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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT MADE AS OF THE 1ST DAY OF JUNE, 1998, BY AND BETWEEN
XXXXXX INTERNATIONAL LTD., AN ONTARIO CORPORATION, HAVING AN XXXXXX XX 0 XXXXXX
XXXXXXXX, XXXXXXX, XXXXXXX (HEREINAFTER REFERRED TO AS "EMPLOYER") AND XXXXX
XXXXXX, AN INDIVIDUAL RESIDING AT 00 XXXXXXXXX XXXXXX, XXXXXXX, XXXXXXX
(HEREINAFTER REFERRED TO AS "EMPLOYEE");
W I T N E S S E T H :
WHEREAS Employer employs and desires to continue to employ Employee as
Chairman of the Board, Secretary-Treasurer and Principal Accounting Officer;
AND WHEREAS Employee is willing to continue to be employed as Chairman of
the Board, Secretary-Treasurer and Principal Accounting Officer in the manner
provided for herein, and to perform the duties of Chairman of the Board,
Secretary-Treasurer and Principal Accounting Officer of Employer upon the terms
and conditions herein set forth;
NOW THEREFORE in consideration of the promises and mutual covenants herein
set forth it is agreed as follows:
1. EMPLOYMENT
Employer hereby employs Employee as Chairman of the Board,
Secretary-Treasurer and Principal Accounting Officer of Employer.
2. TERM
Subject to Section 10 below, the term of this Agreement shall commence on
June 1, 1998 (the "Commencement Date") and expire two (2) years from such date.
Each twelve (12) month period from the Commencement Date forward during the term
hereof shall be referred to as an "Annual Period". During the term hereof,
Employee shall devote substantially all of his business time and efforts to
Employer and its subsidiaries and affiliates.
3. DUTIES
The Employee shall perform those functions generally performed by persons
of such title and position, shall attend all meetings of the stockholders and
the Board, shall perform any and all related duties and shall have nay and all
powers as may be prescribed by resolution of the Board, and shall be available
to confer and consult with and advise the officers and directors of Employer at
such times that may be required by Employer at such times that may be required
by Employer. Employee shall report directly and solely to the Board.
4. COMPENSATION
(a) (i) Employee shall be paid $175,000.00 U.S. for each Annual Period,
payable not less than monthly;
(ii) Employee is eligible for an annual bonus of $25,000.00 U.S.
payable upon achievement by Employer of its projected net income
as set out on Schedule "A" attached hereto.
(b) (i) In the event of a "Change of Control" whereby:
(A) a person (other than a person who is an office or a Director of
Employer on the effect date hereof), including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, becomes, or obtains the right to become, the beneficial
owner of Employer securities having 30% or more of the combined
voting power of then outstanding securities of the Employer
that may be cast for the election of directors of the Employer;
(B) at any time, the Board nominated slate of candidates for the
Board is not elected;
(C) Employer consummates a merger in which it is not the surviving
entity;
(D) substantially all of Employer's assets are sold; or
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(E) Employer's stockholders approve the dissolution or liquidation
of Employer; then
(ii) (A) Employee shall be eligible to receive a one time bonus, equal
on an after-tax basis to one and one-half (1 1/2) times his
then current annual base salary. To effectuate this provision,
the bonus shall be "grossed-up" to include the amount
necessary to reimburse Employee for his federal, state,
provincial and local income tax liability on the bonus and on
the "gross-up" at the respective effective marginal tax rates.
In no event shall this bonus exceed three times Employee's
then current base salary. Said bonus shall be paid within
thirty (30) days of the Change of Control.
(B) All stock options, warrants and stock appreciation rights
("rights") granted by Employer to Employee under any plan or
otherwise prior to the effective date of the Change of
Control, shall become vested, accelerate and become
immediately exercisable.
(c) Employer shall include Employee in its health insurance program
available to Employer's executive officers and shall pay 100% of the
premiums for such program;
(d) Employee shall have the right to participate in any other employee
benefit plans established by Employer;
(e) Employee shall be entitled to a car provided to him by the Company and
the Company will pay all insurance and maintenance and expenses in
connection therewith in an amount of at least $1,000.00 U.S. monthly;
(f) In the event that this Agreement is not renewed between Employer and
Employee following a Change of Control on terms mutually satisfactory
to Employer and Employee, then the foregoing provisions of Section
4(b)(ii)(A) and (B) shall apply.
5. BOARD OF DIRECTORS
Employer agrees that so long as this Agreement is in effect, Employee will
be nominated to the Board as part of management's slate of Directors.
6. EXPENSES
Employee shall be reimbursed for all of his actual out of pocket expenses
incurred in the performance of his duties hereunder, provided such expenses are
acceptable to Employer, which approval shall not be unreasonably withheld, for
business related travel and entertainment expense, and that Employee shall
submit to Employer reasonably detailed receipts with respect thereto.
