NEWTEK CAPITAL, INC.
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Employment Agreement with
Xxxxxxx Xxxxx
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PREAMBLE. This Agreement entered into this ____ day of __________ 1999,
by and between Newtek Capital, Inc. (the "Company") and Xxxxxxx Xxxxx (the
"Executive"), effective immediately.
WHEREAS, the Executive is to be employed by the Company as an executive
officer; and
WHEREAS, the parties desire by this writing to set forth the employment
relationship of the Company and the Executive.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
When used anywhere in the Agreement, the following terms shall have
the meaning set forth herein.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Control" shall mean any one of the following events:
(i) the acquisition of ownership, holding or power to vote more than 25% of the
Company's voting stock, (ii) the acquisition of the ability to control the
election of a majority of the Company's directors, (iii) the acquisition of a
controlling influence over the management or policies of the Company by any
person or by persons acting as a "group" (within the meaning of Section 13(d) of
the Securities Exchange Act of 1934), or (iv) during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period constitute the Board of Directors of the Company (the "Existing
Board") cease for any reason to constitute at least two-thirds thereof, provided
that any individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the Continuing
Directors then in office shall be considered a Continuing Director. For purposes
of this paragraph only, the term "person" refers to an individual or a
corporation, partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(d) "Code ss.280G Maximum" shall mean the product of 2.99 and the
Executive's "base amount" as defined in Code ss.280G(b)(3).
(e) "Company" shall mean Newtek Capital, Inc., and any successor to
its interest.
(f) "Common Stock" shall mean common stock of the Company.
(g) "Effective Date" shall mean the date of execution referenced in
the Preamble of this Agreement.
(h) "Executive" shall mean Xxxxxxx Xxxxx.
(i) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Executive in writing: (i) the
requirement that the Executive move his personal residence, or perform his
principal executive functions, more than fifty (50) miles from his primary
office as of the Effective Date; (ii) a material reduction in the Executive's
base compensation as the same may be increased from time to time; (iii) the
failure by the Company to continue to provide the Executive with compensation
and benefits provided for on the Effective Date, as the same may be increased
from time to time, or with benefits substantially similar to those provided to
him under any of the Executive benefit plans in which the Executive now or
hereafter becomes a participant, or the taking of any action by the Company
which would directly or indirectly reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by him; (iv) the assignment to
the Executive of duties and responsibilities materially different from those
associated with his position on the Effective Date; (v) a failure to elect or
reelect the Executive to the Board of Directors of the Company; (vi) a material
diminution or reduction in the Executive's responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Company.
(j) "Just Cause" shall mean the Executive's willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, conviction for a felony, or material breach of any
provision of this Agreement. No act, or failure to act, on the Executive's part
shall be considered "willful" unless he has acted, or failed to act, with an
absence of good faith and without a reasonable belief that his action or failure
to act was in the best interests of the Company.
(k) "Protected Period" shall mean the period that begins on the
date six months before a Change in Control and ends on the later of the second
annual anniversary of the Change in Control or the expiration date of this
Agreement.
(l) "Trigger Event" shall mean (i) the Executive's voluntary
termination of employment either for any reason within the 30-day period
beginning on the date of a Change in Control, or within 90 days of an event that
both occurs during the Protected Period and constitutes Good Reason, or (ii) the
termination by the Company or its successor(s) in interest, of the Executive's
employment for any reason other than Just Cause during the Protected Period.
2. Employment. The Executive is employed as President and Chief
Operating Officer of the Company. The Executive shall render such administrative
and management services for the Company and its subsidiaries at the request of
the Board as are currently rendered and as are customarily performed by persons
situated in a similar executive capacity and consistent with the duties of the
President and Chief Operating Officer as set forth in the
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bylaws of the Company. The Executive shall also promote, by entertainment or
otherwise, as and to the extent permitted by law, the business of the Company
and its subsidiaries. The Executive's other duties shall be such as the
Company's Chief Executive Officer may from time to time reasonably direct,
including normal duties as an officer of the Company.
3. Base Compensation. The Company agrees to pay the Executive during
the term of this Agreement a salary at the rate of $300,000 per annum, payable
in cash not less frequently than monthly. On each annual anniversary date of the
Effective Date, the Executive's annual salary shall automatically be increased
10 percent. Additionally, the Board shall review, not less often than annually,
the rate of the Executive's salary and may decide to further increase his
salary.
4. Annual Cash Bonuses. The Board shall determine the Executive's right
to receive incentive compensation in the form of cash bonuses and other awards.
No other compensation provided for in this Agreement shall be deemed a
substitute for such incentive compensation. Cash bonuses shall be awarded
pursuant to the terms of the Company's Annual Cash Bonus Plan.
5. Other Benefits.
(a) Participation in Retirement, Medical and Other Plans. The
Executive shall participate in any plan that the Company maintains for the
benefit of its employees if the plan relates to (i) pension, profit-sharing, or
other retirement benefits, (ii) medical insurance or the reimbursement of
medical or dependent care expenses, or (iii) other group benefits, including
disability and life insurance plans.
