EMPLOYMENT AGREEMENT
This
Employment Agreement (“Agreement”) is entered into as of October 4, 2007
(“Effective Date”) between SFG Financial Corporation (“Company”) and Xxxxxxx
Xxxxxxx (“Executive”).
RECITALS
Company
wishes to retain Executive as its Chief Executive Officer and President and
Executive wishes to accept such employment under the terms and conditions
set
forth in this Agreement.
IT
IS AGREED as follows:
1. Employment.
Company hereby offers Executive employment as its Chief Executive Officer
and
President. Executive accepts such employment.
2. Term.
The term of employment under this Agreement shall commence on the
Effective Date and shall continue thereafter for a period of three (3) years,
unless otherwise terminated earlier under Section 9 (the “Term”). The Term shall
be automatically extended for an additional one (1) year period unless at
least
sixty (60) days prior to its expiration, either Company or Executive furnishes
the other with written notice that the Term not be so extended.
3. Duties.
Executive shall devote his full-time efforts to the proper and faithful
performance of all duties customarily discharged by a Chief Executive Officer
and President, consistent with Company policies and budgets and directives
of
Company’s Board of Directors together with any additional duties assigned to him
from time to time by the Board of Directors. Executive agrees to use his
best
efforts and comply with all fiduciary and professional standards in the
performance of his duties. Executive shall provide services to any subsidiary
or
affiliate of Company without additional compensation and benefits beyond
those
set forth in this Agreement. For so long as he serves as Chief
Executive Officer and President of the Company, the Executive shall also
serve
as a Director of the Company, subject to election by the
shareholders.
Provided
that the activities listed
below do not materially interfere with the duties and responsibilities under
this Agreement, nothing in this Agreement shall preclude Executive from devoting
reasonable periods required for:
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(a)
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Serving
as a member of any organization involving no conflict of interest
with the
Company;
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(b)
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Serving
as a consultant in his area of expertise to government, commercial
and
academic panels where it does not conflict with the interests of
Executive; and
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(c)
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Managing
his personal investments or engaging in any other non-competing
business
activity during his non-business
time;
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(d)
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Serving
as a member of the Board of Directors or in an advisory capacity
to
government, commercial and academic panels where it does not conflict
with
the interests of Executive.
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4. Base
Salary. Executive shall be paid a base salary of Two Hundred Thousand
Dollars ($200,000.00) per annum for the first year of the Term, Two Hundred
Fifteen Thousand Dollars ($215,000.00) per annum for the second year of the
Term
and Two Hundred Twenty Five Thousand Dollars ($225,000.00) per annum for
the
third year of the Term, payable, less applicable withholding, in equal monthly
payments or more frequently in accordance with Company’s regular practice.
Notwithstanding the foregoing, the base salary for the period from the Effective
Date through December 31, 2007 (“Deferred Salary”) shall be accrued but not paid
to the Executive in accordance with Company’s regular practice and the Deferred
Salary shall be due and payable to the Executive anytime on or after January
1,
2008, upon demand of the Executive. Upon any extension of the Term, Executive’s
base salary will be set by the Compensation Committee of Company; provided,
however, that Executive’s base salary shall not be reduced from the base salary
in effect immediately prior to extension of the Term.
5. Bonus.
Executive shall be eligible to receive an
incentive bonus during each fiscal year of the Term as determined by the
Compensation Committee of Company.
6. Restricted
Stock. The Company shall issue to Executive on each anniversary of the
date hereof, the following number of shares of restricted common
stock: first year – 250,000 shares; second year – 300,000 shares,
and; third year – 350,000 shares. In the event the Company shall have earnings
before interest, taxes, depreciation and amortization (“EBITDA”), for the
following years, the Company shall issue additional restricted shares of
common
stock to the Executive, as set forth below:
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Target
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Bonus
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Year
Ended January 31,
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EBITDA
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Shares
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2009
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$ |
1
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500,000
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2010
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$ |
2,000,000
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600,000
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2011
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$ |
10,000,000
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1,000,000
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In
the
event the Company achieves EBITDA of at least 25% of the target EBITDA during
the second or third years of the Term of this Agreement, the Executive shall
earn and be issued a pro rata amount of the bonus shares for achievement
of 25%,
50% and 75% of the target EBITDA. In the event the Company changes it
fiscal year, the year end target date shall be adjusted
accordingly.