7. VACATION
Employee shall be entitled to receive 4 weeks paid vacation time after each
year of employment upon dates agreed upon by Employer. Upon separation of
employment, for any reason, vacation time accrued and not used shall be paid at
the salary rate of Employee in effect at the time of employment separation, to a
maximum accrued amount equivalent to four (4) weeks paid vacation.
8. SECRECY
At no time shall Employee disclose to any unauthorized person any
confidential or secret information (not already constituting information
available to the public) concerning internal affairs or proprietary business
operations of Employer.
9. TERMINATION
(a) TERMINATION BY EMPLOYER
(i) Employer may terminate this Agreement upon written notice for
Cause. For purposes hereof, "Cause" shall mean (A) engaging by the
Employee in conduct that constitutes activity in direct
competition with Employer; and/or (B) any action or omission of
the Employee which constitutes a willful and material breach of
this Agreement which is not cured or as to which
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diligent attempts to cure have not commenced within thirty (30)
business days after receipt by Employee of notice of same, and/or
(C) fraud, embezzlement or misappropriate as against the Employer,
and/or (D) the conviction (from which no appeal can be taken) of
Employee for any criminal act which is a felony, and/or (E) the
habitual abuse of alcohol or controlled substances. Notwithstanding
anything to the contrary in this Section 9(a)(I), Employer may not
terminate Employee's employment under this Agreement for Cause
unless Employee shall have first received notice from the Board
advising Employee of the specific acts or omissions alleged to
constitute Cause, and such acts or omissions continue after
Employee shall have had a reasonable opportunity (at least 10 days
from the date Employee received the notice from the Board) to
correct the acts or omissions so complained of.
(ii) Employer may terminate Employee's employment under this Agreement
if, as a result of any physical or mental disability, Employee
shall fail or be unable to perform his duties under this Agreement
for any consecutive period of 180 days during any twelve month
period. If Employee's employment is terminated under this Section
9(a)(ii): (A) Employee shall be paid twice his full compensation
under Section 4(a) of this Agreement for a period of two (2) years
from the date of termination; and (B) Employee shall continue to
be entitled, insofar as is permitted under applicable insurance
policies or plans, to such general medical and employee benefit
plans (including profit sharing or pension plans) as Employee had
been entitled to on the date of termination. Any amounts payable
by Employer to Employee under this paragraph shall be reduced by
the amount of any disability payments payable by or pursuant to
plans provided by Employer and actually paid to Employee.
(iii) this Agreement automatically shall terminate upon the death of
Employee, except that Employee's estate shall be entitled to
receive one and one half times the compensation payable under
Section 4(a) of this Agreement for a period of two (2) years from
the date of Employee's death and the pro rata amount payable under
Section 4(a)(ii) for the period prior to Employee's death and any
other amount to which Employee was entitled at the time of his
death.
(b) TERMINATION BY EMPLOYEE
Anything herein to the contrary notwithstanding, Employee may terminate
this Agreement upon 30 days written notice, in which event Employee shall
be entitled to only to his compensation pursuant to Section 4(a)(i) to
the date of termination and any stock option rights which have vested to
the date of termination.
(c) INSURANCE
Employer will have the right to place insurance on Employee's life and/or
disability insurance, at Employer's expense, to cover payments under
Sections 9(a)(ii) and (iii). Employer will use reasonable efforts to
obtain and maintain such insurance.
10. REMEDIES
Employer recognizes that because of Employee's special talents, stature and
opportunities in the wholesale electronics industry, and because of the special
creative nature of and compensation practices of said industry and the material
impact that individual projects can have on a wholesale electronics company's
results of operations, in the event of termination by Employer hereunder (except
under Section 9(a)(I)), the Employer acknowledges and agrees that the provisions
of this Agreement regarding further payments of base salary, bonuses and the
exercisability of rights constitute fair and reasonably provisions for the
consequences of such termination, do not constitute a penalty, and such payments
and benefits shall not be limited or reduced by amounts Employee might earn or
be able to earn from any other employment or ventures during the remainder of
the agreed term of this Agreement.
11. FULL TIME AND ATTENTION
During the term of this Agreement, Employee shall devote his full time and
personal attention to the
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business of Employer and shall not engage in any other business or occupation
without first having obtained the consent in writing of Employer; provided that
nothing herein shall be construed so as to prevent Employee from making
investments of a strictly passive nature so long as the undertaking forming the
subject matter of any such investment is not competitive with the business or
undertaking from time to time carried on by Employer. Further, nothing shall
restrict Employee from investing in any shares of any corporation which competes
with the business or undertaking of Employer and whose shares are publicly
traded, so long as Employee does not own, directly or indirectly, more than five
(5%) percent of the issued and outstanding shares of such corporation.
