ATLANTIC INTERNATIONAL ENTERTAINMENT
EMPLOYNENT AGREEMENT
EMPLOYMENT AGREEMENT effective as of the 1st day of May, 1997, by and
between XXXXXXX X. XXXXXXX, an individual residing at 000 XX 00xx Xxxxxx, Xxxx
Xxxxx, XX 00000 ("Executive"), and ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD., a
Delaware corporation with its principal offices at 0000 Xxxxxxxxx Xxxxxxxxx,
Xxxxx 000, Xxxx Xxxxx, XX 00000 (the "Company").
W I T N E S S E T E:
WHEREAS, the Company, through its wholly-owned or controlled
subsidiaries, is engaged in a variety of businesses, including gaming, wagering
and internet software development and related telecommunications and financial
advisory and business consulting services; and
WHEREAS, the Company, desires the Executive to serve, and the Executive
is willing to serve, as the Company's Chief Executive Officer on and subject to
the terms set forth in this Agreement;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. Employment. The Company hereby employs the Executive as its Chief
Executive Officer for the Term of this Agreement (as hereinafter defined)
subject to and in accordance with the terms, conditions and provisions of this
Agreement. The Executive shall also serve as an executive officer of such of the
Company's wholly-owned or controlled subsidiaries (the "Subsidiaries") which
shall include any entity existing as of the date hereof or formed or acquired
during the Term hereof, including corporations, partnerships, limited liability
companies, joint ventures or other entities (each an "entity" and collectively,
the "Entities"), owned or controlled by the Company or by any Entity owned or
controlled by any such Entity, to which Executive may be elected by the board of
directors of any such Subsidiary. The Executive shall also serve in such other
positions or capacities, not inconsistent with his position as Chief Executive
Officer of the Company or the provisions of this Agreement, to which he may be
elected by the Board or by the board of directors of any Subsidiary or to which
he may be assigned by the Board from time to time during the Term hereof. The
Company shall, subject to the Executive's consent, cause the Executive to be
nominated and elected to the Board and to the boards of directors of such of the
Subsidiaries as the Board may determine. The Executive hereby accepts such
employment upon and subject to the terms, conditions and provisions of this
Agreement.
2. Executive' s Duties and Responsibilities.
(a) During the Term hereof, the Executive will perform all of the
services customarily associated with the position of chief executive officer
including, without limitation, services on behalf of any Subsidiary of which he
may serve as an officer, subject to the policies established by and at the
direction of the Board.
(b) The Executive will devote substantially all of his business time,
attention and efforts to the performance of his duties under this Agreement
during the Term hereof and shall perform such duties diligently, in good faith
and in a manner consistent with the best interests of the Company. The Executive
will use his best efforts at all times during the Term hereof to preserve,
protect, enhance and maintain the trade, business and goodwill of the Company.
Subject to the provisions of subparagraphs 7(b) and (c) hereof, the Executive
will perform his services wherever his services may reasonably be required, but
principally at the principal offices of the Company, which are currently located
at the address set forth above.
3. Term: Severance.
(a) The term of this Agreement (the "Term") commenced in January 1997
and shall expire on December 31, 2000, subject to earlier termination as
provided in subparagraph 3(b) below:
(b) This Agreement shall terminate prior to December 31, 2000, upon the
occurrence of any of the following events:
(i) The death of the Executive;
(ii) The Permanent Disability, as hereinafter defined, of the
Executive, subject to the provisions of Paragraph 8 of this Agreement;
(iii) Entry of a final judgment by a court of competent
jurisdiction that there has been a breach or default by the Executive in the
performance or observance of any of the provisions of Paragraph 9 of this
Agreement;
(iv) Entry of a final judgment by a court of competent
jurisdiction that there has been repeated and deliberate misconduct by the
Executive;
(v) Entry of a final judgment by a court of competent
jurisdiction that there has been a repeated breach of trust or other repeated
action by which the Executive has obtained a material personal gain (other than
as provided for in this Agreement or consented to by the Board) at the material
expense or to the material detriment of the Company;
(vi) Entry of a final judgment by a court of competent
jurisdiction that there has been a failure by the Executive to perform the
customary duties of his position; provided that the Executive is furnished with
notice of such breach from the Company, which notice sets forth with
particularity such alleged failures, and the Executive fails to cure any such
breach within thirty (30) days of such notice. If the alleged breach is of a
type that cannot be cured within thirty (30) days, no breach shall exist under
this subparagraph 3(b)(vi) if the Executive has undertaken and is diligently
pursuing such cure;
(vii) Upon notice to the Company by the Executive of the
termination of this Agreement for any breach or default by the Company of any of
its obligations or covenants under this Agreement; provided that any such breach
or default is not cured within thirty (30) days of such notice; or
(viii) In the event of a Change of Control, as hereinafter
defined, during the Term hereof, the Executive may terminate this Agreement upon
ninety (90) days notice to the Company. For purposes of this Agreement, the term
"Change of Control" shall mean the date on which the Company sells all or
substantially all of its assets, sells more than 20% of the outstanding capital
2
stock of any one or more subsidiaries, the aggregate gross revenues of which
constitute 33-1/3% or more of the gross revenues of the Company on a
consolidated basis, merges with or into or consolidates with any Entity, issues
to an independent, non-affiliated third party such number of shares of its
outstanding capital stock (or equity or debt securities convertible into or
exchangeable for shares of the Comp any's capital stock) as shall equal twenty
five percent (25%) or more of its total issued and outstanding shares of capital
stock, or Executive is removed from the Board, without cause, provided, however,
that a Change of Control shall not be deemed to occur as a result of or in
connection with any recapitalization or public offering of the Company's
securities or the occurrence of any of the foregoing transactions which is
approved by the Executive. For the purpose of this subparagraph 3(b)(viii), a
merger transaction shall mean the merger or consolidation of the Company with or
into any other Entity; or
(ix) Upon thirty (30) days notice from Executive if Executive is
removed from the Board without cause; or
(x) Upon seven days notice from Executive in the event of the
entry by a court of competent jurisdiction of a decree or order for relief in
respect of the Company in an involuntary case under any applicable bankruptcy,
insolvency, or similar law then in effect or the appointment of a receiver,
liquidator, assignee, custodian, trustee, or sequestrator of the Company or for
any substantial part of its property or an order by any such court for the
wind-up or liquidation of the Company's affairs; or a petition initiating an
involuntary case under any such bankruptcy, insolvency, or similar law is filed
against the Company and is pending for sixty (60) days without a stay or
dismissal; or the Company commences a voluntary case under any such bankruptcy,
insolvency, or similar law then in effect, or makes any general assignment for
the benefit of its creditors or fails generally to pay its debts as such debts
become due or takes corporate action in furtherance of any of the foregoing.