All
shares amounts referenced herein
assume completion of a one-for-7.351808 reverse stock split which has been
authorized by the Board of Directors but not yet effectuated. In the
event the restricted shares are issued to the effectuation of such reverse
stock
split, all share amounts referenced above shall be multiplied by
7.351808.
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7.
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Benefits.
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(a)
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Executive
shall be entitled to participate in all Company sponsored retirement
plans, 401(k) plans, life insurance plans, medical insurance plans,
short-term and long-term disability insurance plans, and such other
benefit plans generally available from time to time to executive
management of the Company for which he qualifies under the terms
of the
plans. Executive’s participation in and benefits under any benefit plan
shall be on the terms and subject to the conditions specified in
such
plan.
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(b)
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Executive
will receive at least four (4) weeks of paid vacation per
year,
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(c)
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The
Company shall maintain directors’ and officers’ insurance for the benefit
of Executive.
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(d)
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Executive
shall be entitled to participate in any stock options enacted,
as
determined by the compensation committee or Board of
Directors.
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8. Reimbursement
of Expenses. The Company will reimburse Executive for the ordinary and
necessary expenses incurred by him in the performance of his duties under
this
Agreement, including but not limited to travel and entertainment, automobile
and
cellular phone expenses.
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9.
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Termination
of Employment.
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(a) Executive’s
employment under this Agreement may be terminated at any time by the Board
of
Directors of Company for Cause.
(b) Executive’s
employment under this Agreement shall terminate upon expiration of the Term
without extension as described in Section 2.
(c) Executive’s
employment under this Agreement shall terminate upon his retirement, resignation
or death,
(d) Executive’s
employment under this Agreement shall terminate upon written notice by Company
to Executive of a termination due to Disability.
(e) If
Executive’s employment terminates for Cause, Company shall be obligated only to
continue to pay Executive’s base salary and, to the extent earned, accrued and
unpaid, annual incentive bonus and furnish the then existing benefits under
Section 7 up to the date of termination; provided, that if Executive’s
employment is terminated as a result of Executive’s Disability, Executive shall
remain eligible for benefits under any long-term disability program of Company,
as amended from time to time, as long as his Disability continues. Executive
shall also he entitled to reimbursement of all expenses and payment of any
Deferred Salary.
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(f) If
Executive’s employment is terminated by Company other than for Cause, or upon
expiration of the Term without extension, or by Executive for Good Reason,
in
addition to the amounts payable under Section 9(e), Executive shall be entitled
to receive all compensation due for the remaining term of the agreement and
a
lump sum severance payment equivalent to one week of his then current base
salary for every month of service, with a minimum of three months equivalent,
and medical and other insurance benefits under Section 7(a) for a period
of
twelve (12) months. Further, any restricted stock earned at the time of
termination, will be issued to Executive. As a condition to the salary and
benefit continuation under this Section 9(f), Executive must first execute
and
deliver to Company, in a form prepared by Company, a release of all claims
against Company and other appropriate parties, excluding Company’s performance
under this Section 9(f) and of Executive’s vested rights under any Company
sponsored retirement plans, 401(k) plans and stock ownership plans. Executive
shall also be entitled to reimbursement of all expenses.
(g) Resignation
from Board. Upon any termination of the Executive’s employment
hereunder, the Executive shall be deemed to have resigned as a member of
the
Board of the Company or any subsidiaries on which he serves, including any
committees thereof, effective as of his date of termination.
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10.
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Definitions.
The meaning of certain terms in this Agreement are as
follows:
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(a)
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“Cause”
shall consist of any of the
following:
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(i)
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the
Executive is convicted of, or has pleaded guilty or entered a plea
of nolo
contendere to, a felony (under the laws of the United States or
any state
there of);
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(ii)
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fraudulent
conduct by the Executive in connection with the business or other
affairs
of the Company or any related company or the theft, embezzlement,
or other
criminal misappropriation of funds by the Executive from the Company
or
any related company;
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(iii)
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the
Executive’s failure to perform the duties of the Chief Executive Officer,
after reasonable notice has been provided of such non-performance
and, if
such failure is curable, Executive has not cured such failure within
a
reasonable period following such notice;
or
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(iv)
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the
Executive’s failure to comply with reasonable directives of the Board
which are communicated to him in writing, after reasonable notice
has been
provided of such non-performance and, if such failure is curable,
Executive has not cured such failure within a reasonable period
following
such notice.
