EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 1, 2004 by and between Sparta
Commercial Services, Inc., a Nevada corporation with an address at X.X. Xxx 00,
Xxx Xxxx, Xxx Xxxx 00000 (the "Company") and Xxxxxxx X. Xxxxxxx ("Executive")
with an address at 000 Xxxxx Xxxxxxxxxxxx Xxxxx, Xxxxxx, XX 00000.
WHEREAS, the Company and Executive wish to enter into an agreement
relating to the employment of Executive by the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
1. Term of Employment. Subject to the provisions of Section 8 of this
Agreement and on the other terms and subject to the conditions set forth
herein, Executive shall be employed by the Company for a period commencing
on November 1, 2004 (the "Commencement Date") and ending on the first
anniversary of the Commencement Date (the "Employment Term").
Notwithstanding the preceding sentence, the Employment Term shall be
automatically extended for an additional two-year period followed by a
further two-year period, unless the Company or Executive provides the other
party hereto 3 months prior written notice before the expiration of the
Employment Term that the Employment Term shall not be so extended.
"Employment Term" shall include any extension that becomes applicable
pursuant to the preceding sentence.
2. Position.
(a) During the Employment Term, Executive shall serve as the
Company's Chief Operations Officer. In such position, Executive shall
have the powers, duties and responsibilities that are customary for
such position in a corporation of the size, type and nature of the
Company and shall perform such other duties as the Company's Board of
Directors or Company's Chief Executive Officer ("CEO"), as the case
may be, shall determine in their reasonable discretion. Executive
shall report exclusively to the Company's CEO. Executive shall comply
with all federal, state and local laws applicable to his duties and
also shall comply with the rules and regulations of any
self-regulatory organization (as such term is defined in Rule 3(a)(26)
of the Securities Exchange Act of 1934, as amended) having
jurisdiction over the Company.
(b) During the Employment Term, Executive will devote his full
business time to the performance of his duties hereunder and will not
engage in any other business, profession or occupation for
compensation or otherwise which would conflict with the rendition of
such services either directly or indirectly, without the prior written
consent of the CEO. Nothing contained herein shall preclude Executive
from (i) serving on corporate, civic and charitable boards or
committees and (ii) managing his personal investments; provided that
none of the activities set forth in clauses (i) and (ii) interferes in
any material respect with the performance of Executive's employment
hereunder or
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conflict in any material respect with the business of the Company. The
Company and Executive acknowledge that Executive shall perform his
duties hereunder primarily in the State of California. Executive
further acknowledges that in allowing him to work primarily from the
State of California, the Company is doing so as an accommodation to
Executive and neither the Company nor Executive intends to construe
such accommodation as in any way limiting or contravening the specific
rights and duties of the parties contained in this Agreement
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary (the "Base Salary") at the annual rate of $160,000
until May 1, 2005 at which point the Base Salary shall be increased to
$200,000 per annum, payable in regular installments in accordance with the
Company's usual payment practices. Executive shall be entitled to such
annual increases in his Base Salary, if any, as may be determined in the
sole discretion of the Company's Board of Directors or of the Compensation
Committee thereof.
4. Additional Compensation
In addition to salary and other compensation specified in this
agreement, Executive may from time to time, receive such additional
compensation from the Company in such form or forms as may be determined by
the Company's Board of Directors or the Compensation Committee thereof from
time to time in order to more fully compensate Executive for the true value
of his services to the Company.
5. Equity Arrangements.
(a) Executive shall be entitled to a grant (the "Grant") of shares of
the Company's Common Stock, $.001 par value per share (the "Compensation
Shares"), subject to stock splits. The number of shares constituting the
Grant shall be 1,000,000 shares. Subject to Section 8, Executive's rights
to such shares of stock shall vest as follows:
(i) 20% the Compensation Shares on the Commencement Date;
(ii) 20% the Compensation Shares on the first anniversary of the
Commencement Date;
(iii) 20% the Compensation Shares on the second anniversary of the
Commencement Date
(iv) 20% of the Compensation Shares on the third anniversary of the
Commencement Date;
(v) 10% of the Compensation Shares on the fourth anniversary of the
Commencement Date; and
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(v) 10% of the Compensation Shares on the fifth anniversary of the
Commencement Date.
