EXHIBIT 10.5
LOAN AGREEMENT
THIS AGREEMENT (the "Loan Agreement") is made and entered into as of July
23, 2001 between XXXXX & XXXXX COMPANY, a Delaware corporation (the "Company"),
and XXXX X. XXXXXXXX ("Executive").
WHEREAS, the Company and Executive have entered into an employment
agreement effective as of July 1, 2001 (the "Employment Agreement"), whereby
Executive will be Chief Operating Officer of the Company; and
WHEREAS, the Employment Agreement provides for a loan in an amount of up
to three hundred thousand dollars ($300,000) (the "Loan"), to be evidenced by a
promissory note (the "Note").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and terms hereafter set forth, it is agreed as follows:
1. COMMITMENT TO LEND. The Company offers to lend to Executive the
principal sum of up to three hundred thousand dollars ($300,000) on the
following terms.
2. BORROWING. Executive may borrow up to $300,000 on and after the
commencement date of his employment with the Company. The Company's commitment
to lend to Executive hereunder shall expire on the earliest to occur of
termination of Executive's employment with the Company for any reason, or
December 31, 2001.
3. PROMISSORY NOTES. Executive may request a Loan of up to $300,000
on or after July 23, 2001, by executing a Note in the form attached hereto as
Exhibit A and incorporated herein by reference, and by delivering the original,
executed Note to the Chief Financial Officer of the Company, accompanied by a
request to borrow. The date of funding shall be the "Borrowing Date."
4. TERM OF LOAN. The term of the Loan hereunder shall extend for a
period ending July 23, 2004 (the "Loan Due Date").
5. INTEREST RATE. The interest rate per annum on the Loan shall be
the short-term applicable federal rate of interest under Internal Revenue Code
Section 1274(d) on the Borrowing Date for loans on which interest is compounded
annually. Interest shall accrue annually from the date of each Borrowing.
Interest on the Loan shall compound annually.
6. REPAYMENT AND AMORTIZATION OF THE LOAN. The principal on the Loan
shall be amortized annually over the period commencing on the Borrowing Date and
ending on each July 23 of 2002, 2003 and 2004.
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7. ACCELERATION OF THE LOAN DUE DATE. Notwithstanding the provisions
of Paragraph 6, upon termination of Executive's employment with the Company by
Executive without "Good Reason" or by the Company for "Cause," as those terms
are defined in the Employment Agreement and are incorporated herein by
reference, before the Loan Due Date, the outstanding balance of the Loan,
including accrued interest, shall be immediately due and payable in cash.
8. USE OF PROCEEDS. Executive represents and warrants that the
proceeds from the Loan will not be used to finance the purchase of shares of
capital stock of the Company.
9. TAXES. Executive represents that he has reviewed with his own tax
advisor the federal, state, local and foreign tax consequences, if any, of the
Loan and the transactions contemplated by this Loan Agreement. Executive further
represents that he has relied solely on such advisor and not on any statements
or representations of the Company or any of its agents with respect to tax
matters in connection with this Loan Agreement. Executive understands that
Executive (and not the Company) shall be responsible for Executive's tax
liability that may arise as a result of the Loan or the transactions
contemplated by this Loan Agreement.
10. TRANSFER OF THE COMPANY'S RIGHTS AND OBLIGATIONS HEREUNDER. The
Company is entitled to transfer its rights and obligations under this Loan
Agreement to one or more persons or entities, and all covenants and agreements
hereunder shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. If the Company undergoes a "Change of Control," as that
term is defined in the Employment Agreement and incorporated herein by
reference, then the Company shall use its best efforts to cause any surviving
corporation or entity or acquiring corporation or entity, or affiliate of such
corporation or entity, to assume the Company's obligations under this Loan
Agreement.
11. RIGHTS TO CONTINUATION OF EMPLOYMENT. Executive acknowledges and
understands that the benefits conferred upon Executive hereunder do not
constitute an express or implied promise of continued employment with the
Company, and that this Loan Agreement shall not be construed as obligating the
Company to employ or retain Executive for any specific period of time.
12. DISPUTES. Any dispute arising in connection with this Loan
Agreement shall be finally determined and settled by arbitration. Arbitration
shall be initiated by one party making written demand upon the other party and
simultaneously filing the demand together with required fees in the office of
the American Arbitration Association in New York, New York. The arbitration
proceeding shall be conducted in New York, New York by a single arbitrator in
accordance with the Expedited Procedures of the Employment Dispute Resolution
Rules of the American Arbitration Association, except as otherwise provided
herein. Except as required by the arbitrator, the parties shall have no
obligation to comply with discovery requests made in the arbitration proceeding.