(c) In the event of a Change of Control of any Subsidiary to which
Executive renders services pursuant to this Agreement, or the occurrence of any
event with respect to any such subsidiary under subparagraphs 3(b)(vii) or
3(b)(ix), the Executive shall have the right to resign as an officer and/or
director of such Subsidiary; provided, however, that such resignation shall not
affect the compensation or any benefits payable to the Executive, or any rights
of the Executive pursuant to this Agreement.
4. Compensation. In consideration of the performance by the Executive
of the services to be performed by him under this Agreement during the Term
hereof, the Company will pay to the Executive the following compensation:
(a) (i) An annual salary at the rate of One Hundred Forty-four Thousand
Dollars ($144,000), plus the increases thereto hereinafter referred to (the
"Salary") from January 1, 1997 through the remainder of the Term hereof. The
Salary shall be paid to the Executive in equal bi-weekly installments (after the
deduction of all applicable withholding and other required payroll deductions),
in arrears, during the Term hereof. The Salary may be increased at any time and
from time to time by the Board during the Term hereof. The term "Salary" shall
also include all such increases as well as all increases pursuant to
subparagraph 4(a)(ii) below.
3
(ii) Commencing January 1, 1998 and on each January 1 thereafter
during the Term hereof, the Executive shall receive an increase in Salary equal
to the greater of (A) five percent (5%) of the Salary in effect for the year
prior to such increase, or (B) the increase, if any, in the Cost of Living
Index, as hereinafter defined. The Company will, on the next payroll date
following the publication of such Cost of Living Index, pay to the Executive all
amounts of such increased salary determined in accordance with the preceding
sentence for the period commencing on the 1st day of January of such year
through such payroll date.
(iii) For purposes of this subparagraph-4(a), the increase in the
Cost of Living Index shall be computed as follows:
(A) The Cost of Living Index, as hereinafter defined, for each
December, commencing with December 1996, shall be compared with the Cost of
Living Index for December of the previous year. The increase in the Cost of
Living Index shall mean the percentage increase in the Cost of Living Index from
the previous December to the December as of which the computation is made. Such
determination shall be made as soon as possible after publication of the Cost of
Living Index for the December as of which the computation is being made.
(B) The Cost of Living Index shall mean the "Consumers Price
Index for Urban Wage Earners and Clerical Workers (Revised Series) - Boca Raton
Metropolitan Area," published by the Bureau of Labor Statistics of the United
States Department of Labor. If the said Cost of Living Index in the form in
which it is published as of the date of this Agreement or the calculation basis
thereof shall be revised or discontinued, the parties shall attempt in good
faith to modify the provisions of this subparagraph 4(a)(ii) on a basis which
will provide a method of calculation consistent with the method described herein
for prior years.
(b) (i) A bonus for each calendar year during the Term of this
Agreement (the "Bonus") commencing with the year ending December 31, 1997, equal
to Five percent (5%) of the amount by which the greater of (A) the Company's
consolidated net income before income taxes, determined in accordance with
generally accepted accounting principles applied on a basis consistent with
prior years or (B) the Company's Consolidated Net Cash Flow, as hereinafter
defined, exceeds Six Hundred Thousand Dollars ($600,000). "Consolidated Net Cash
Flow" shall mean (A) consolidated net income, plus (B) depreciation,
amortization and other non-cash items of expense, minus (C) payments of all
principal amounts of then outstanding indebtedness, all determined in accordance
with generally accepted accounting principles applied on a basis consistent with
prior years. The computation of consolidated net income before income taxes and
Consolidated Net Cash Flow shall be made in a manner consistent with the
financial statements included in the Company's Annual Report on Form 10-K for
the year with respect to which the Bonus is computed; provided, however, that
such computation shall be made without any deduction for the Bonus payable to
the Executive pursuant to this subparagraph 4(b). Such computation shall be made
by the Company's independent auditors, whose determination shall be final,
binding and conclusive on the parties (subject to the provisions of subparagraph
4(b)(iii) hereof)
4
(ii) The Bonus shall be payable to the Executive on or before the
later of (A) thirty (30) days following the completion of the audited
consolidated financial statements of the Company, or (B) May 1 of each such
year, or (C) within ten (10) days after the final resolution of any disagreement
with respect to the calculation of consolidated net income before income taxes
or Consolidated Net Cash Flow pursuant to subparagraph 4(b)(iii) of this
Agreement. In the event of any termination of this Agreement prior to the end of
any calendar year during the Term hereof, the Company will pay to the Executive
(or, in the case of early termination due to the Executive's death, to his
beneficiary, as hereinafter defined), with respect to the year in which any such
termination occurs, a portion of the Bonus which shall be determined by
calculating the Bonus for the entire year in which such termination occurs and
multiplying such Bonus by a fraction, the numerator of which is the number of
months in such year prior to the month in which such termination occurs and the
denominator of which shall be twelve (12), unless such termination results from
an event or occurrence described in subparagraphs 3(b)(iv) or 3(b)(v) of this
Agreement, in which case, notwithstanding any provision of this Agreement to the
contrary, the Company will have no obligation to make any payment of the Bonus
to the Executive for the year in which such termination occurs. As used in this
Agreement, the term "Beneficiary" shall mean the person designated by the
Executive by an instrument signed by the Executive, acknowledged before a notary
public and delivered to the Company. In the event that the Executive fails to
designate a beneficiary as provided in the previous sentence, his estate shall
be deemed to be his beneficiary.