(b) Following the termination of Executive's employment hereunder, if
Executive determines to sell all or any portion of his vested Compensation
Shares Executive shall first offer to sell such Shares to the Company by
providing written notice to the Company setting forth the number of
Compensation Shares to be sold. If the Company elects to purchase all of
such Compensation Shares so offered the purchase price per share therefor
shall equal 90% of the average daily bid price per share of the Company's
Common Stock during the 7-trading day period following receipt by the
Company of such notice. If the Company elects to purchase less than all of
the Compensation Shares so offered, the purchase price per share shall be
100% of the average daily bid price per share of the Company's Common Stock
during the 7-trading day period following receipt by the Company of such
notice. The Company shall notify Executive in writing of its decision
whether to purchase any or all of the Compensation Shares so offered within
three days of the end of such 7-trading day period. If the Company elects
to purchase such Shares, the Company shall pay the full purchase price
therefor within thirty (30) days of the Company's election to so purchase.
If the Company does not so elect or fails to notify Executive of its
election within the time specified herein, Executive shall be permitted to
sell such Compensation Shares in the open market in accordance with the
applicable rules and regulations of the Securities and Exchange Commission.
6. Employee Benefits. During the Employment Term, Executive shall be
provided, in accordance with the terms of the Company's employee benefit
plans as in effect from time to time, health insurance and short term and
long term disability insurance, retirement benefits and fringe benefits
(collectively "Employee Benefits") on the same basis as those benefits are
generally made available to other employees of the Company. Executive shall
be entitled to paid vacation of three (3) weeks during the first year of
the Employment Term, and four (4) weeks during the remaining years of the
Employment Term. Such vacation shall be taken at times consistent with the
proper performance by the Executive of his duties and responsibilities and
with the approval of the CEO. Vacation not taken in any calendar year shall
carry forward to any future year.
7. Business Expenses. During the Employment Term, reasonable business
expenses incurred by Executive in the performance of his duties hereunder
shall be reimbursed by the Company in accordance with Company policies.
8. Termination. Notwithstanding any other provision of this Agreement:
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(a) By the Company for Cause or By Executive Resignation without
Good Reason.
(i) The Employment Term and Executive's employment hereunder
may be terminated by the Company for Cause (as defined below) or
by Executive's resignation for any reason.
(ii) For purposes of this Agreement, "Cause" shall mean (A)
the Executive's continued failure to substantially perform the
duties of his position or breach of material terms of this
Agreement, after notice (specifying the details of such alleged
failure) and a reasonable opportunity to cure if such breach can
be cured; (B) any willful act or omission which is demonstrably
and materially injurious to the Company or any of its
subsidiaries or affiliates; (C) conviction or plea of nolo
contendere to a felony or other crime of moral turpitude other
than involving acts of negligence; or (D) willful failure to
carry out the legitimate directives of the Company's Board of
Directors or the CEO. No act or failure to act will be deemed
"willful" (i) unless effected without a reasonable belief that
such action or failure to act was in or not opposed to the
Company's best interest; or (ii) if it results from any physical
or mental incapacity.
(iii) If Executive's employment is terminated by the Company
for Cause, or if Executive resigns, Executive shall be entitled
to receive (A) any accrued but unpaid Base Salary through the
date of termination; (B) such compensation and Employee Benefits,
if any, as to which Executive may be entitled under the employee
compensation and benefit plans of the Company; (C) any
reimbursable business expenses incurred; and (D) any accrued but
unpaid Additional Compensation through the termination date.
Following such termination of Executive's employment by the
Company for Cause or resignation by Executive, except as set
forth in this Section 8(a), Executive shall have no further
rights to any compensation or any other benefits under this
Agreement, including without limitation the right to receive
unvested Compensation Shares.
(b) Disability, Death or Retirement.
(i) The Employment Term and Executive's employment hereunder
shall terminate (A) upon his death; (B) if Executive becomes
physically or mentally incapacitated for a period of indefinite
duration and is therefore unable for a period of two (2)
consecutive months or for an aggregate of three (3) months in any
twelve (12) consecutive month period to perform his duties, (such
incapacity is hereinafter referred to as "Disability"); and (C)
upon his Retirement (as defined below). Any question as to the
existence of the Disability of Executive as to which Executive
and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive
and the Company. If Executive and the Company cannot agree as to
a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall
make such determination in writing.
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The determination of such third physician shall be binding upon the
parties hereto. For purposes of this Agreement, "Retirement" shall
mean Executive's voluntary resignation any time after attaining age 65
(or at any earlier date with the permission of the Board).
