EMPLOYMENT AGREEMENT dated as of August ___, 1997 (the "Agreement") between
Proformix Systems, Inc. ("Proformix") and Xxxxxxx Xxxxxx, presently residing at
00 Xxxxxx Xxxxxxx, Xxxxxxxxxxx, Xxx Xxxxxx 08807(the "Executive").
WHEREAS, the Executive is presently employed by Proformix, Inc., a
subsidary of Proformix Systems, Inc.; and
WHEREAS, Proformix, Inc. was recently the subject of a business
combination, as of July 18, 1997 with Whitestone Industries, Inc., a Delaware
corporation ("Whitestone"), since renamed Proformix Systems, Inc., pursuant to
which Whitestone sought to acquire all or substantially all of the outstanding
Common Stock of Proformix, Inc. (the "Sale"); and
WHEREAS, in connection with the Sale, the parties desire to enter into this
Agreement in order to insure Executive continued employment by Proformix and
Proformix, Inc. (collectively "the Company"), in his current capacity, and to
insure the Company that it will have the benefit of his continued services for
at least the Term of Employment herein described;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1. General. The Company hereby employs the Executive, and the Executive
agrees to serve as President and Chief Executive Officer of Proformix and as a
Director upon the terms and conditions herein contained, and in such capacities
the Executive agrees to serve the Company faithfully and to the best of his
ability under the direction of the Board of Directors of Proformix (the
"Board"). Nothing contained herein shall restrict the Executive from acting
as a director of or owning shares in other companies not in competition with the
Company, provided that such services and ownership interests do not materially
interfere with the Executive's performance of his duties hereunder.
1.2. Exclusive Services. For so long as the Executive is employed by the
Company, he shall devote his full-time working hours to his duties hereunder.
The Executive shall not, directly or indirectly, render services to any other
person or organization for which he receives compensation without the unanimous
consent of the Board or otherwise engage in activities which would interfere
significantly with his faithful performance of his duties hereunder.
1.3. Term of Employment. The Executive's employment under this Agreement
shall commence on the date of the Sale (the "Effective Date") and shall
terminate on the earliest of (i) the fifth anniversary of the Effective Date,
(ii) the death of the Executive or (iii) the termination of the Executive's
employment pursuant to this Agreement; provided, however, that the term of the
Executive's employment under this Agreement may be extended by mutual agreement
between the parties for a period of up to three years by notice of approval from
the Board to the Executive at least six months prior to the expiration of the
then effective term of employment but not earlier than the fourth anniversary of
the Effective Date, acceptance in writing to be tendered by the Executive within
60 days thereafter. The period commencing on the Effective Date and ending on
the fifth anniversary of the Effective Date, or such later date to which the
term of the Executive's employment shall have been extended, is hereinafter
referred to as the "Employment Term".
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2. SALARY
2.1. Base Salary. From the Effective Date, the Executive shall be entitled
to receive a base salary ("Base Salary") at a rate of $108,000 per annum,
payable in equal installments not less frequently than bi-weekly in accordance
with Proformix's payroll practices, with such increases as may be provided by
Proformix' Board of Directors. Once increased, such higher amount shall
constitute the Executive's annual Base Salary. During the term hereof, his
salary shall not be reduced below $108,000 per year.
2.2. Annual Increases. Annual increases will be evaluated and determined by
the Board of Directors.
2.3. Stock Bonuses. Executive shall receive a bonus consisting of 140,000
shares of Proformix's Common Stock, for the first year, and 200,000 shares in
any year thereafter, in any of which years Proformix's after tax net profits
exceed $1,000,000 for each of its first three full fiscal years during the
Employment Term, beginning with calendar year 1998. The bonus shall be paid
during the calendar quarter following completion of the audit of Proformix's
financial statements for the calendar year in question. Net profits shall be
computed using generally accepted accounting principles. There shall be no stock
bonus paid after the first three full fiscal years.