(b) Executive Benefits; Expenses. The Executive shall participate
in any fringe benefits which are or may become available to the Company's senior
management Executives, including for example incentive compensation plans, club
memberships, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Executive under this
Agreement. The Executive shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Company.
(c) Split-Dollar Life Insurance. The Company shall provide the
Executive with split-dollar life insurance coverage. The coverage shall be
provided under a separate Split-Dollar Life Insurance Agreement (the
"Split-Dollar Agreement") entered into between the Executive and the Company,
the terms of which shall include the following:
(i) Amount of Insurance. The Company shall obtain an insurance
policy (the "Policy") in the face amount of $2 million on the life of the
Executive.
(ii) Ownership. The Company shall be the sole owner of the
Policy.
(iii) Payment of Premiums. The Company shall pay all premiums
for each Policy year.
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(iv) Death Benefits. Upon the death of the Executive, the death
benefit payable under the Policy shall be paid to the Company in an amount equal
to the lesser of (i) the aggregate premiums paid by the Company and (ii) the
cash surrender value of the Policy. The balance shall be paid to the Executive's
designated beneficiary or, if none is validly designated, his estate.
(v) Dividends. All dividends on the Policy shall be used to
purchase additions to insurance issued by the insurer.
(vi) Termination of Employment. If the Company terminates the
Executive's employment for Just Cause pursuant to Section 11(a) hereof, the
Split-Dollar Agreement shall automatically be cancelled, and the Executive may
elect, by written notice to the Company within 30 days of such termination, to
purchase the Policy from the Company by paying the lesser of (i) the total
premiums paid by the Company and (ii) the cash surrender value of the Policy. If
the Executive's employment terminates for any other reason, the Company's
obligation to pay premiums for the Policy shall continue for the life of the
Executive.
6. Term. The Company hereby employs the Executive, and the Executive
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 24 months thereafter or such earlier date as is
determined in accordance with Section 11 (the "Term"). Additionally, on each
annual anniversary date of the Effective Date, the Executive's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date, unless either party to this Agreement notifies the
other party in writing no later than 90 days before such expiration date that
this Agreement shall not be extended.
If the Executive is an employee of the Company on the expiration date
of the Term (as amended hereunder) of this Agreement, the Executive shall be
paid an amount equal to 299% times the highest W-2 income that the Company
reported to him for a calendar year that ended before said expiration date. Said
sum shall be paid in one lump sum within ten (10) days of said expiration date,
unless more than 30 days beforehand the Executive files an election to collect
said sum over a period of up to five years, in which case interest shall accrue
on unpaid amounts at a rate determined pursuant to Section 1274(d) of the Code.
7. Loyalty; Noncompetition.
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Executive shall devote substantially all his full business time, attention,
skill, and efforts to the faithful performance of his duties hereunder;
provided, however, from time to time, Executive may serve on the boards of
directors of, and hold any other offices or positions in, companies or
organizations, at the request of the Company or which will not present, in the
opinion of the Board, any conflict of interest with the Company or any of its
subsidiaries or affiliates, nor unfavorably affect the performance of
Executive's duties pursuant to this Agreement, nor violate any applicable
statute or regulation. "Full business time" is hereby defined as that amount of
time usually devoted to like companies by similarly situated executive officers.
During the term of his employment
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under this Agreement, the Executive shall not engage in any business or activity
contrary to the business affairs or interests of the Company.
(b) Nothing contained in this Paragraph 7 shall be deemed to
prevent or limit the Executive's right
(i) to invest in the capital stock or other securities of any
business dissimilar from that of the Company or, solely as a passive or minority
investor, in any business, or
(ii) to own and perform reasonable management duties for J R
Group, LLC (:JR") on behalf of the Company pursuant to a management services
agreement between JR and the Company which provides, among other things, for the
payment to the Company of all revenues of JR in excess of $70,000 per year based
upon its annual federal income tax returns.
8. Standards. The Executive shall perform his duties under this
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Company will provide Executive with the working
facilities and staff customary for similar executives and necessary for him to
perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board shall
in its discretion permit, the Executive shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time; provided that:
(a) The Executive shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management Executives of the Company.
(b) The Executive shall not receive any additional compensation
from the Company on account of his failure to take a vacation, and the Executive
shall not accumulate unused vacation from one fiscal year to the next, except in
either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Executive
shall be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Executive a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Executive shall be entitled to an annual sick
leave benefit as established by the Board.
10. Indemnification. The Company shall indemnify and hold harmless
Executive from any and all loss, expense, or liability that he may incur due to
his services for the Company as an officer and or director (including any
liability he may ever incur under Code ss. 4999, or a
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successor, as the result of severance benefits he collects pursuant to Sections
11 or 13) during the full Term of this Agreement and shall at all times maintain
adequate insurance for such purposes.
11. Termination and Termination Pay. Subject to Section 13 hereof, the
Executive's employment hereunder may be terminated under the following
circumstances:
(a) Just Cause. The Board may, based on a good faith determination
and only after giving the Executive written notice and a reasonable opportunity
to cure, immediately terminate the Executive's employment at any time, for Just
Cause. The Executive shall have no right to receive compensation or other
benefits for any period after termination for Just Cause.
