EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made as of the 1st day of April
1998 by and between Xxxxxx Power Systems, Inc., a Delaware corporation (the
"Company") and Xxxxx X. Xxxxxxxx (the "Employee").
WHEREAS, the Company believes it is in the Company's best interest to
employ the Employee as the Vice President of its Installation and Servicing of
Telecommunications Products Division (the "Division") and Employee desires to be
employed by the Company in such capacity; and
WHEREAS, the Company and Employee desire to set forth the terms and
conditions on which Employee shall be employed by and provide his services to
the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto do hereby agree as
follows:
1. Employment. The Company hereby employs Employee as Vice President of
the Division and the Employee hereby accepts such employment, all upon the terms
and conditions hereinafter set forth.
2. Term. Unless sooner terminated pursuant to the provisions of this
Agreement, the term of employment under this Agreement shall be for a period
commencing on the date first set forth above and shall continue for a period of
Three (3) years thereafter (the "Employment Period").
3. Compensation.
(a) Salary. Employee shall be entitled to receive an annual salary during
the Employment Period of One Hundred Thousand Dollars ($100.000.00) (the "Base
Salary"). Such
Base salary shall be payable in accordance with the normal payroll policies of
the Company and shall be subject to all appropriate withholding taxes.
(b) Stock Options. Employee is hereby granted stock options (the
"Options") to purchase from the Company up to 100,000 shares of the Company's
common stock, par value $.000833 per share (the "Shares") on the terms contained
below. It is the intention of the parties that the Options shall constitute
nonstatutory stock options under Section 83 of the Internal Revenue Code, as
amended ("IRC"), and not incentive stock options under Section 422 or 423 of the
IRC. The parties agree to act in good faith in cooperating to provide one
another with information or undertake such acts as may be requested by the
Internal Revenue Service, by any state taxing authority or by the other party
for the purpose of obtaining tax treatment of this Option under IRC Section 83,
including any election available to Employee under IRC Section 83(b) with
respect to the Options.
(i) The per share price at which Employee shall be entitled to purchase
the 100,000 Shares subject to these Options ("known as the Strike Price")
shall be the per share price at which the shares of common stock trade at
the close of trading on the Employee's initial day of employment (which
date shall be deemed to be the date first appearing in this Agreement),
provided, however, that if Employee's first day of employment is not a
trading date, then the Strike Price shall be the per share price at which
the shares of common stock of Xxxxx x0, Inc. trade at the close of
trading on the first trading date following Employee's first date of
employment.
(ii) These Options may not be exercised more than ten (10) years from the
date of its grant, and they are subject to vesting restrictions below.
During said ten-year period, Employee shall retain the right to exercise
the Option regardless of whether at the time of exercise Employee is
employed by the Company. In the event of Employee's death or incapacity
during said ten year period and prior to the exercise of Employee's full
number of Shares under the Option, the Option may be exercised by
Employee's conservators, executors or other legal representatives, as the
case may be, or by Employee's successor in interest entitled to succeed to
Employee's interest in the Option under Employee's last will and testament
or by operation of applicable intestacy law.
(iii) Employee's right to exercise the Option shall vest on the following
basis:
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Years of Service Number of Shares Employee May
Completed with Company Purchase by Exercise of the Option
---------------------- ----------------------------------
1 year of service 33,334 Shares
2 years of service an additional 33,333 Shares
3 years of service an additional 33,333 Shares
-------------------------------
Total: 100,000 Shares
(iv) The 100,000 Shares of common stock of Elgin e^2, Inc. shall be
adjusted as needed to reflect splits or consolidations in such sock that may
occur after the execution of this Agreement.
(v) The Company does not currently have a stock option plan in place.
However, in the event the Company does implement a stock option plan in the
future, the Options referenced in this paragraph shall be implemented in a
manner consistent with such plan; provided such plan does not restrict or
eliminate Employee's right to receive or exercise the Option granted hereunder.