(ii) Upon termination of Executive's employment hereunder
for death, Disability or Retirement, Executive or his estate (as
the case may be) shall be entitled to receive (A) any accrued but
unpaid Base Salary through the end of the month in which such
termination occurs, (B) a pro rata portion of any Additional
Compensation that the Executive would have been entitled to
receive pursuant to Section 4 hereof in such year based upon the
percentage of the employment year that shall have elapsed through
the date of Executive's termination of employment, payable when
such Additional Compensation would have otherwise been payable
had the Executive's employment not terminated, (C) the
opportunity to exercise vested stock options and Executive's
stock options scheduled to vest during the year following such
termination (i) in the case of death or Disability, for six
months following such termination or (ii) in the case of
Retirement, for one year following such termination, (D) a pro
rata portion of any long term incentive granted to the Executive
and (E) such compensation and Employee Benefits, if any, as to
which he may be entitled under the employee compensation and
benefit plans and arrangements of the Company, (F) any
reimbursable business expenses incurred; and (G) any accrued but
unpaid Additional Compensation through the termination date.
Following such termination of Executive's employment due to
death, Disability or Retirement, except as set forth in this
Section 8(b), Executive shall have no further rights to any
compensation or any other benefits under this Agreement,
including without limitation the right to receive unvested
Compensation Shares.
(c) By the Company without Cause.
(i) The Employment Term and Executive's employment hereunder
may be terminated by the Company without Cause at any time upon
thirty (30) days prior written notice to Executive.
(ii) If Executive's employment is terminated by the Company
without Cause (other than by reason of death or Disability),
Executive shall be entitled to receive (A) any accrued but unpaid
Base Salary through the date of termination payable in accordance
with the Company's standard payroll policy, (B) unpaid Additional
Compensation for the fiscal year prior to termination payable
when such Additional Compensation would have been payable if
Executive's employment had not terminated; (D) payment equal to
the Severance in accordance with Section 9 hereof; (E) such
vested compensation and Employee Benefits, if any, as to which
Executive may be entitled under the employee compensation and
benefit plans and arrangements of the Company; and (F) any
reimbursable business expenses incurred through the termination
date.
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(d) Notice of Termination. Any purported termination of
employment by the Company or by Executive (other than due to
Executive's death or in accordance with the provisions of Section 1
hereof) shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 12(i) hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
employment under the provision so indicated.
9. Severance. Subject to the provisions of Section 8(c) of this
Agreement, Executive shall earn additional "Severance" compensation based
on Executive's base salary according to Executive's length of service with
the Company. Executive shall earn one week of his base salary as of the
date of termination for the first full year of service hereunder and
thereafter two weeks for each succeeding year of service, up to an
aggregate of four (4) months of such base salary. All Severance payments
will be paid in accordance with the Company's regular payroll policy.
10. Confidentiality. Executive will not at any time (whether during or
after his employment with the Company), unless required by a court or
administrative agency, disclose or use for his own benefit or purposes or
the benefit or purposes of any other person, firm, partnership, joint
venture, association, corporation or other business organization, entity or
enterprise other than the Company and any of its subsidiaries or
affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs, marketing,
trading, investment, sales activities, promotion, credit and financial
data, manufacturing processes, financing methods, plans, or the business
and affairs of the Company generally, or of any subsidiary or affiliate of
the Company, provided that the foregoing shall not apply to information
which is not unique to the Company or which is generally known to the
industry or the public other than as a result of Executive's breach of this
covenant. Executive further understands that any processes, formulae,
methods of doing business, software or other programs or other developments
(collectively "Developments") created by him for use by the Company during
the Employment Term, whether or not developed during normal business hours
or at Company facilities, shall be and remain the exclusive property of the
Company and shall be deemed "works for hire", and Executive shall take all
steps to ensure that title to the Developments shall be vested with the
Company, including, without limitation, executing and delivering to the
Company any and all assignments, applications and other documents that the
Company may request in order to apply for and obtain patents, copyrights or
other registrations with respect to any Development in the United States or
elsewhere.
11. Noncompetition.
(a) During the term of Executive's employment with the Company and for
a period of two (2) years after he ceases to be employed by the Company,
Executive shall not engage directly or indirectly in competition with the
Company or its Affiliates (as
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such term is defined in Rule 501(b) of the Securities Act of 1933, as
amended) in the business of motorcycle leasing or finance. Competition
shall include, without limitation, any role as a sponsor, consultant,
employee, partner or stockholder which aids or abets any business to
compete or prepare for competition with the Company or its Affiliates in
any business in which any of them is engaged or planning to engage. In
addition, during such two-year period, Executive shall not solicit any then
current employee of the Company to engage in activities competitive with
the business of the Company. Executive further acknowledges that the
services to be performed by him under this Agreement are of a special,
unique extraordinary and intellectual character, that the Company's
business is national in scope and that its services are marketed throughout
the United States and that the provisions of this Section 10 are reasonable
and necessary to protect the Company's business. As such competitive
activities in violation of this Section could cause irreparable injury to
the Company and that such injury would be difficult or impossible to
measure. Accordingly, the Company shall be entitled to an injunction and
other equitable remedies for any violation without limiting the Company's
rights to pursue monetary or other damages or remedies.