(iii) The Company shall deliver to the Executive with each Bonus
payment a report setting forth the calculation of consolidated net income before
income taxes and Consolidated Net Cash Flow for the year with respect to which
such Bonus is computed in accordance with subparagraph 4(b)(i) of this
Agreement. Unless the Executive notifies the Company within fifteen (15)
business days after receipt of said calculations of his disagreement therewith
(which notice shall state with reasonable specificity the reasons for any such
disagreement and the amounts in dispute), such calculations will be final,
binding and conclusive on the Executive. If there is a disagreement of which the
Company is so notified by the Executive, and the disagreement cannot be resolved
by the Company and the Executive within sixty (60) days following the delivery
of such notice, the items in dispute may be submitted by either the Company or
the Executive to the Company's independent auditors (with a copy being furnished
to the other party). After affording each of the Company and the Executive the
opportunity to present their respective positions (which opportunity shall not
extend for more than ten (10) business days following the submission of such
disputed items to such auditors), the Company's independent auditors shall
determine what changes, if any, are required in the calculations, and such
determination shall be final, binding and conclusive on the Company and the
Executive. The fees, costs and expenses of such independent auditors shall be
borne by the Company.
(iv) The Executive and his duly authorized representatives shall
have the right, at his sole expense, upon reasonable advance notice and during
normal business hours at the Company's offices, to examine and copy the books
and records of the Company relating to its financial statements and/or any sums
payable to Executive under this Agreement.
5
(c) In the event of a termination of this Agreement pursuant to
subparagraphs 3(b)(i), (ii), (vii), (viii), (ix) or (x) of this Agreement, the
Executive will be entitled to receive from the Company, in addition to any
Salary and Bonus payable pursuant to this Paragraph 4, and the Company will pay
to the Executive, severance compensation as follows:
(i) In the event of any termination of the Term hereof pursuant
to subparagraph 3(b)(i) of this Agreement, the Company will pay to the
Executive's beneficiary the face value of the life insurance policy to be
maintained by the Company pursuant to subparagraph 5(b) of this Agreement. In
the event that the Company fails to maintain such insurance, unless such failure
results from the Company having a lack of sufficient funds to pay the premiums
therefor, the Executive's failure to pass an insurance physical or the Executive
being otherwise uninsurable, the Company will pay such amount in forty-eight
(48) equal consecutive monthly installments, the first of which shall be due and
payable on the first day of the first month following the month in which the
Executive's death occurs.
(ii) In the event of the termination of this Agreement pursuant
to subparagraph 3(b)(ii) of this Agreement, the Executive will be entitled to
receive the payments provided for in subparagraph 8(b) of this Agreement.
(iii) In the event of the termination of this Agreement pursuant
to subparagraphs 3(b)(vii), (viii), (ix) or (x) of this Agreement, the
Executive, his legal representative or his beneficiary, as the case may be, will
continue to receive the Executive's then Salary in equal monthly installments,
in advance, for a period of one hundred twenty (120) months from the date of any
such termination.
(d) In the event of the sale, during the Term hereof, of the stock,
business or assets of the Company or any Subsidiary of the Company, the
Executive shall be entitled to a profitsharing bonus (the "Profit-Sharing
Bonus") equal to ten percent (10%) of the gross profit (determined as provided
below), if any, received by the seller in such transaction (the "Seller") as a
result of such sale. In the event of any such sale in which the purchase price
is paid in cash or marketable securities, or a combination of cash and
marketable securities, the Profit-Sharing Bonus shall be paid by delivery to the
Executive by the Seller of cash and/or marketable securities in the same
proportion as received by the Seller. In all other events, the Profit-Sharing
Bonus shall be payable in cash or in such other manner as to which the Executive
and the Company may agree prior to the consummation of such sale. Each
Profit-Sharing Bonus shall be payable by the Seller to the Executive within
twenty (20) days following the date of any such sale and each such payment shall
be accompanied by a document, signed by the Chief Financial Officer of the
Company, showing the Seller's adjusted cost basis in the stock, business or
assets sold, the gross sale price, the gross profit on such sale, which shall be
the Seller's gross sale price less the Seller's adjusted cost basis in the
stock, business or assets sold (the "Gross Profit"), the amount of the
Profit-Sharing Bonus payable and a description and statement of the value of
each kind of property, other than cash, being delivered in payment of the
Profit-Sharing Bonus (the "Bonus Certificate"). The adjusted cost basis of the
Seller in the stock, business or assets being sold, the value of each kind of
property, other than cash, received by the Seller in such sale, the gross sale
price and the amount of the Profit-Sharing Bonus shall be determined by the
Company's
6
independent auditors. If the Executive shall not have disputed the amount of
such payment, the accuracy or completeness of the Bonus Certificate and/or the
information set forth in such Bonus Certificate within thirty (30) days of the
receipt of payment of any Profit-Sharing Bonus under this subparagraph 4(d) and
the related Bonus Certificate, then the information set forth in the Bonus
Certificate shall be conclusive and binding upon the parties. If the Executive
desires to dispute the amount of such payment, the accuracy or completeness of
the Bonus Certificate and/or the information set forth therein, such dispute
shall be conducted and resolved in accordance with the procedures set forth in
the third, fourth and fifth sentences of subparagraph 6(i) of this Agreement.
The Bonus Certificate to which any such dispute relates will be promptly
modified following the resolution of any such dispute to reflect such
resolution.
(e) In the event of the Retirement (as hereinafter defined) of the
Executive, the Executive or his legal representative or beneficiary, as the case
may be, will continue to receive, as and for retirement compensation, an amount
equal to one-twelfth of the greater of (i) the Executive's Salary for the year
in which Retirement occurs, or (ii) the average of the Executive's Salary and
Bonus for each of the five (5) years immediately preceding the year in which
Retirement occurs, for a period of twenty (20) months from the date of
commencement of such Retirement. The amount calculated pursuant to the preceding
sentence shall be payable, in equal monthly installments, in arrears. For the
purpose of this subparagraph 4(e), "retirement" shall be deemed to have occurred
at the expiration of the Term or any renewal Term of this Agreement or upon
termination of the employment provided for herein prior to the expiration of the
Term by the mutual consent of the Executive and the Company.
