Exhibit 10.1
EMPLOYMENT AGREEMENT BETWEEN
SMARTPROS LTD.
AND
XXXXX X. XXXXXX
This employment agreement dated as of February 1, 2007 is by and between
SmartPros Ltd., a Delaware corporation (the "Company"), and Xxxxx X. Xxxxxx, an
individual residing at 000 Xxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxxxx 00000 (the
"Executive").
1. EMPLOYMENT. The Company shall employ the Executive, and the Executive
agrees to serve the Company, on the terms and conditions set forth herein.
The Executive shall serve as Chairman and Chief Executive Officer of the
Company and shall be based at the Company's headquarters in Hawthorne, New
York, but Executive may work up to 2 days per week from his home. The
Executive hereby accepts such employment hereunder, except for absences
occasioned by illness and reasonable vacation periods, and agrees to
undertake the duties and responsibilities inherent in such position and
such other duties and responsibilities as the Company shall from time to
time reasonably assign to him. The Executive shall report to and be
supervised by the Board of Directors of the Company (the "Board"). The
Executive shall use his best efforts, including the highest standards of
professional competence and integrity, and shall devote his full business
time and effort to the performance of his duties hereunder. The Executive
shall not engage in any other business activity except that the Executive
may engage from time to time in such personal investment activities as do
not interfere with his day to day responsibilities to the Company. The
Executive shall be allowed to serve as an independent member of the boards
of directors of other companies with the prior approval of the Board.
2. COMPENSATION AND BENEFITS.
2.1 SALARY. During the Term (as defined below) of this Agreement, the
Executive shall be paid a salary at the rate of $275,000 per annum
("the Base Salary"), payable as customarily paid by the Company.
During the Term of this Agreement, Executive's Base Salary shall be
reviewed at least annually by the Board. The first such review will
be made no later than October 1, 2007 and thereafter the Base Salary
shall be reviewed on or before October 1 of each succeeding year.
The Board, in its sole discretion, may increase, but not decrease
the Base Salary.
2.2 BONUS. In addition to his Base Salary, the Executive may be entitled
to bonuses at times and amounts determined in the discretion of the
Board.
2.3 BENEFITS. The Executive shall be entitled to participate in all
employee benefit programs or plans maintained by the Company from
time to time on the same
basis as other similarly situated executive employees of the
Company. If the Executive elects not to participate in the Company's
health, dental or life insurance plans the Company will pay or
reimburse (based on the cost to the Company for a family plan) the
Executive for the direct premium cost of Executive's participation
in the Bank of America Corp. health and life insurance plan. (Any
increase in the Company's cost for their plan will increase the
amount of reimbursement.) The Company will pay or reimburse the
lease cost of the automobile currently leased by the Executive and
upon expiration or termination of the lease will continue to provide
the Executive with a similar suitable automobile for his business
and/or personal use. The Company will pay or reimburse all
maintenance, insurance, tolls, fuel, and other operating expenses of
the automobile currently leased by Executive or any replacement
provided by the Company hereunder including any excess mileage
charges. The Executive will be entitled to 4 weeks paid vacation per
year.
2.4 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the Executive
in accordance with its general reimbursement policies for all
ordinary and necessary expenses incurred by the Executive on behalf
of the Company upon the presentation of appropriate supporting
documentation.
3. TERM; TERMINATION; RIGHTS UPON TERMINATION.
3.1 TERM. The period of Executive's employment under this Agreement shall
begin as of February 1, 2007 and shall continue for thirty-six (36)
full calendar months thereafter. Commencing as of February 1, 2008,
and continuing on February 1 of each year thereafter (the
"Anniversary Date"), this Agreement shall renew for an additional
year such that the remaining term shall be thirty-six full calendar
months, unless written notice of non-renewal is provided to the
Executive or to the Company, at least thirty (30) days prior to any
such Anniversary Date, in which event this Agreement shall terminate
at the end of twenty-four (24) months following such Anniversary
Date. Prior to each notice period for non-renewal, the independent
members of the Board of Directors of the Company ("Board") or the
compensation committee of the Board will conduct a performance
evaluation and review of Executive for purposes of determining
whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting. Any notice given
pursuant to this Section shall be provided in accordance with the
terms of Section 8.1.
3.2 TERMINATION. The Company may at any time, terminate the employment
of the Executive under this Agreement for Cause (as defined below),
or without Cause, immediately and without any requirement of notice.
The rights and obligations of the parties upon any termination of
the Executive's employment shall be as set forth in Section 3.3. For
purposes of this Agreement the term "Cause" shall mean (i) any act
of dishonesty or gross and willful misconduct with respect to the
Company, including without limitation, fraud or theft, on the
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part of the Executive, (ii) conviction of the Executive of a felony,
or (iii) the Executive's failure to perform his assigned duties
hereunder after written notice and a 30 day opportunity to cure.