(b) It is the intention of the parties to restrict Executive's
activities during the Employment Term and the period of
non-competition set forth in this Section 11 only to the extent
necessary to protect the Company's legitimate business interests. To
the extent that any covenant set forth in Section 10 hereof or this
Section 11 is held to be unreasonable, arbitrary or against public
policy, such covenant will be considered to be divisible with respect
to the scope, time or geographic area, and such lesser scope, time or
geographic area, or all of them, as a court of competent jurisdiction
may determine to be reasonable, not arbitrary and not against public
policy, will be effective, binding and enforceable against Executive,
and the covenant shall not be rendered invalid, but instead shall be
deemed automatically amended for such lesser term or to such lesser
extent, or in such other degree, as may grant the Company or any party
seeking enforcement the maximum protection and restrictions on
Executive's activities permitted by applicable law in such
circumstances. Executive will, while the covenants under this
Agreement are in effect, give notice to the Company within ten (10)
days after accepting any other employment of the identity of
Executive's new employer. The Company may notify such employer that
Executive is bound by this Agreement and, at the Company's discretion,
furnish such new employer with a copy of this Agreement or the
relevant portions thereof.
The covenants set forth in Sections 10 and 11 hereof are
essential elements of this Agreement, constitute consideration on
Executive's part for the Company's Agreement to enter into this
Agreement and without Executive's agreement to comply with such
covenants the Company would not have entered into this Agreement or
employ or continue to employ Executive. Both parties hereto have been
advised by their respective counsels of the meaning, reasonableness
and propriety of such covenants, with specific regard to the nature of
the Company's business.
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Executive acknowledges and agrees that the separate and distinct
promises in this Agreement are reasonable and necessary in order to
promote the legitimate business interests of the Company, that any
violation would result in irreparable harm to the Company and the
enforcement of a remedy by way of injunction or otherwise would not
prevent Executive from earning a living.
Executive's covenants in Sections 10 and 11 are independent
covenants and the existence of any claim by Executive against the
Company under this Agreement or otherwise will not excuse Executive's
breach of any covenant in Section 10 or 11.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York,
without regard to conflicts of laws principles thereof, and without
regard to the location of Executive's residence or place of
employment.
(b) Arbitration. Except as otherwise set forth in this Agreement
with respect to the obtaining of any injunctive relief, any dispute or
controversy arising under or in connection with this Agreement shall
be resolved by binding arbitration held in New York and conducted in
accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA") in effect at the time of the
arbitration before a single arbitrator appointed by the President of
the AAA; provided that such arbitrator shall be an expert in the field
of finance and shall not have had any previous dealings or
relationships with either party.
(c) Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the employment of
Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly
set forth herein. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto.
(d) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of
the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
(e) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not
be affected thereby.
(f) Assignment. This Agreement shall not be assignable by
Executive. This Agreement may be assigned by the Company to a company
which is a
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successor in interest to substantially all of the business operations
of the Company. Such assignment shall become effective when the
Company notifies the Executive of such assignment or at such later
date as may be specified in such notice. Upon such assignment, the
rights and obligations of the Company hereunder shall become the
rights and obligations of such successor company, provided that any
assignee expressly assumes the obligations, rights and privileges of
this Agreement.
(g) Successors; Binding Agreement. This Agreement shall inure to
the benefit of and be binding upon personal or legal representatives,
executors, administrators, successors, heirs, distributes, devises and
legatees.
(h) Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered by
facsimile or United States registered mail, return receipt requested,
postage prepaid, or by recognized overnight courier service addressed
to the respective addresses set forth on the execution page of this
Agreement or such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If delivery is by facsimile:
If to the Company, at 000-000-0000
If to Executive, at 000-000-0000.
(i) Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(j) Survival. The provisions of Section 8,10, 11 and 12(b) shall
survive the expiration or termination of this Agreement regardless of
the reason or reasons therefor.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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SPARTA COMMERCIAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