The arbitration award shall be a final and binding determination of the dispute
and shall be fully enforceable as an arbitration award in any court having
jurisdiction and venue over such parties.
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13. NO WAIVER; SEVERABILITY. Either party's failure to enforce any
provision hereunder shall not in any way be construed as a waiver of any such
provision, nor prevent that party from thereafter enforcing such provision
and/or any other provision of this Loan Agreement. The invalidity of any
provision of this Loan Agreement shall not in any manner affect the validity or
enforceability. of any other provisions hereof.
14. NOTICES. Any notice to be given under the terms of this Loan
Agreement to the Company shall be addressed to the Company in care of the Chief
Legal Officer, 0000 Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000; and any
notice to be given to Executive shall be addressed to him at his address of
record on file with the Company. By a notice given pursuant to this Section,
either party may hereafter designate a different address for notices to be given
to him. Any notice which is required to be given to the Executive shall, if
Executive is then deceased, be given to Executive's personal representative if
such representative has previously informed the Company of his status and
address by written notice under this Section. Any notice to any party will be
effective upon receipt (or refusal of receipt), and shall be in writing and
delivered personally or sent by telecopy or certified or registered mail,
postage prepaid.
15. TITLES. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
16. GOVERNING LAW; ENTIRE AGREEMENT; AMENDMENTS. This Loan Agreement
shall be administered, interpreted and enforced under the internal laws of the
State of New York, without regard to conflicts of laws thereof. This Loan
Agreement represents the entire agreement between the parties with respect to
the Loan as provided for in Executive's employment agreement with the Company,
and supersedes all prior understandings of the parties with regard thereto. In
the event of a conflict between the provisions of his employment agreement with
the Company and this Loan Agreement, the terms of the Loan Agreement shall
prevail. This Loan Agreement may not be modified except in a writing signed by
both parties.
This Loan Agreement may be signed in counterpart, each of which shall be
deemed an original for all purposes and both of which together shall constitute
one instrument.
IN WITNESS WHEREOF, this Loan Agreement has been executed by the parties
as indicated below.
EXECUTIVE XXXXX & XXXXX COMPANY
/s/ XXXX X. XXXXXXXX By: /s/ XXXXX X. XXXXXXXX
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Xxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
Date: JULY 26, 2001 Date: JULY 26, 2001
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EXHIBIT A TO LOAN AGREEMENT
PROMISSORY NOTE - PAGE 1 OF 2
[GRAPHIC OMITTED]
$------- 300,0000------- NEW YORK, NEW YORK JULY 30, 2001
------------------------ --------------- -------------- ------------------
(City) (State) (Date)
On or, as indicated below, before JULY 23 , 2004 (the "Maturity Date"), for
value received, the undersigned Xxxx X. Xxxxxxxx ("Maker") promises to pay to
Xxxxx & Xxxxx Company, a Delaware corporation, or its wholly owned subsidiary
named below (hereinafter, "Xxxxx & Xxxxx Company"), or order, at 0000 Xxxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, or such other place as the holder
shall designate, the amount financed as set forth above ("principal"), plus
interest thereon at the rate of 4.07 per cent per annum ("interest"), or the
highest rate permitted by law, whichever is less. Principal and interest shall
be payable in lawful money of the United States and payments made shall be
applied first to accrued interest and then to unpaid principal.
The principal shall be amortized and paid in installments at the following
dates:
JULY 23, 2002
JULY 23, 2003
JULY 23, 2004
Interest shall accrue annually on the outstanding principal balance of this Note
on each July 23 of 2002, 2003 and 2004.
NOTWITHSTANDING THE FOREGOING REPAYMENT PROVISIONS, UPON TERMINATION OF MAKER'S
EMPLOYMENT WITH THE COMPANY BY MAKER WITHOUT GOOD REASON AS DEFINED IN THE LOAN
AGREEMENT OR BY THE COMPANY FOR CAUSE, AS DEFINED IN THE LOAN AGREEMENT, BEFORE
THE MATURITY DATE, THE OUTSTANDING BALANCE OF THE LOAN, INCLUDING ACCRUED
INTEREST, SHALL BE IMMEDIATELY DUE AND PAYABLE IN CASH.
The Maker reserves the right to prepay all or any part of the unpaid principal
and accrued interest at any time without any penalty or charge therefor.
