. XXXX
Chief Executive Officer
And By: /s/ Xxxxxxx X. Xxx
XXXXXXX X. XXX
Independent Director