3.3 RIGHTS UPON TERMINATION. In the event that:
(a) The employment of the Executive is terminated (i) by
the Company without Cause or (ii) by the Executive, pursuant
to written notice to the Company, upon any change by the
Company in Executives function, duties or responsibilities,
which change would cause Executive's position with the
Company to become one of lesser responsibility, importance or
scope from the position described in Section 1, then, for the
remainder of the then current term of employment hereunder,
(subject to Section 3.3(e)), (x) the Company shall pay to the
Executive, at the time otherwise due under Section 2, all
Base Salary at the rate in effect at the time of termination,
(y) a bonus equal to the average of the last two years annual
bonuses received by the Executive multiplied by the amount of
whole and partial years remaining on the contract, and (z)
the Company shall provide to Executive all benefits described
in section 2.3. The obligations of the Company pursuant to
this Section 3.3(a) shall be in lieu of any other rights of
the Executive hereunder to compensation or benefits in
respect of any period before or after the date of such
termination except for payments due under paragraph 3.3(e).
Notwithstanding anything contained in this section 3.3(a) to
the contrary, the Company shall have thirty (30) days from
the date it receives written notice from the Executive that
he intends to exercise his right to terminate his employment
as a result of the conditions described in clause (ii) of the
first sentence of this section 3.3(a), to "cure" such
conditions. Upon such "cure", the Executive's right to the
payments described in this section 3.3(a) shall immediately
lapse.
(b) The Executive's employment terminates by reason of
death or disability, then the Company shall pay and provide
to the Executive or Executive's estate or other successor in
interest at the time otherwise due under Section 2 all Base
Salary and benefits due to the Executive under Section 2
through the end of the sixth month after the month in which
the termination occurs, but reduced in the case of disability
by any payments received under any disability plan, program
or policy paid for by the Company. The Company is entitled to
reduce payments to Executive once Executive files for Long
Term Disability payments under a Company paid plan even if
the payments are not yet received by Executive. In the event
the payments are not received by the Executive under the Long
Term Disability plan within 90 days of such filing or are
reduced by the insurance company, the Company shall
immediately pay to Executive the amount of the payments not
received or the amount by which the
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payments are reduced. The obligations of the Company pursuant
to this Section 3.3(b) shall be in lieu of any other rights of
the Executive hereunder to compensation or benefits in respect
of any period before or after the date of such termination and
in lieu of any severance payment, and no other compensation of
any kind or any other amounts shall be due to the Executive by
the Company under this Agreement. For purposes of this
Agreement, the term "disability" shall mean the Executive's
failure to perform the services contemplated by this Agreement
as a result of his physical or mental illness or incapacity
for a period of 6 consecutive months, or a total of 240 days,
in any 365 day period.
(c) The employment of the Executive is terminated by the
Company for Cause, or by the Executive other than under
circumstances described in Section 3.3(a) or (b) above, the
Executive shall not be entitled to compensation or benefits
granted hereunder beyond the date of the termination of the
Executive's employment.
(d) If a Change in Control as defined in Section 7 shall
occur, a termination without Cause shall be deemed to have
occurred and Executive shall be entitled to receive the
payments and benefits described in Section 3.3(a), provided
that for purposes of determining the time period during which
the payments and benefits under Section 3.3(a) are to be
paid/provided following a Change in Control, the remainder of
the then current employment term shall be deemed to be not
less than two years. Provided, further, that notwithstanding
this Section 3.3(d), in no event shall the aggregate payments
or benefits to be made or afforded to the Executive under
this paragraph 3.3(d) (the "Termination Benefits") constitute
an "excess parachute payment" under Section 280G of the
Internal Revenue Code of 1986. In order to avoid such a
result, Termination Benefits will be reduced, if necessary,
to an amount (the "Non-Triggering Amount"), the value of
which is one dollar ($1.00) less than an amount equal to
three (3) times the Executive's "base amount", as determined
in accordance with said Section 280G. The allocation of the
reduction required hereby among Termination Benefits provided
by the preceding paragraphs of this Section 3.3(d) shall be
determined by the Executive.
(e) Executive's contract is not renewed pursuant to a
notice of non-renewal provided in accordance with Section
3.1(a), and the Executive's employment is subsequently
terminated by the Company with less than 6 months remaining
under the term of this Agreement, the remainder of the then
current term of employment for purposes of Section 3.3(a)
shall be the greater of the remaining term of the Agreement
or 6 months.
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4. PROPRIETARY INFORMATION.
4.1 The Executive agrees that all information and know how, whether or
not in writing, of a private, secret or confidential nature
concerning the business or financial affairs of the Company and its
subsidiaries (collectively, for purposes of this Section 4, the
"Company") and not within Executive's possession or knowledge prior
to his employment with the Company (collectively, "Proprietary
Information"), is and shall be the exclusive property of the
Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods,
techniques, projects, developments, plans, research data, financial
data, personnel data. The Executive will not disclose any
Proprietary Information to others outside the Company or use the
same for any unauthorized purposes without written approval by the
Company, either during or after his employment, unless and until
such Proprietary Information has become public knowledge without
fault of the Executive.
4.2 The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, or other written, photographic,
or other tangible material containing Proprietary Information,
whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive property
of the Company to be used by the Executive only in the performance
of his duties for the Company.