Except to the extent expressly prohibited by applicable law, bonuses under
Maker's Retention Bonus Program dated as of July 23, 2001 that are payable to
Maker by Xxxxx & Xxxxx Company at any time after this Note is signed, to the
extent that any balance of principal or interest remains unpaid under this Note,
shall be applied to the outstanding balance of this Note until it has been
repaid in full. The Maker hereby assigns all foregoing sums to Xxxxx & Xxxxx
Company; provided, however, that such repayment shall not relieve Maker of his
obligation to repay
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PROMISSORY NOTE - PAGE 2 OF 2
amounts owing under this Note in the event that such bonuses to be received are
not sufficient or timely to meet Maker's obligations hereunder. The Maker agrees
to pay all reasonable attorneys' fees and costs incurred by the holder to
collect all sums due under this note whether or not any arbitration or legal
action is commenced or concluded.
The Maker warrants, represents and agrees that he has not relied upon any
statement by Xxxxx & Xxxxx Company with respect to the matters covered by this
Note except for the matters expressly stated in this Note. The Maker hereby
waives presentment for payment, notice of non-payment, notice of dishonor,
demand for payment and any notices in connection with the delivery, presentment,
acceptance, performance, default or enforcement of this Note.
In the event a claim or controversy arises concerning any failure by Maker to
pay holder all or any portion of the amounts provided herein, such claim or
controversy shall be finally determined and settled by arbitration. Arbitration
shall be initiated by one party making written demand upon the other party and
simultaneously filing the demand together with required fees in the office of
the American Arbitration Association in New York, New York. The arbitration
proceeding shall be conducted in New York, New York by a single arbitrator in
accordance with the Expedited Procedures of the Employment Dispute Resolution
Rules of the American Arbitration Association, except as otherwise provided
herein. Except as required by the arbitrator, the parties shall have no
obligation to comply with discovery requests made in the arbitration proceeding.
The arbitration award shall be a final and binding determination of the dispute
and shall be fully enforceable as an arbitration award in any court having
jurisdiction and venue over such parties. In the event any arbitration
proceeding or legal action to enforce an arbitration award is commenced
hereunder, the prevailing party shall be entitled to recover its expenses and
reasonable attorneys' fees incurred therein from the unsuccessful party.
This Note shall be governed by and construed in accordance with the internal
laws of the state of New York, without regard to the conflict-of-law provisions.
MAKER
----------------------------
Xxxx X. Xxxxxxxx
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RETENTION BONUS PROGRAM
JULY 23, 2001
XXXX X. XXXXXXXX
1. ELIGIBILITY FOR BONUSES. You are eligible to receive a retention bonus
("Bonus") for each of the following periods commencing on your
Commencement Date and ending three years from your Commencement Date,
upon the continuation of your employment with the Company in the capacity
of Chief Operating Officer, and according to such other terms as are set
forth below.
YEAR
First (ending 7/23/02)
Second (7/23/02 - 7/23/03)
Third (7/23/03 - 7/23/04)
2. CALCULATION OF THE BONUSES. Each bonus will be calculated as follows: you
will be paid, at the last day of each of the above periods, an amount
equal to the accrued interest and principal due under the Loan
outstanding under the Loan Agreement dated as of July 23, 2001 between
you and the Company (the "Loan Agreement"), plus an amount necessary to
pay applicable income and employment taxes on the bonus.
3. ACCELERATION OF BONUSES UPON CERTAIN EVENTS. Upon any of the following
events, you shall receive a bonus equal to the outstanding and unpaid
accrued interest and principal under the Loan outstanding under the Loan
Agreement, plus an amount necessary to pay applicable income and
employment taxes on the bonus:
(i) Following a "Change of Control." "Change of Control" shall have
the meaning set forth in your employment agreement with the
Company dated as of July 1, 2001, which is incorporated herein by
reference (the "Employment Agreement"), and such definition shall
be incorporated herein by reference:
(ii) if your employment with the Company is terminated by the Company
other than for "Cause." "Cause" shall have the meaning set forth
in your Employment Agreement, and such definition shall be
incorporated herein by reference.
5. APPLICATION OF BONUS PAYMENTS. You agree that all bonuses paid hereunder
will be applied to outstanding principal and accrued interest of the Loan
issued to you under the Loan Agreement between you and the Company dated
as of July 23, 2001 (the "Loan Agreement") as evidenced by the promissory
note that you have executed in favor of the Company as of July 30, 2001
(the "Loan").
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6. REPORTING OF INCOME. You acknowledge and agree that each bonus payment
hereunder, whether or not applied to repayment of the Loan, shall be
reported by the Company to the Internal Revenue Service as compensation
income to you upon earning the bonus.
This Retention Bonus Program may be signed in counterpart, each of which
shall be deemed an original for all purposes and both of which together shall
constitute one instrument.
IN WITNESS WHEREOF, this Retention Bonus Program has been executed by the
parties as indicated below.
EXECUTIVE XXXXX & XXXXX COMPANY
By:
---------------------------------------- -------------------------------------
Xxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx
President and Chief Executive Officer
Date: Date:
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