(c) Bonus. While employed full-time by the Company pursuant to this
Employment Agreement, Employee shall be entitled to be paid an annual bonus (the
"Bonus") subject to the terms of this Paragraph (c). The Bonus, if any, shall be
based on the following formula: Five Percent (5%) of Base Salary for each One
Million Dollars ($1,000,000), pro rated, above the first Two Million Dollars
($2,000,000) of gross revenues attributable to the Division (i.e., if gross
revenues attributable to the Division are $2.5 million, Employee is entitled to
a bonus of $2,500). For purposes of computing the Bonus applicable to the
Division's gross revenue in any given year, the Company's and Division's normal
accounting method shall be used.
(d) Motor Vehicles. Upon expiration of the Employment Period, or upon
termination of this Agreement for any reason whatsoever, Employee shall have the
option to purchase the motor vehicles (the "Vehicles") set forth on Schedule
3(d) annexed hereto for consideration of One Dollar ($1.00) per Vehicle (the
"Purchase Option"). In addition, if during the Employment Period
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the Company decides to sell or trade any of the Vehicles, prior to such sale or
trade the Company shall provide written notice to the Employee of such
intention. The Employee shall then have the right to exercise the Purchase
Option within five (5) business days after receipt of such notice.
4. Vacation. Employee shall be entitled up to Four (4) weeks of paid
vacation annually during the first year of the Employment Period and Five (5)
weeks annually thereafter.
5. Other Benefits. Employee agrees that the compensation set forth in
Section 3 hereof (including the Option and Bonus), and the vacation time
specified in Section 4 hereof, are the sole and exclusive compensation of the
Employee for his duties hereunder; provided, however, that Employee shall
receive group medical and dental insurance for himself and his dependents, and
all employee group and individual benefits, including without limitation,
hospital, medical, health and disability insurance, provided at any time by the
Company to any of its executive-level employees. The benefits offered by the
Company are subject to change from time to time as determined in the sole and
absolute discretion of the Board of Directors of the Company.
6. Business Expenses and Reimbursements.
(a) Employee shall be entitled to reimbursement by the Company for
ordinary and necessary business expenses incurred by Employee in the performance
of his duties, which types of expenditures shall be determined and approved in a
manner consistent with past practice, provided that:
(i) Each such expenditure is of a nature qualifying it as a proper
deduction on the Federal and State income tax returns of the Company as a
business expense and not as deductible compensation to the Employee; and
(ii) Employee furnishes the Company with adequate records and other
documentary
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evidence required by Federal and State statutes and regulations for the
substantiation of such expenditures as deductible business expenses of the
Company.
(b) Notwithstanding anything set forth in (a) hereinabove, the Company
shall not be obligated to make any payment to or for the benefit of Employee if
the Company determines that Employee agrees that such payment may be disallowed
in whole or in part as a deductible expense to Company by the appropriate taxing
authorities.
(c) Employee shall be paid reimbursements for use of his automobile in
connection with the Company's business during the term hereof in a monthly
amount of Four Hundred and Fifty Dollars ($450.00).
7. Duties. During the Employment Period:
(a) Employee shall report directly to the President and Chief Executive
Officer of the Company and shall furnish all manner of services in connection
with his position and duties as Vice President of the Division, including, but
not limited to managing the Division's operations with respect to: (i)
installation and servicing of telecommunication products; and (ii) installation
and servicing needs of the Company and Xxxxxx Power Systems.
(b) Employee shall devote full time, energy and skill to the service of
the Company and the promotion of its interests, and shall use his best efforts
in the performance of his services hereunder. The parties agree that Employee
may not, during the Employment Period, be engaged in any other business activity
whether or not such activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, Employee may invest his personal assets in
noncompetitive and non-related businesses where the form or manner of such
investment will not require any substantial devotion of time or attention. If
requested to do so by the Company,
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Employee shall relocate from his current residence to the greater Hudson, New
Hampshire area. Employee shall receive no additional consideration or
compensation in the event of relocation; provided, however, that the Company
shall pay or reimburse Employee for all reasonable costs and expenses attendant
to such relocation.