3. EMPLOYMENT BENEFITS
3.1. General Benefits. The Executive shall receive the following benefits
during the Employment Term:
(a) the Executive will be eligible to participate in benefit programs of
the Company
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consistent with those benefit programs provided to other senior executives of
the Company excluding any key employee stock option plan that may be adopted by
Proformix so long as the stock bonus programs reflected in Section 2.3 above is
in effect; and
(b) a fully paid medical/hospitalization policy for Executive and his
family.
3.2. Vacation. The Executive shall be entitled to four weeks paid vacation
each year in accordance with company policies and procedures. The Executive must
take at least five (5) consecutive days during each twelve (12) months period.
3.3. Reimbursement of Expenses. The Company will reimburse the Executive
for reasonable, ordinary and necessary business expenses incurred by him in the
fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such expenditures, in accordance with Company practices
consistently applied. The Executive will be provided with a car allowance of
$500 per month or such other amount as the Board of Directors may approve from
time to time. The allowance covers a single vehicle to be utilized for Company
business, however the Company will not be required to otherwise pay for the use
of said automobile.
3.4. Non-Renewal of Agreement. In the event this Agreement is not renewed
by the Company as provided in Section 1.3, the Executive shall be entitled to
three (3) months of his Base Salary as severance, payable in equal installments
on the same terms as at the end of the Employment Term ("Severance Pay").
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4. TERMINATION OF EMPLOYMENT
4.1. Termination for Cause; Resignation.
4.1.1. General. If, prior to the expiration of the Employment Term,
the Executive's employment is terminated by the Company for Cause, the Executive
shall be entitled only to his Severance Pay, if applicable, unless such
termination is for a Disloyalty Termination Event (as described in Section 4.2
below), in which case the Executive shall be entitled only to payment of his
Base Salary as then in effect through and including the date of termination. If
the Executive resigns from his employment hereunder, the Executive shall be
entitled only to payment of his Base Salary as then in effect through and
including the date of resignation. The Executive shall have no further right to
receive any other compensation, or to participate in any other plan,
arrangement, or benefit, after such termination or resignation of employment,
subject to the terms of such plans or arrangements.
4.1.2. Date of Termination/Resignation. The date of termination for a
Felony Termination Event (as defined in Section 4.2 below) shall be the date of
the written Notice of Termination provided for in Section 4.1.3. The date of
termination for a Conduct, Performance or Disloyalty Termination Event shall be
the date the Event is finally determined through arbitration. The date of
resignation shall be the date specified in the written notice of resignation
from the Executive to the Company, or if no date is specified therein, 10
business days after receipt by the Company of written notice of resignation from
the Executive.
4.1.3. Notice of Termination for Felony Termination Event. Unless
first terminated by a written notice of the Board, termination of the
Executive's employment for a Felony Termination Event (as defined in Section 4.2
below) shall be effected by delivery of a
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written notice of termination from Proformix to the Executive, which notice
shall specify the event or events set forth in Section 4.2 giving rise to such
termination (the "Notice of Termination").
4.1.4. Arbitration. All disputes involving termination of the
Executive's employment for a Conduct, Performance or Disloyalty Termination
Event shall be resolved by binding arbitration administered by the American
Arbitration Association (the "AAA") in accordance with the terms of this
Agreement, and the Commercial Arbitration Rules of the AAA. In the event of any
inconsistency between such rules and this Agreement, this Agreement shall
control. The arbitration process shall commence when the Executive has received
written notice by Proformix that the Executive is being dismissed for any of the
above referenced reasons. Either party may then notify the AAA who shall then
supply the parties with a list of three potential arbitrators. Each party shall
then have four (4) business days to object to one of the potential arbitrators.
The remaining potential arbitrator (and if more than one is remaining, then one
shall be selected by lot) shall serve as the single arbitrator. Each party shall
then have sixty (60) days to conduct discovery pursuant to the terms and
provisions of the New Jersey Rules of Civil Procedure. Upon conclusion of the
sixty (60) day period or such earlier time as the parties may agree the parties
shall participate in an arbitration proceeding in accordance the with AAA's then
current policies and procedures. The arbitration proceedings shall be conducted
in New Jersey at the offices of AAA or such other place in New York as the
parties shall mutually agree. The arbitrator shall be empowered to impose
sanctions and take such other actions as the arbitrator deems necessary to the
same extent a judge could do pursuant to the New York Rules of Civil Procedure
and applicable law. Judgment upon the award rendered by
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the arbitrator may be entered in any court having jurisdiction. Unless the
termination is decided by the arbitrator to be appropriate, Proformix shall be
liable to the Executive for damages for wrongful termination.