5. Executive Benefits. In addition to the Salary, Bonus and severance
compensation, the Executive will receive the following benefits:
(a) The Executive will be entitled to four (4) weeks paid vacation and
fifteen (15) paid sick days during each calendar year of the Term hereof
commencing with 1997. The Executive will take such vacation at such times as
will not unreasonably interfere with significant activities of the Company and
upon reasonable advance notice to the Company. Any unused vacation or sick days
shall be paid to the Executive by the Company at the end of each year of the
Term hereof based upon Executive's then Salary.
(b) The Company will pay for and maintain for the Executive during the
Term of this Agreement, disability insurance providing for the payment to the
Executive of a minimum of sixty percent (60%) of his Salary for any "disability"
as defined in such disability insurance policy. The Company will also pay and
maintain for the Executive during the Term hereof, major medical,
hospitalization, dental and vision insurance (which insurance will cover the
Executive and members of his immediate family, as defined in the applicable
insurance policies) and life insurance upon the life of the Executive having a
face value of not less than One Million Dollars ($1,000,000), the proceeds of
which shall be payable to such beneficiary(ies) as shall be designated by the
Executive from time to time during the Term hereof, or, in the absence thereof,
Executive's estate. The Company will maintain such disability, medical, dental,
and vision insurance in effect, at the Company's cost, for a period of one
hundred twenty (120) months after the expiration or termination of the Term
hereof unless this Agreement shall be terminated
7
pursuant to subparagraphs 3(b)(iii), (iv), (v) or (vi) of this Agreement, in
which case the Company will not be obligated to maintain such insurance. During
the Term hereof, any such life insurance policy which the Company is obligated
hereby to maintain will remain the property of the Company; provided, however,
upon the expiration of the Term hereof, the Executive will have the right to
have such life insurance policy assigned to him and the Company shall continue
to pay or reimburse the Executive for all costs therefor. The Company may, at
its election at any time during the Term hereof, obtain and maintain at its
cost, a key man life insurance policy on the Executive's life with the Company
as the beneficiary thereof, and the Executive will cooperate with the Company
and its insurer with respect to obtaining and maintaining in force such
insurance policy.
(c) The Company will provide the Executive with a late model luxury
automobile during the Term of this Agreement (and/or reimburse the Executive for
all costs incurred by him in connection therewith) with a maximum of $750.00 per
month. In addition, the Company will pay or reimburse the Executive for the cost
of insurance, gasoline, service and maintenance of such automobile upon
presentation of bills or other evidences of payment therefor.
(d) The Company agrees that nothing contained in this Agreement is
intended to, or shall be deemed to be a grant to the Executive in lieu of, or as
a limitation upon, any rights and privileges to which the Executive may
otherwise be entitled as an executive employee of the Company or any Subsidiary
under any retirement, pension, profit sharing, insurance, hospitalization or
other employee benefit plan of any type (including, without limitation, any
incentive, profit sharing, bonus or stock option plan), which may now be in
effect or which may hereafter be adopted or instituted by the Company or any
Subsidiary during the Term hereof of which the Executive is an officer or
director, it being understood that the Executive shall have the same rights and
privileges to participate in such Company and Subsidiary benefit plans as any
other officer or executive employee of the Company or any such Subsidiary.
6. Executive's Right to Participate in Future Expansion of the Company.
(a) From and after January 1997, and through the expiration or earlier
termination of the Term hereof, the\ Executive or his designees (who or which,
for the purposes\of this Paragraph 6, shall be deemed to be included in the
definition of and referred to as the "Executive"), shall have the right to and
benefit of participating in the future growth and expansion of the Company, as
hereinafter provided in this Paragraph 6.
(b) If the Company or its wholly-owned subsidiaries, or any subsidiary
of the Company shall propose to acquire, or enters into any agreement or other
understanding to acquire, by purchase, merger, consolidation or by or as a
result of any other form of business arrangement (including the establishment of
a new business) or combination (an "Acquisition"), all or any part of any
corporation, partnership, joint venture, proprietorship or other operating
business, or any equity interest in any such business (other than for investment
purposes only, for services rendered or as a fee, as provided for in
subparagraph 6(e) hereof), including, but not limited to, the acquisition of
common or preferred stock of any class or series, or options, warrants, rights
or other securities convertible into or exchangeable for common or preferred
stock of any class or series
8
(each a "Security" or collectively, the "Securities"), the Executive shall have
the right to form or cause to be formed, at his sole cost and expense, the
subsidiary or subsidiaries to be used by the Parent for such purpose (the
"Purchaser") and, in consideration of the Executive bearing such cost and
expense, the Executive shall receive, as of the date of the formation of any
such Purchaser, 5% of the Securities of each class and series of such Purchaser
which are issued at that time (the "Founder's Securities") Whether or not the
Founder's Securities of any Purchaser are physically issued on the date of the
formation of any such Parent, the Executive shall be deemed to have equitable
and beneficial ownership of 5% of such securities as of the date of formation of
any such Purchaser.
(c) If, subsequent to the formation of any such Purchaser, such
Purchaser issues, or agrees to issue, any Securities (other than as a dividend
or in respect of any Securities of such Purchaser then held by the Parent or
Executive), Executive shall, simultaneously and on the date of such issuance (or
on the date of such agreement to issue, if earlier), receive five (5%) percent
of such subsequently issued securities (the ~Subsequently Issued Securities"),
free and clear of all liens, charges and encumbrances. The purchase price
payable by Executive for any such Subsequently Issued Securities shall be the
same as provided for in subparagraph 6(g) with respect to the Investment
Securities referred to therein (except that the Purchase Date, for purposes of
this subparagraph (c), shall be the date on which the Subsequently Issued
Securities are approved for issuance by the Purchaser's Board of Directors) and
the payment terms therefor shall be the same as provided for in subparagraph
6(j) with respect to the Investment Securities referred to therein. Whether or
not the Subsequently Issued Securities of any Purchaser are physically issued,
the Executive shall be deemed to have equitable and beneficial ownership of five
(5%) percent of such securities as of the first date on which any recipient of
such securities became entitled to receive the same.