8. Death or Incapacity. In the event of the death or incapacity
("incapacity" being defined as the involuntary failure of Employee to devote
full time to the service of the Company for a period of Thirty (30) consecutive
days), during the Employment Period, or longer period as determined in the sole
discretion of the Board of Directors, the Employee's employment hereunder shall
terminate immediately upon such death or determination of incapacity. The
Company shall pay to the Employee or Employee's estate all amounts owed to the
Employee hereunder which have accrued until the date of death or determination
of incapacity, including without limitation, the salary (including any prorated
Bonus) due under Section 3, and shall continue to pay to Employee or Employee's
estate the amount of salary payable to Employee pursuant to Section 3 hereof
immediately prior to the date of such death or determination of incapacity for a
period of Ninety (90) days subsequent to the date of death or determination of
incapacity. Such amounts shall be payable at such times and in the manner set
forth in Section 3 herein.
9. Termination By Company. The Employee may be terminated by the Company
only for cause, "cause" being defined as adjudicated criminal misconduct, gross
negligence in the performance of or failure to perform Employee's duties
hereunder, malfeasance or a material breach of this Agreement by Employee. In
the event Employee is terminated for cause, the Company shall be obligated to
pay to Employee the salary accrued through the date of termination. In the event
the Company terminates Employee without cause, in addition to any other rights
and
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remedies the Employee may have, the Company shall continue to pay the Employee
the salary specified under Section 3, in the same manner and at the same times
required under such section, until the first to occur of (a) the expiration of
the Employment Period, or (b) alternate employment arrangements are secured by
Employee in which event the Company shall be obligated to pay to Employee the
difference between One Hundred Thousand Dollars ($100,000) per year and the
actual gross compensation of Employee pursuant to such alternate employment
arrangements, provided that the foregoing shall confer no obligation upon
Employee to seek alternate employment arrangements, provided, however, that in
the event that during the Employment Period Employee directly or indirectly, as
owner, partner, joint venturer, lender, employee, agent, corporate officer,
principal, licensor, shareholder or in any other capacity whatsoever, engages in
or makes preparation to engage in or becomes interested in or has any connection
with any business competitive with the business of the Company or any of its
affiliates, subsidiaries or successors as is conducted at the time of
termination of Employee, then the Company shall have no further obligation to
Employee, including, without limitation, the payment obligations set forth in
Paragraphs 3, 4, 5, and 7. Nothing set forth herein shall be deemed to terminate
this Agreement as the Employee, including, without limitation, Employee's
obligations under Paragraph 10.
10. Confidentiality. In the course of his employment, the Company may
disclose or make known to the Employee, and the Employee may be given access to
or may become acquainted with, certain information, trade secrets, customers,
policies, and other information and know-how, all relating to or useful in the
Company's business (collectively "Information"), and which the Company considers
proprietary and desires to maintain confidential regardless of whether a patent
or copyright may be obtained for the Information.
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During the Employment Period and at all times thereafter, the Employee
shall not in any manner, either directly or indirectly, divulge, disclose or
communicate to any person or firm, except to or for the Company's benefit as
directed by the Company any of the Information which he may have acquired in the
course of or as an incident to his employment by the Company, the parties
agreeing that such Information affects the successful and effective conduct of
the Company's business and its goodwill, and that any breach of the terms of
this Section is a material breach of this Agreement and shall serve as "cause"
for termination.
11. Restrictive Covenants. The Employee acknowledges that the Information
is unique in character and is of particular significance to the Company and that
the Company is in a competitive business. Therefore, during the Employment
Period and for a period of Three (3) years thereafter, Employee shall not
directly or indirectly, as owner, partner, joint venturer, lender, employee,
broker, agent, corporate officer, principal, licensor, member, shareholder or in
any other capacity whatsoever, engage in or make preparation to engage in or
acquire any interest in or have any connection with any business competitive
with the business of the Company, or any of its subsidiaries, affiliates or
successors, if any as are conducted during said period (hereinafter a
"Competitive Business") nor shall the Employee solicit any other employee of the
Company for the purpose of hiring or engaging such other employee in connection
with any business of which Employee is an owner, partner, joint venturer,
vender, employee, broker, agent, officer, principal, licensor or shareholder.