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(b)
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“Disability”
means the inability of Executive, due to injury, illness, disease
or
bodily or mental infirmity, to engage in the performance of his
material
duties of employment with Company as determined in good faith by
Company,
for (i) any period of ninety (90) consecutive days or (ii) a period
of one
hundred eighty days (180) in any continuous twenty-four (24) month
period,
provided that interim returns to work of less than ten (10) consecutive
business days in duration shall not be deemed to interfere with
a
determination of consecutive absent days if the reason for absence
before
and after the interim return are the same. Benefits to which Executive
is
entitled under any disability policy or plan provided by Company
shall
reduce the base salary paid to Executive during any period of Disability
on a dollar-for-dollar basis.
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(c)
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“Good
Reason” means (A) any material reduction in the Base Salary or duties and
responsibilities of Executive or (B) any material breach by the
Company of
this Agreement or any other agreement between Executive and the
Company,
or any affiliate of’ the Company, that continues without cure for a period
of thirty (30) days after notice of such breach is given by Executive
to
the Company.
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11. Confidential
Information. During Executive’s employment with the Company and at all
times after the termination of such employment, regardless of the reason
for’
such termination, Executive shall hold all Confidential Information relating
to
the Company in strict confidence and shall not use, disclose or otherwise
communicate the Confidential Information to anyone other than the Company
without the prior written consent of the Company. “Confidential Information”
includes, without limitation, financial information, trade secrets, business
plans, business methods or practices, market studies, customer lists, referral
lists and other proprietary business information of the Company. “Confidential
Information” shall not include information which is or becomes in the public
domain through no action by Executive or information which is generally
disclosed by the Company to third parties without restrictions on such third
parties. Executive shall return all Confidential Information to the Company
upon
termination of employment.
12. Solicitation
of Customers. During his employment with the Company and for a period
after the termination of Executive’s employment, regardless of the reason for
the termination, equal to the greater of (a)one (1) year or (b) the period
for
which Executive receives payment of his base salary under Section 9(f) (the
“Non-Competition Period”), Executive shall not influence or attempt to
influence, directly or indirectly, any customer of the Company to divert
its
business away from the Company.
13. Soliciting
Employees. Executive agrees that during his employment with the Company
and during the Non-Competition Period, he will not directly or indirectly
solicit any person who is then, or at any time within six months prior thereto
was, an employee of the Company to work for any person or entity then in
competition with the Company.
14. Non-Competition.
During his employment with the Company and for a one-year period
after
termination of Executive’s employment, Executive shall not, directly or
indirectly, in any capacity:
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(a)
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Engage,
own or have any interest in;
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(b)
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Manage,
operate, join, participate in, accept employment with, render advice
to,
or become interested in or be connected
with;
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(c)
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Furnish
consultation or advice to; or
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(d)
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Permit
his name to be used in connection
with;
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any
person or entity that competes with the business of the Company. Notwithstanding
the foregoing, holding five percent (5%) or less of an interest in the equity,
stock options or debt of any publicly traded company shall
not be considered a violation of this Section
14.
15. Remedies.
In the event of a material breach or threatened material breach of Section
11,
Section 12, Section 13 or Section 14, Company, in addition to its other remedies
at law or in equity, shall be entitled to injunctive or other equitable relief
in order to enforce or prevent any violations of the aforementioned Sections.
In
the event of any such material breach, if applicable Company may immediately
cease payment of Executive’s base salary and the providing to Executive of
benefits under Section 9(f).
16. Severability
and Savings. Each provision in this Agreement is separate. If necessary
to effectuate the purpose of a particular provision, the Agreement shall
survive
the termination of Executive’s employment with the Company. If any provision of
this Agreement, in whole or in part, is held to he invalid or unenforceable,
the
parties agree that any such provision shall be deemed modified to make such
provision enforceable to the maximum extent permitted by applicable law.
As to
any provision held to he invalid or unenforceable, the remaining provisions
of
this Agreement shall remain in effect.
17. Binding
Effect. This Agreement shall he binding upon and shall inure to the
benefit of Company and its successors and assigns. This Agreement shall be
binding upon and inure to the benefit of Executive, his heirs and personal
representatives. This Agreement is not assignable by Executive.