(d) Attached hereto as Schedule A is a Schedule as of the date hereof
setting forth the name, state of incorporation and date of formation of each
Purchaser, the capitalization of each Purchaser as of its date of formation, the
Founder's Securities of such Purchaser issued to the Executive, the costs and
expenses incurred and paid by the Executive in connection with the formation of
each such Purchaser, the Subsequently Issued Securities of each Purchaser, if
any, the Subsequently Issued Securities of each Purchaser owned by Executive,
the date of ownership of same and the purchase price paid by Executive therefor.
Each time, subsequent to the date of this Agreement, that a new Purchaser is
formed, the Executive shall prepare and deliver to the Company a supplement to
or an updated Schedule A which shall set forth the date of such supplement or
update and include the information specified in the preceding sentence with
respect to the new Purchaser. Each such supplement or updated Schedule A shall
be signed by the Executive when delivered to the Company and, upon receipt by
the Company, will be countersigned and returned to the Executive by the Chief
Financial Officer of the Company. Each time, subsequent to the date hereof, that
Subsequently Issued Securities are approved for issuance by the Board of
Directors of a Purchaser, the Company shall prepare and deliver to the Executive
a supplement to or an updated Schedule A which shall include the information
specified above with respect to the Subsequently Issued Securities. The
information with respect to the purchase price to be paid by the Executive for
inclusion in such supplement to or updated Schedule A shall be provided by the
Company on the basis of the terms and procedures provided for in subparagraph
6(g) (subject to Executive's right to dispute the same in the same manner as
provided in subparagraph 6(i)
9
hereof). Each such supplement to or updated Schedule A shall be signed by the
Chief Financial Officer of the Company when delivered to the Executive and, upon
receipt by the Executive and subject to the provisions relating to dispute
resolution specified in subparagraph 6(i), will be countersigned and returned to
the Chief Financial Officer of the Company by the Executive. Notwithstanding any
provision in this Agreement to the contrary, Schedule A attached hereto is
binding and conclusive on the parties hereto with respect to the accuracy of the
information set forth therein.
(e) If a Parent shall purchase or acquire any Securities solely for
investment purposes or in exchange for or in consideration of the performance of
services or as a fee, the Executive will purchase from the Parent, and the
Parent will sell to the Executive, simultaneously with and on the same date as
the acquisition of each such Security by the Parent (the "Purchase Date"), free
and clear of all liens, charges and encumbrances, ten (10%) percent of each such
Security (the "Investment Securities"). Notwithstanding the date on which legal
title to any such Security is transferred to the Executive by the Parent, the
Executive shall have equitable and beneficial ownership of such Security
concurrently with the acquisition of such Security by the Parent.
(f) Notwithstanding the provisions of any subparagraph of this
Paragraph 6, the Executive shall have no entitlement to any debt or equity
securities of the Company which are issued to or in any other manner become the
property of any subsidiary of the Company.
(g) The purchase price to be paid by the Executive for each Investment
Security purchased pursuant to subparagraph 6(e) hereof shall be an amount equal
to one hundred ten percent (110%) of the "fair market value" of each such
Security on the Purchase Date (the "Purchase Price"). The fair market value of
each such Security on the aforesaid date shall be determined by the Company's
then independent auditors who, in making such determination shall consider,
among such other criteria as they shall deem relevant, the purchasing Parent's
cost to acquire such Security, the net tangible book value per share of such
Security, the existence or absence of a trading market in such Security, the
magnitude of the public float of such Security, the trading volume, if any, of
such Security over such period of time as they shall deem relevant, any
restrictions, legal or otherwise, on the Executive's ability to freely trade
such Security in a public market, any other restrictions on the free
transferability or pledge of such Security, the value as collateral of such
Security, the value of the property or services delivered in exchange for such
Security and the current value and collectibility of any loans or advances made
or debt incurred by the purchasing Parent in connection with the acquisition of
such security.
(h) Attached hereto as Schedule B is a schedule setting forth as of the
date hereof each Investment Security purchased by the Executive prior to the
date hereof, the Purchase Price of each such Security, the date or dates of
acquisition of each such Security by a Parent, and the date of transfer to the
Executive of each such Security. Each time, subsequent to the date hereof that
the Parent acquires or otherwise obtains an Investment Security which is subject
to subparagraph 6(e) of this Agreement, the Company shall prepare and deliver to
the Executive a supplement to or an updated Schedule B which will set forth the
date of such supplement or update, the Investment Security acquired or otherwise
obtained by the Parent (including the type or designation of such Security, the
number of shares of such Security and the date of purchase
10
or acquisition thereof) the Purchase Price of such Security and the date of
transfer to the Executive of such Security. Each such supplement or updated
Schedule B shall be signed by the Chief Financial Officer of the Company when
delivered to the Executive and, upon receipt by the Executive, will be
countersigned and returned to the Company by the Executive (unless disputed in
accordance with the provisions of subparagraph 6(i) hereof). Notwithstanding any
provision in this Agreement to the contrary, Schedule B attached hereto is
binding and conclusive on the parties hereto as to the Investment Securities,
Purchase Price, and dates of acquisition and transfer as set forth in such
Schedule.