4.3 The Executive agrees that his obligation not to disclose or use
Proprietary Information and records of the type set forth herein
also extends to such types of Proprietary Information, records and
tangible property of other third parties who may have disclosed or
entrusted the same to the Company or to the Executive in the course
of the Company's' business.
5. OTHER AGREEMENTS. The Executive hereby represents that his performance of
all the terms of this Agreement and as an employee of the Company does not
and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust
prior to his employment with the Company.
6. NON-COMPETITION, NON-SOLICITATION.
6.1 NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS. The Executive agrees
that during the term of the Executive's employment with the Company
and for a period of one year thereafter, the Executive shall not
directly or indirectly (i) recruit, solicit or otherwise induce or
attempt to induce any employees of the Company or any of its
subsidiaries to leave their employment or (ii) call upon, solicit,
divert or take away, or attempt to divert or take away, the business
or
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patronage of any, customer licensee, vendor, collaborator or
corporate partner of the Company or any of its subsidiaries that had
a business relationship with the Company or any of its subsidiaries
at the time of termination of Executive's employment with the
Company and that did not have a business or personal relationship or
was known to Executive prior to his employment with the Company.
6.2 NON-COMPETITION. The Executive agrees that during the term of the
Executive's employment with the Company, the Executive shall not
directly or indirectly, engage in competition with the Company or
any subsidiaries, or own or control any interest in, or act as
director, officer or employee of, or consultant to, any firm,
corporation or institution directly engaged in competition with the
Company or any of its subsidiaries: provided the Company or one of
its subsidiaries are actively engaged in such business at the time
the Executive's employment by the Company is terminated: and
provided that the foregoing shall not prevent the Executive from
holding shares as a passive investor in a publicly held company
which do not constitute more than 5% of the outstanding shares of
such company. In the event the Executive (i) voluntarily terminates
his employment, (including at any time on or after the End Date)
other than in connection with a Change in Control or (ii) is
terminated by the Company for Cause, the Executive agrees to not
compete in the E-Learning marketplace for one year from the date of
such termination.
7. CHANGE IN CONTROL PROTECTION. For purposes of this Agreement, a "Change in
Control" of the Company shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended, or any similar item, schedule or form, whether or not the
Company is then subject to such reporting requirement.
8. MISCELLANEOUS.
8.1 NOTICES. All notices required or permitted under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed if to the Executive, at the address shown above
and if to the Company at its principal place of business at 00 Xxxxxxx
Xxxxx, Xxxxxxxxx, Xxx Xxxx, or at such other address or addresses as
either party shall designate to the other in accordance with this Section
8.1.
8.2 PRONOUNS. Wherever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms of nouns and pronouns shall include the
plural, and vice versa.
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8.3 ENTIRE AGREEMENTS. This Agreement constitutes the entire agreement
between the parties and supercedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of
this Agreement.
8.4 AMENDMENT. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Executive.
8.5 GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of New York.
8.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company
may be merged or which may succeed to its assets or business, provided,
however, that the obligations of the Executive are personal and shall not
be assigned by him.
8.7 WAIVERS. No delay or omission by the Company in exercising any right
under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Company on any one occasion shall be
effective only in this instance and shall not be construed as a bar or
waiver of any right on any other occasion.
8.8 CAPTIONS. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
8.9 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
8.10 SPECIFIC ENFORCEMENT. The parties acknowledge that the Executive's
breach of the provisions of Section 4 and 6 of this Agreement will cause
irreparable harm to the Company. It is agreed and acknowledged that the
remedy of damages will not be adequate for the enforcement of such
provisions and that such provisions may be enforced by equitable relief,
including injunctive relief, which relief shall be cumulative and in
addition to any other relief to which the Company may be entitled.
9. ARBITRATION. Any claims, controversies, demands, disputes or differences
between or among the parties hereto or any persons bound hereby arising out of,
or by virtue of, or in connection with, or otherwise relating to this Agreement
shall be submitted to and settled by arbitration conducted in New York, New York
before one or three arbitrators each of which shall be knowledgeable in
employment law. Such arbitration shall otherwise be conducted in accordance with
the rules then obtaining of the American Arbitration Association. The parties
hereto agree to share equally the
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responsibility for all fees of the arbitrators, abide by any decision rendered
as final and binding, and waive the right to appeal the decision or otherwise
submit the dispute to a court of law for a jury or non-jury trial. The parties
hereto specifically agree that neither party may appeal or subject the award or
decision of any such arbitrator(s) to appeal or review in any court of law or in
equity or by any other tribunal, arbitration system or otherwise. Judgment upon
any award granted by such an arbitrator(s) may be enforced in any court having
jurisdiction thereof. If the arbitration decision holds that the Company is at
fault the Executive shall be entitled to reimbursement of fees and expenses from
the Company in an amount not to exceed $50,000. If the arbitration decision
holds that the Company is not at fault, the Company shall be entitled to
reimbursement of fees and expenses from the Executive in an amount not to exceed
$25,000.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year set forth above
SmartPros Ltd.
By: /s/ Xxxx Xxxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
/s/ Xxxxx X. Xxxxxx
--------------------------------
XXXXX X. XXXXXX
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