4.2. Cause. Termination for "Cause" shall mean termination of the
Executive's employment because the Executive (a) has engaged in fraudulent or
criminal conduct in connection with the performance of his duties hereunder,
which conduct materially and adversely affects the Company (a "Conduct
Termination Event"), (b) admits to or has been convicted of a crime punishable
by imprisonment for more than one year (a "Felony Termination Event"), (c) has
failed to perform in all material respects (following a written warning
specifying such deficiency) the normal and customary duties required of his
position of employment (a "Performance Termination Event"), (d) has been
disloyal to the Company by assisting competitors of the Company to the
disadvantage of the Company by a breach of Section 6 or by otherwise actively
assisting competitors to the disadvantage of the Company (a "Disloyalty
Termination Event"), or (e) has failed to heed a reasonable directive issued by,
or policy approved by the Board.
5. PERMANENT DISABILITY
In the event the Executive shall fail because of illness, physical or mental
disability or other incapacity, for a period of six consecutive months, or for
shorter periods aggregating six months during any twelve-month period, to render
the services provided for by this Agreement, then the Company may, by written
notice to the Executive after the last day of the six consecutive months of
disability or the day on which the shorter periods of disability equal an
aggregate of
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six months, reduce the Executive's compensation hereunder for "Permanent
Disability" as follows:
First Six Months No Reduction
Following 12 months Fifty percent (50%)
(or if less, the of compensation
balance of the
Employment Term)
The Executive will use his reasonable best efforts to cooperate with any
physician practicing in the State of New Jersey selected by the Company to
determine whether or not Permanent Disability exists, and the determination of
such physician made in writing to the Company and the Executive shall be final
and conclusive for all purposes of this Agreement; provided that if such
physician declines to make a determination as to medical disability, the matter
will be referred to arbitration in the manner set forth in Section 4.1.4. Any
payments provided for in this Section 5 shall be reduced to the extent that such
payments, together with any disability payments received by the Executive under
any plan, program or arrangements, exceed the Executive's Base Salary. Except
(i) as to the obligation to continue to pay the Executive's medical insurance
premiums for a period of 18 months following delivery of the written notice of
"Permanent Disability" to the Executive or (ii) as otherwise provided in this
Section 5, upon final determination of permanent disability, the Company shall
have no further obligation to the Executive under this Agreement.
6. NONCOMPETITION/NONSOLICITATION AND CONFIDENTIALITY
6.1. Noncompetition/Nonsolicitation. The Executive shall not, directly or
indirectly,
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as a sole proprietor, member of a partnership, stockholder or investor, officer
or director of a corporation, or as an employee, associate, consultant or agent
of any person, partnership, corporation or other business organization or entity
other than the Company: (a) engage in any business that is in competition with
any business actively conducted by Proformix or any of its subsidiaries within
the various states in which Proformix conducts business; (b) solicit or endeavor
to entice away from Proformix or any of its subsidiaries any person who is, or
was during the then most recent 24-month period, employed by or associated with
Proformix or any of its subsidiaries; (c) solicit or endeavor to entice away
from Proformix or any of its subsidiaries any person or entity who is, or was
within the then most recent 24-month period, a customer, client or prospect of
Proformix or any of its subsidiaries; or (d) perform any services in competition
with Proformix for or on behalf of any such customer, client or prospect. The
obligations of this Section 6.1 shall apply for 36 months after termination of
employment of, or resignation by the Executive as well as after the end of the
Term of Employment and during employment and shall be extended by a period of
time equal to any period during which the Executive shall be in breach of such
obligations.