(i) The supplement or updated Schedule B provided for in subparagraph
6(h) hereof shall be prepared and delivered by the Company to the Executive
within thirty (30) days of the purchase or acquisition by a Parent of any
Investment Security, together with a notice of such purchase or acquisition (the
"Purchase Notice"). If the Executive shall not have disputed the computation of
the Purchase Price or date of acquisition by the Parent and transfer to the
Executive with respect to any Investment Security within thirty (30) days after
receipt of the Purchase Notice, then the information set forth in the Purchase
Notice shall be binding upon the parties and the Purchase Price shall be
immediately due and payable, as provided elsewhere herein. If the Executive
disputes the computation of the Purchase Price, or the date of acquisition by
the Parent or transfer to the Executive as set forth in the Purchase Notice, he
shall be required to give notice of such dispute to the Company within such
thirty (30) day period (the "Dispute Notice"). The Dispute Notice shall set
forth the Executive's computation of the Purchase Price with respect to such
Security (and/or the date of such acquisition and/or transfer), and, if the
Company and Executive shall not have agreed upon a Purchase Price (or such date
of acquisition and/or transfer) within thirty (30) days after the Company's
receipt of the Dispute Notice, the matter shall be submitted to the Company's
then independent auditors for a determination thereof and the decision of such
auditors shall be final, binding and conclusive on the Company, the Parent and
the Executive. Pending the determination by said auditors, payment of the
Purchase Price shall be made, as provided elsewhere herein, based upon the
purchase price set forth by the Executive in the Dispute Notice, subject to
adjustment thereto in the event that the Purchase Price is subsequently
determined by such auditors to be higher than that set forth in the Dispute
Notice. The fees of said auditors shall be paid by the Company. The supplement
or updated Schedule B to which the Dispute Notice relates will be promptly
modified following the resolution of any such dispute to reflect such
resolution.
(j) Payment of the Purchase Price with respect to any Investment
Security subject to the provisions of subparagraph 6(e) hereof shall be made by
the Executive immediately following the thirty (30) day period after Executive's
receipt of a Purchase Notice as referred to in subparagraph 6(i) hereof if
Executive does not dispute the same in accordance with the terms thereof or, if
disputed by Executive as provided therein, within ten (10) days after either any
resolution of the dispute between the Company and the Executive or the
submission of the dispute to the Company's independent auditors (subject to
adjustment, if any, as provided for in subparagraph 6(i) hereof), against
delivery by the purchasing Parent to the Executive of certificates or other
evidences of ownership of the ten (10%) percent of any such Investment Security
purchased by the Executive. Payment of the Purchase Price for any Investment
Security subject to the provisions of subparagraph 6(e) hereof may be made in
cash, by delivery of a five
11
(5) year recourse promissory note of the Executive (the "Note") bearing interest
to be payable annually within forty-five (45) days after the end of each year of
the term of the Note at the lowest rate necessary to avoid imputed interest
under the applicable provisions of the Internal Revenue Code of 1986, as amended
(such rate to be determined as of the Purchase Date), prepayable, in whole or in
time to time, without penalty or of the Company's Common Stock and/or any
publicly traded company (or other a publicly traded company as described below),
including affiliates of the Company or any such stock to be valued, for these
purposes, at the fair market value thereof on the date such stock is tendered in
payment of the Purchase Price. For the purposes of this subparagraph 6(j), the
fair market value of (A) any unregistered shares of common stock of a publicly
traded company shall mean the fair market value thereof as determined pursuant
to subparagraph 6(g) hereof, and (B) any registered shares of common stock of a
publicly traded company shall mean the closing price on the principal stock
exchange on which such shares are traded (if the shares are traded on the New
York or American Stock Exchange or other nationally recognized exchange) or on
The Nasdaq Stock Market or, if there are no sales on such date or if the shares
are not so listed, the average of the closing bid and ask prices as reported by
Nasdaq, the National Quotation Bureau, Inc. or similar entity selected by the
Board of Directors of the Company. In addition, fair market value, for the
purposes of this subparagraph 6(j), shall not include or reflect any discount or
reduction for any other restriction of any kind relating or applicable to the
securities tendered in payment of the Purchase Price. In the event that the
Executive tenders securities which are not publicly traded but which are
convertible into securities which are publicly traded, the tendered securities
shall be valued in the same manner as if they were fully converted on the date
tendered, even if, on the date tendered, the securities are not then
convertible. Payment of the principal and/or interest of any Note delivered as
payment for all or any part of the Purchase Price, may be made, in whole or in
part, at the election of the Executive, in shares of the Company's Common Stock
and/or shares of common stock of any publicly traded company (or any such
convertible securities) in accordance with the provisions set forth in this
subparagraph 6(j).
7. Expense Reimbursement.
(a) The Company will reimburse the Executive for all ordinary and
necessary expenses incurred by him in connection with the performance of his
services under this Agreement, subject to and upon receipt by the Company of
invoices or other supporting documentation in accordance with the Company's
expense reimbursement policies as in effect from time to time.
(b) In the event that the Company moves its corporate headquarters from
the New York metropolitan area, the Company will, if the Executive elects to
relocate, pay the Executive's reasonable moving expenses, including temporary
living accommodations for up to six months; provided. that the Company may not
require the Executive to relocate. In the event the Company so relocates its
corporate headquarters and the Executive elects not to relocate, the Company
will provide the Executive, at the Company's cost, with such offices and staff
in a location in the Boca Raton area as to which the Company and the Executive
may agree.
(c) In the event that the Company establishes multiple offices and the
Executive is required to spend any significant part of his time at more than one
Company office, the Company shall pay
12
to the Executive a housing allowance of Three Thousand Five Hundred Dollars
($3,500) per month for as long as more than one Company office is maintained;
provided, however, that following the closing of any such office, the Company
will reimburse the Executive for any costs incurred by him in moving and in
terminating any lease obligations and similar expenses.
8. Disability.
(a) In the event the Executive suffers any temporary disability during
the Term hereof, he shall continue to receive one hundred (100%) percent of the
Salary and Bonus to which he was entitled at the time he became so disabled for
any period of disability not in excess of six (6) consecutive calendar months.
The term "Permanent Disability" as used in this Agreement shall mean any
disability of the Executive for a period in excess of six (6) consecutive
calendar months. For the purpose of this subparagraph 8(a). the terms "Disabled"
and "disability" shall mean (i) any physical or mental illness, injury or other
incapacity which, in the opinion of a doctor reasonably satisfactory to the
Company and the Executive or his legal representative, renders the Executive
unable to perform substantially all of his duties under this Agreement, or (ii)
a judicial determination of incompetence. The date that any such disability
shall be deemed to have commenced shall be the date the Executive first absents
himself from work during a continuous period of disability as determined by the
doctor referred to in this subparagraph 8(a) or the date of judicial
determination of incompetence, as the case may be.