(b) Without Just Cause. The Board may, by written notice to the
Executive, immediately terminate his employment for a reason other than Just
Cause, in which case the Executive shall be paid an amount equal to the Code
280G Maximum. Said sum shall be paid in one lump sum within ten (10) days of
such termination, unless more than 30 days beforehand the Executive shall have
filed an election to collect said sum over a period of up to five years, in
which case interest shall accrue on unpaid amounts at a rate determined pursuant
to Section 1274(d) of the Code.
(c) Resignation by Executive with Good Reason. The Executive may at
any time immediately terminate employment for Good Reason, in which case the
Executive shall be entitled to receive the following compensation and benefits:
(i) the salary and cash bonus provided pursuant to Sections 3 and 4 hereof, up
to the expiration date (the "Expiration Date") of the Term, including any
renewal term, of this Agreement, and (ii) the cost to the Executive of obtaining
all health, life, disability and other benefits which the Executive would have
been eligible to participate in through the Expiration Date based upon the
benefit levels substantially equal to those that the Company provided for the
Executive at the date of termination of employment. Said payment shall be made
in a lump sum payment within 10 days after his termination of employment, unless
more than 30 days beforehand the Executive shall have filed an election to
receive such benefits over a period of up to five years, in which case interest
shall accrue on unpaid amounts at a rate determined pursuant to Section 1274(d)
of the Code.
(d) Resignation by Executive without Good Reason. The Executive may
voluntarily terminate employment with the Company during the Term of this
Agreement, upon at least 60 days' prior written notice to the Board of
Directors, in which case the Executive shall receive only his compensation,
vested rights, and Executive benefits up to the date of his termination of
employment.
(e) Retirement, Death, or Disability. If the Executive's employment
terminates during the Term of this Agreement due to his death, a disability that
results in his collection of any long-term disability benefits, or retirement at
or after age 62, the Executive (or the beneficiaries of his estate) shall be
entitled to receive the compensation and benefits that the Executive would
otherwise have become entitled to receive pursuant to subsection (d) hereof upon
a resignation without Good Reason.
12. No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, and no such
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payment shall be offset or reduced by the amount of any compensation or benefits
provided to the Executive in any subsequent employment.
13. Change in Control.
(a) Notwithstanding any provision herein to the contrary, if a
Trigger Event occurs during the Protected Period, the Executive shall be paid an
amount equal to the Code ss. 280G Maximum. Said sum shall be paid in one lump
sum within ten (10) days of such termination, unless more than 90 days before
the Change in Control the Executive shall have filed an election to collect
benefits over a period of up to five years, in which event interest shall accrue
on unpaid amounts at a rate determined pursuant to Section 1274(d) of the Code.
(b) Not later than three business days after a Change in Control,
the Company shall (a) deposit in a grantor trust (the "Trust"), having terms
consistent with Revenue Procedure 92-64, an amount that the Company reasonably
projects to be sufficient to fund the payment of all benefits that are or may
become payable, pursuant to this Agreement, and (b) provide the trustee of the
Trust with a written direction both to hold said amount and any investment
return thereon in a segregated account for the benefit of Executive, and to
follow the procedures set forth in the next paragraph as to the payment of such
amounts from the Trust. The provisions of this Section shall be null and void
only if the Executive provides a written release of all claims under this
Agreement.
During the 27-consecutive month period after a Change in Control, the
Executive may provide the trustee of the Trust with a written notice directing
the trustee to pay to Executive an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall pay such amount to the Executive,
and coincidentally shall provide the Company or its successor with notice of
such payment. Upon the earlier of the Trust's final payment of all amounts due
under the preceding paragraph or the date 27 months after the Change in Control,
the trustee of the Trust shall pay to the Company the entire balance remaining
in the segregated account maintained for the benefit of the Executive. The
Executive shall thereafter have no further interest in the Trust.
14. Reimbursement for Litigation Expenses.
In the event that any dispute arises between the Executive and the
Company as to the terms or interpretation of this Agreement, whether instituted
by formal legal proceedings or otherwise, including any action that the
Executive takes to enforce the terms of this Agreement or to defend against any
action taken by the Company, the Executive shall be reimbursed for all costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, provided that the Executive shall obtain a final
judgement by a court of competent jurisdiction in favor of the Executive. Such
reimbursement shall be paid within ten (10) days of Executive's furnishing to
the Company written evidence, which may be in the form, among other things, of a
cancelled check or receipt, of any costs or expenses incurred by the Executive.
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15. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding
upon any corporate or other successor of the Company which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Company.
(b) Since the Company is contracting for the unique and personal
skills of the Executive, the Executive shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Company.
16. Corporate Authority. Company represents and warrants that the
execution and delivery of this Agreement by it has been duly and properly
authorized by the Executive's Board of Directors and that when so executed and
delivered this Agreement shall constitute the lawful and binding obligation of
the Company.
17. Amendments. No amendments or additions to this Agreement shall be
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of New York shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement between the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
Witnessed by: NEWTEK CAPITAL, INC.
By
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Secretary Its
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Witnessed by:
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Xxxxxxx Xxxxx
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