6.2. Confidentiality. The Executive covenants and agrees with the Company
that he will not at any time, except in performance of his obligations to the
Company hereunder or with the prior written consent of the Company, directly or
indirectly, disclose any secret or confidential information that he may learn or
has learned by reason of his association with the Company or any of its
subsidiaries and affiliates. The term "confidential information" includes
information not previously disclosed to the public or to the trade by the
Company's management, or otherwise in the public domain, with respect to the
Company's, or any of its affiliates or
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subsidiaries, products, services, facilities, applications and methods, trade
secrets and other intellectual property, systems, procedures, manuals,
confidential reports, product or service price lists, customer lists, technical
information, financial information (including the revenues, costs or profits
associated with any of the Company's products), business plans, prospects or
opportunities.
6.3. Exclusive Property . The Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by the Executive relating to
the business of the Company shall be and remain the property of the Company.
Similarly, all patents and/or inventions or new products developed by the
Executive, alone or with others during the term of this Agreement shall
constitute "work product" as such term is generally used and shall remain the
property of the Company upon termination or expiration of this Agreement.
6.4. Injunctive Relief. Without intending to limit the remedies available
to the Company, the Executive acknowledges that a breach of any of the covenants
contained in this Section 6 may result in material and irreparable injury to the
Company or its affiliates or subsidiaries for which there is no adequate remedy
at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, the Company
shall be entitled to obtain a temporary restraining order and/or a preliminary
or permanent injunction restraining the Executive from engaging in activities
prohibited by this Section 6 or such other relief as may be required
specifically to enforce any of the covenants in this Section 6. If for any
reason a final decision of any court determines that the restrictions under this
Section 6 are not reasonable or that consideration therefor is inadequate, such
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restrictions shall be interpreted, modified or rewritten by such court to
include as much of the duration and scope identified in this Section 6 as will
render such restrictions valid and enforceable
6.5 Executive shall immediately receive 60,000 shares of the Company's
Common Stock as consideration for the non-competition clause contained in
Section 6.1 above.
7. MISCELLANEOUS
7.1. Notices. All notices or communications hereunder shall be in writing,
addressed as follows:
To Company:
Chief Financial Officer
or Chairman of The Board
Proformix Systems, Inc.
00 Xxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx
cc: Xxxx Xxxxxxx, Esq.
Silverman, Collura, Xxxxxxx
& Xxxxxxx, P.C.
000 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
To the Executive:
Xxxxxxx Xxxxxx
00 Xxxxxx Xxxxxxx
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Any such notice or communication shall be sent certified or registered mail,
return receipt requested, addressed as above (or to such other address as such
party may designate in writing from time to time), and the actual date of
receipt, as shown by the receipt therefor, shall
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determine the time at which notice was given.
7.2. Severability. If a court of competent jurisdiction determines that any
term or provision hereof is invalid or unenforceable, (a) the remaining terms
and provisions hereof shall be unimpaired and (b) such court shall have the
authority to replace such invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.
7.3. Assignment. This Agreement shall inure to the benefit of the heirs and
representatives of the Executive and the assigns and successors of the Company,
but neither this Agreement nor any rights hereunder shall be assignable or
otherwise subject to hypothecation by the Executive.
7.4. Entire Agreement. This Agreement represents the entire agreement of
the parties and shall supersede any and all previous contracts, arrangements or
understandings between the Company and the Executive, including the Prior
Agreement. The Agreement may be amended at any time by mutual written agreement
of the parties hereto.
7.5. Withholding. The Company shall be entitled to withhold, or cause to be
withheld, from payment any amount of withholding taxes required by law with
respect to payments made to the Executive in connection with his employment
hereunder.
7.6. Governing Law. This Agreement shall be construed, interpreted, and
governed in accordance with the laws of New Jersey without reference to rules
relating to conflict of law.
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IN WITNESS WHEREOF, Proformix has caused this Agreement to be duly executed
and the Executive has hereunto set his hand, as of the day and year first above
written.
PROFORMIX SYSTEMS, INC.
By:____________________________________
Name:
Title:
_______________________________________
XXXXXXX X. XXXXXX
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