18. Indemnification.
The Company shall defend, indemnify and hold harmless Executive
(and
his heirs and personal representatives) in his capacity as an officer and
director of the Company to the fullest extent permitted by applicable law
against any losses or damages incurred by Executive in connection with any
action, suit or proceeding to which Executive may be made a party by reason
of
his being or having been an officer or director of the Company, or because
of
actions taken by Executive which were believed by Executive to be in the
best
interests of the Company and not in violation of applicable law, and Executive
shall be entitled to be covered by any directors’ and officers’ liability
insurance policies which the Company maintains for the benefit of its directors
and officers, subject to the limitations of any such policies. The Company
shall
have the right to assume, with legal counsel of its choice, who shall be
reasonably acceptable to Executive, the defense of Executive in any such
action,
suit or proceeding for which the Company is providing indemnification to
Executive. Should Executive determine to employ separate legal counsel in
any
such action, suit or proceeding, any costs and expenses of such separate
legal
counsel shall be the sole responsibility of Executive unless the Executive
shall
have reasonably concluded, based upon the written of legal counsel to the
Executive, a copy of which shall be furnished to the Company, that there
may be
conflicts in the defenses available to the Executive which are different
from or
additional to those available to the Company (if the Company is also a party
or
potential party to the claim), in which case the reasonable costs and expenses
of such separate legal counsel shall he borne by the Company. If the Company
does not assume the defense of any such action, suit or proceeding, the Company
shall, upon the request of the Executive, promptly advance or pay any amount
for
costs or expenses, including the reasonable fees of counsel retained by
Executive, incurred by Executive in connection with such action, suit or
proceeding; provided that Executive agrees in writing to repay any such amounts
advanced if it is ultimately determined by a court of competent jurisdiction
that Executive is not entitled to such indemnification. Executive shall be
entitled to indemnification under this clause regardless of any subsequent
amendments of the Certificate of Incorporation or By-Laws of the
Company.
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19.
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Miscellaneous.
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(a)
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No
provision of this Agreement may be modified, waived or discharged
unless
such waiver, modification or discharge is agreed to in writing
and signed
by the Company and Executive. The waiver or non-enforcement by
the Company
of a breach by Executive of any provision of this Agreement shall
not be
constructed as a waiver of any subsequent breach by
Executive.
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(b)
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Any
notice under this Agreement must be in writing and delivered personally
or
by overnight courier, sent by facsimile transmission or mailed
by
registered or certified mail to the parties at their
respective addresses.
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(c)
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This
Agreement shall be governed by the laws of the State of’ New
York.
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(d)
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This
Agreement may be executed in counterparts, which together shall
constitute
one Agreement.
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(e)
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By
their signatures below, the parties acknowledge that they have
had
sufficient opportunity to read and consider, and that they have
carefully
read and considered, each provision of this Agreement and that
they are
voluntarily signing this Agreement.
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(f)
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All
notices and other communications under this Agreement shall be
in writing
and may be given by personal delivery, registered or certified
mail,
postage prepaid, return receipt requested or generally recognized
overnight delivery service. Notices shall be sent to the appropriate
party
at the following addresses:
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Executive:
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000 Xxxx
00 Xxxxxx
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Xxxxxxxxx
00 X
Xxx
Xxxx,
XX 00000
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Company:
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000
Xxxxxxxxx Xx.
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Xxxxx
000
Xxxxxxxxx,
XX 00000
Attn: Xxxxx
Xxxxxxx, Chairman
All
such
notices and communications shall be deemed received upon (a) actual receipt
by
addressee or (b) actual delivery to the appropriate address.
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(g)
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This
Agreement may he executed in counterparts, both of which shall
be
considered an original, but both of which together shall constitute
the
same instrument.
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(h)
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This
Agreement contains the complete statement of all arrangements between
the
parties with respect to its subject matter, supersedes all prior
agreements between them with respect to that subject matter, and
may not
be changed or terminated orally. Any amendment or modification
must be in
writing and signed by the party to be
charged.
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[Intentionally
Blank]
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IN
WITNESS WHEREOF the parties have executed this Employment Agreement
effective as of the day and year first above written.
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SFG
FINANCIAL CORPORATION
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By:
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/s/
XXXXX XXXXXXX
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Name:
Xxxxx Xxxxxxx
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Title:
Chairman
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/s/
XXXXXXX XXXXXXX
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Xxxxxxx
Xxxxxxx
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