12. INDEMNIFICATION
To induce Employee to accept employment and continue as an officer and
director of Employer and its subsidiaries, Employer agrees to indemnify and hold
harmless Employee from any losses, expenses (including attorneys' fees),
judgments, fines, amounts paid in settlement actually and reasonably incurred by
him in any investigation, action, suit or proceeding, including any appeal
thereof, and any other costs in connection with any proceeding or claim made
against Employee involving him by reason of his being or having been an officer
and/or director of Employer and/or its subsidiaries, if he acted in good faith
and in a manner he reasonably believe to be in or not opposed to the best
interest of Employer and/or its subsidiaries, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. This indemnification provision is not to otherwise modify or limit in
any way the indemnification provided by the corporate law of the Province of
Ontario or that provided in Employer's Articles of Incorporation or By-laws, and
is to provide Employee with the fullest indemnification in accordance with the
law.
13. ARBITRATION
Any controversies between Employer and Employee involving the construction
or application of any of the terms, provisions or conditions of this Agreement
shall on the written request of either party served on the other be submitted to
arbitration. Such arbitration shall comply with and be governed by the
provisions of the Ontario Arbitrations Act. An arbitration demand must be made
within one (1) year of the date on which the party demanding arbitration first
had notice of the existence of the claim to be arbitrated, or the right to
arbitration along with such claim shall be considered to have been waived. An
arbitrator shall be selected according to the procedures of the Ontario
Arbitrations Act. The cost of arbitration shall be born by the losing party or
in such proportions as the arbitrator shall decide. The arbitrator shall have no
authority to add to, subtract from or otherwise modify the provisions of this
Agreement, or to award punitive damages to either party. Any submission to
arbitration shall be a condition precedent to the bringing of any court
proceeding in any jurisdiction.
14. ATTORNEY'S FEES AND COSTS
If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which he may be entitled.
15. ENTIRE AGREEMENT; SURVIVAL
(a) This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated herein and supersedes,
effective as of the date hereof any prior agreement or understanding
between Employer and Employee with respect to Employee's employment by
Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other provision. This
Agreement may not be amended except by an agreement in writing signed
by the Employee and the Employer, or any waiver, change, discharge or
modification as sought. Waiver of or failure to exercise any rights
provided by this Agreement and in any respect shall not be deemed a
waiver of any further or future rights.
(b) The provisions of this Agreement shall survive the termination
thereof, where applicable.
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16. ASSIGNMENT
This Agreement shall not be assigned to other parties.
17. GOVERNING LAW
This Agreement and all the amendments thereof, and waivers and consents
with respect thereto shall be governed by the laws of the Province of Ontario,
without regard to the conflicts of laws principles thereof. The forum for any
arbitration or proceedings shall be within the Province of Ontario.
18. NOTICES
All notices, responses, demands or other communications under this
Agreement shall be in writing and shall be deemed to have been given when
(a) delivered by hand;
(b) send by telex or telefax, (with receipt confirmed), provided that a
copy is mailed by registered or certified mail, return receipt
requested; or
(c) received by the addressee as sent be express delivery service (receipt
requested) in each case to the appropriate addresses, telex numbers
and telefax numbers as the party may designate to itself by notice to
the other parties:
(i) if to the Employer:
Xxxxxx International Ltd.
0 Xxxxxx Xxxxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Telephone: (000) 000-0000
Telefax: (000) 000-0000
with a copy to:
Grubner, Xxxxxx
Barristers & Solicitors
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telefax: (000) 000-0000
(ii) if to the Employee:
00 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
Any party may change an address, telex number or telefax number by notice
in writing.
19. SEVERABILITY OF AGREEMENT
Should any part of this Agreement for any reason be declared invalid by a
court of competent jurisdiction, such decision shall not affect the validity of
any remaining portion, which remaining provisions shall remain in full force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties that they
would have executed the remaining portions of this Agreement without including
any such part, parts or portions which may, for any reason be hereafter declared
invalid.
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IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
day and year first above written.
XXXXXX INTERNATIONAL LTD.
Per: /s/ XXXXX XXXXXX
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Xxxxx Xxxxxx
/s/ XXXXX XXXXXX
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Xxxxx Xxxxxx
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SCHEDULE "A"
SECTION 4(A)(II) -- PROJECTED GROSS REVENUE AND NET INCOME FOR ENTITLEMENT OF
BONUS
For fiscal year ending May 31, 1999 -- U.S. $32,430,000 gross revenue and U.S.
$1,657,000 net income
For fiscal year ending May 31, 2000 -- U.S. $45,120,000 gross revenue and U.S.
$2,354,000 net income