(b) In the event of a Permanent Disability, the shall pay to the
Executive, as disability benefits, one twenty (120) monthly payments each in an
amount equal to percent (60%) of Executive's then Salary divided by twelve first
of such payments to commence on the first day of month following any such
termination of this Agreement as a result of a Permanent Disability. In the
event that such date is a date subsequent to the date such Permanent Disability
is determined, payments for all prior months in which the Executive was entitled
to such payments will be made together with the first payment made. Such
payments shall be reduced by the amount of all payments which the Executive
receives under any disability policy maintained by the Company.
9. Confidentiality and Non-Disclosure Covenant.
(a) The Executive hereby acknowledges that, in the performance of his
duties pursuant to this Agreement, he may obtain and be entrusted with
unpublished confidential and proprietary information relating to the Company's
and its Subsidiaries' present and proposed businesses and operations, the use or
disclosure of which would materially adversely affect the operations of the
Company or its Subsidiaries, including, without limitation, unpublished material
financial information relating to the Company's and its Subsidiaries' present
and proposed businesses and operations, the cost and pricing of the Company's
and its Subsidiaries' services, the sales and marketing plans and strategies of
the Company and its Subsidiaries, proposed acquisitions by the Company and its
Subsidiaries, and the terms of all material agreements to which the Company or
any Subsidiary is a party. All of such unpublished information that may be
obtained by the Executive shall, for purposes hereof, be referred to as
"Confidential Information". The Executive hereby agrees that, unless the
Confidential Information becomes publicly known other than by
13
reason of any improper act or omission of the Executive, neither he, nor any
entity or person owned or controlled by him, shall, during or after the Term
hereof, use for his own benefit or for the benefit of others for any purpose and
in any manner whatsoever, divulge to any person, firm, corporation or other
entity or otherwise publish or disclose any Confidential Information, except as
necessary in connection with the performance of the Executive's services under
this Agreement. Notwithstanding the foregoing, the Executive shall not be in
breach of this covenant with respect to any use or disclosure of any
Confidential Information by him which is required as a result of any legal
process served upon him in any judicial or administrative, (provided, if
possible, the Company shall be given notice in time to enable it to object to
such disclosure) or which was obtained by the Executive from a third party
without such third party's breach of any agreement or obligation of trust. The
term "entity or person owned or controlled by" the Executive or words of like
import shall not include the Company or any of its Subsidiaries.
(b) The Executive agrees that his violation or threatened violation of
any of the provisions of this Paragraph 9 may cause immediate and irreparable
harm to the Company. In the event of any breach or threatened breach of said
provisions, the Company shall be entitled to seek all available equitable
remedies therefor including, without limitation, preliminary and permanent
injunctions by a court of competent jurisdiction prohibiting Executive from any
violation or threatened violation of these provisions and compelling the
Executive to comply with these provisions. This Paragraph 9 shall not affect or
limit, and the equitable remedies provided in this subparagraph 9(b) shall be in
addition to, any other remedies available to the Company at law. The provisions
of this Paragraph 9 shall survive the termination or expiration of the Term of
this Agreement.
10. Representations and Warranties of the Executive. The Executive
represents and warrants to the Company as follows:
(a) All action on the part of the Executive necessary for the
authorization, execution, delivery and performance of this Agreement by him and
the consummation of the transactions contemplated hereby, has been taken and
this Agreement constitutes a valid and legally binding obligation of the
Executive, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization,-moratorium, or other laws
affecting generally enforcement of creditors' rights and by general principles
of equity.
(b) The authorization, execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, will
not result in any violation or be in conflict with or constitute, with
or-without the passage of time and giving of notice, a default under any
provision of any instrument, judgment, order, writ, decree or agreement to which
the Executive is a party or by which he is bound.
(c) There is no action, suit, proceeding, or investigation pending, or
to the knowledge of the Executive, currently threatened against the Executive,
in any way relating to the validity of this Agreement or the right of the
Executive to enter into or to consummate this Agreement and the transactions
contemplated hereby.
14
11. Representations and Warranties of the Company. The Company
represents and warrants to the Executive as follows:
(a) All action on the part of the Company, SISC and each Subsidiary
necessary for the authorization, execution, delivery and performance of this
Agreement by them and the consummation of the transactions contemplated hereby,
has been taken and this Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium,
or other laws affecting generally the enforcement of creditors' rights and by
general principles of equity.
(b) The authorization, execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, will
not result in any violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, a default under any provision
of any instrument, judgment, order, writ, decree or agreement to which the
Company, or any Subsidiary is a party or by which any of them is bound.
(c) There is no action, suit, proceeding, or investigation pending, or
to the knowledge of the Company, currently threatened against the Company or any
Subsidiary, in any way relating to the validity of this Agreement or the right
of the Company to enter into or to consummate this Agreement and the
transactions contemplated hereby.
12. Arbitration. Except for any action under this Agreement for
injunctive or other equitable relief and except . otherwise expressly provided
in subparagraphs 4(b) and 6(i) of this Agreement, all disputes, controversies
and differences between the parties hereto arising under this Agreement which
the parties hereto are unable to settle amicably shall be resolved in Boca
Raton, Florida, by binding arbitration in accordance with the rules then in
force of the American Arbitration Association. The arbitration shall be held
before three arbitrators, one of which shall be selected by each of the
Executive and the Company and one of which shall be selected by the other two
arbitrators, and the decision of such arbitrators shall be deemed to be final.
Judgment upon any award or decision rendered by such arbitrators may be entered
or enforced in any court, domestic or foreign, having jurisdiction thereof. The
arbitrators shall not, except as provided in subparagraph 14(f) of this
Agreement, have any authority to modify or amend any express provisions of this
Agreement.