If, in any legal proceedings, a court or arbitration board shall refuse to
enforce the covenants included in this Section, then such unenforceable
covenants shall be amended by such court or arbitration board to relate to such
lesser period or geographical area as shall be enforceable. Employee hereby
acknowledges that the restrictions on his activity as
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contained in this Agreement are required for the reasonable protection of the
Company and its subsidiaries, affiliates and successors, if any. Employee hereby
agrees that in the event of the violation by him of any of the provisions of
this Agreement, the Company and its subsidiaries, affiliates and successors, if
any, will be entitled if any so elects, to institute and prosecute proceedings
at law or in equity to obtain damages with respect to such violation or to
enforce the specific performance of this Agreement by Employee or to enjoin
Employee from engaging in any activity in violation hereof. In the event Company
or its subsidiaries, affiliates or successors, if any, is determined to be the
prevailing party in any legal action or other proceeding for the enforcement of
this Section 11, the time for calculating the term of the covenants in this
Section 11 shall not include the period of time commencing with the filing of
legal action or other proceeding to enforce the terms hereof through the date of
final judgment or final resolution, including all appeals, if any, of such legal
action or other proceeding. Notwithstanding the foregoing, in the event that
Employee is terminated without cause, the restrictive covenants set forth in
this Paragraph 11 shall be of no force or effect.
12. Entire Agreement. This Agreement represents the entire understanding
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
13. Amendments. The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
14. Binding Effect. All of the terms and provisions of this Agreement,
whether so
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expressed or not, shall be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective administrators, executors, legal
representatives, heirs, successors and permitted assigns.
15. Severability. If any part of this Agreement or any other Agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible.
16. Waivers. The failure or delay of the Company at any time to require
performance by the Employee of any provision of this Agreement, even if known,
shall not affect the right of the Company to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
the Company of any breach of any provision of this Agreement should not be
construed as a waiver or any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on the Employee in any case shall,
of itself, entitle such party to any other or future notice or demand in similar
or other circumstances.
17. Notices. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including
facsimile) and shall be (as elected by the person giving such notice) by hand
delivery by messenger or courier service, facsimile, or United States Postal
Service (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
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If to Company: Xxxxxx Power Systems, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxx, Xxx Xxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
If to Employee: Xx. Xxxxx Xxxxxxxx
Communication Service Company
00 Xxxxxxx Xxxx (Xxxxxx)
Xxxx, Xxxxx 00000
In each case with
a copy to: Lev, Berlin & Xxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
and Xxxxx X. Xxxxx, Esq.
Bernstein, Shur, Xxxxxx & Xxxxxx, P.A.
X.X. Xxx 0000
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000-0000
Each such notice, request, consent and other communication shall be deemed
delivered (a) on the date delivered if by personal delivery, (b) on the date of
telecopy transmission if confirmed by telephone, and (c) on the date upon which
the return receipt is signed or delivery is refused or the notice is designated
by the postal authorities as not deliverable, as the case may be, if mailed.
18. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware without regard to
the principles thereof relating to conflicts of law. The parties hereto consent
to the jurisdiction of the courts of the State of New York and the United States
District Court for the Southern District of New York.
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19. Assignability. This Agreement may not be assigned by Employee. This
Agreement may be assigned to an affiliate or subsidiary of the Company in the
sole discretion of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXX POWER SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
Its: President, Chief Executive Officer
Hereunto Duly Authorized
ELGIN e^2, INC.
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxx Xxxxxxx
Its: President, Chief Executive Officer
Hereunto Duly Authorized
/s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxxx
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SCHEDULE 3(d)
Motor Vehicles