13. Agreements with Affiliates. The Executive may enter into employment
agreements with affiliates of the Company (the "Affiliate Agreements"). To the
extent that, for any year during the Term hereof that the aggregate annual
salary paid to Executive pursuant to the Affiliate Agreements does not exceed
the Salary payable pursuant to this Agreement for such year, such aggregate
salary received by the Executive under such Affiliate Agreements shall reduce
the Salary payable pursuant to this Agreement on a dollar for dollar basis. If,
for any year during the Term hereof that the aggregate annual salary paid to
Executive pursuant to the Affiliate Agreements exceeds the Salary payable
pursuant to this Agreement for such year, no Salary shall be paid by the Company
to the Executive pursuant to this Agreement for such year; provided, however,
that in such event the Executive shall not be required to refund any Salary (or
salary or other compensation received by him pursuant to any Affiliate
Agreement) paid to him during
15
such year. Any bonuses or other non-salary compensation or benefits paid to
Executive pursuant to the Affiliate Agreements shall not affect in any way the
Salary, Bonus, or other benefits payable to Executive pursuant to this
Agreement.
14. Miscellaneous.
(a) This Agreement constitutes the entire agreement of the Company and
the Executive with respect to the subject matter hereof and supersedes all prior
written or prior or contemporaneous oral understandings or agreements, including
the Prior Employment Agreements and any other employment agreements or
understandings between the Company and the Executive with respect to the subject
matter covered in this Agreement. This Agreement may not be modified or amended,
nor may any right be waived, except by a writing which expressly refers to this
Agreement, states that it is intended to be a modification, amendment or waiver
and is signed by both parties hereto in the case of a modification or amendment
or by the party granting the waiver. No course of conduct or dealing between the
parties hereto and no custom or trade usage shall be relied upon to vary the
terms of this Agreement. The failure of a party to this Agreement to insist upon
strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
(b) Any notice, demand or other communication (collectively, the
"Notices") required or permitted by or with respect to the provisions of this
Agreement shall be given in writing and delivered by hand, overnight courier or
messenger service, against a signed receipt or acknowledgment of receipt, or
mailed by registered or certified mail, return receipt requested, with notice to
the Company being sent to the attention of the individual who executed this
Agreement on behalf of the Company. Either party may, by notice given in
accordance with the terms hereof, change the person, address or telecopier
number to which Notice should be sent. All such Notices shall be deemed given
when personally delivered or transmitted as aforesaid, or, if mailed as
aforesaid, on the fifth (5th) business day after mailing or on the day actually
received, if earlier, except for a notice of a change of person, address or
telecopier number which shall be effective only upon receipt.
(c) Except as specifically set forth in this subparagraph, neither
party hereto may assign this Agreement or his or its rights, benefits or
obligations hereunder without the written consent of the other party; except
that the rights of the Executive set forth in Paragraph 6 hereof may be assigned
to designated purchasers and shall inure to the benefit of the Executive's
heirs, administrators, executives, personal representatives, successors and
permitted assigns. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their heirs,
administrators, executors, personal representatives, successors and permitted
assigns. Nothing contained herein is intended to confer upon any person or
entity, other than the parties hereto, and their respective heirs,
administrators, executors, personal representatives, successors or permitted
assigns or, in the case of the Executive, his designated purchasers under
Paragraph 6 hereof, any rights, benefits, obligations, remedies or liabilities
under or by reason of this Agreement.
16
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida with respect to contracts made and to be
fully performed therein, without regard to the conflicts of laws principles
thereof. By their execution hereof, the Company and the Executive hereby consent
and irrevocably submit to the in personam jurisdiction of the American
Arbitration Association tribunal located in the City of Boca Raton, County of
Palm Beach and State of Florida or, with respect to Paragraph 9, the Federal or
state courts situated in Palm Beach County, State of Florida, which shall have
sole jurisdiction as to such matters, and agree that any process in any action
commenced in such tribunal or court under this Agreement may be served upon it
or him personally, by certified or registered mail, return receipt requested, or
by Federal Express or other courier service, with the same full force and effect
as if personally served upon it or him in Boca Raton. Each of the parties hereto
hereby waives any claim that the jurisdiction of any such tribunal is not a
convenient forum for any such action and any defense of lack of in personam
jurisdiction with respect thereto. In the event of any arbitration proceeding
pursuant to Paragraph 9 hereof, the arbitrator shall have the right to assess
reasonable counsel fees and disbursements.
(e) The parties hereto hereby agree that, at any time and from time to
time during the Term hereof, upon the reasonable request of the other party
hereto, they shall do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, such further acts, deeds, assignments,
transfers, conveyances, other documents and assurances as may be reasonably
required to more effectively consummate this Agreement and the transactions
contemplated thereby or to confirm or otherwise effectuate the provisions of
this Agreement.
(f) If any term or provision of this Agreement, or the application
thereof to any person or circumstance, is finally determined by a court or
arbitration tribunal to any extent to be illegal, invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held illegal,
invalid or unenforceable, shall not be affected thereby and each term and
provision of this Agreement shall be valid and shall be enforced to the fullest
extent permitted hereunder and by law.
(g) During and after the Term hereof, the Company shall defend,
indemnify and hold the Executive harmless from any and all claims, causes of
action, liabilities, damages, costs or expenses (including, without limitation,
attorneys' fees and disbursements) incurred by the Executive based upon or in
connection with the performance of his services under this Agreement to the
fullest extent permitted by the laws of the State of New York (and, with respect
to indemnification by by a Subsidiary, the laws of the jurisdiction of
incorporation of any such Subsidiary) and of the By-Laws of the Company, or any
such Subsidiary, as the case may be. In the event that, under applicable law,
the Company is not permitted to defend the Executive or pay the costs of defense
as provided in this subparagraph 14(g) unless the Executive undertakes to
reimburse the Company in the event that any such payment is unlawful, then, in
such event, the Company may condition such defense or payment on receipt of an
appropriate reimbursement agreement from the Executive. This provision will
survive the expiration or termination of the Term of this Agreement.
17
(h) The headings in this Agreement are for convenience of reference
only and shall not affect in any way the construction or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
/s/ Xxxxxxx X. Xxxxxxx
By: --------------------------------------------
Xxxxxxx X. Xxxxxxx, President & CEO
Attest: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx, Secretary
EMPLOYEE:
By:/s/ Xxxxxxx X. Xxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxx
