Registration of Securities of a Small-Business Issuer — Form 10-SB Filing Table of Contents
Document/ExhibitDescriptionPagesSize
1: 10SB12G Form 10Sb HTML 922K
2: EX-3.1 Articles of Incorporation/Organization or By-Laws HTML 70K
3: EX-3.2 Exhibit 3.1 HTML 100K
4: EX-3.3 Articles of Incorporation/Organization or By-Laws HTML 40K
5: EX-3.4 Articles of Incorporation/Organization or By-Laws HTML 60K
6: EX-4.1 Instrument Defining the Rights of Security Holders HTML 209K
7: EX-4.2 Instrument Defining the Rights of Security Holders HTML 72K
8: EX-4.3 Instrument Defining the Rights of Security Holders HTML 142K
9: EX-4.4 Instrument Defining the Rights of Security Holders HTML 193K
10: EX-10.1 Material Contract HTML 74K
11: EX-10.2 Material Contract HTML 35K
12: EX-10.3 Material Contract HTML 119K
13: EX-10.4 Material Contract HTML 24K
14: EX-10.6 Material Contract HTML 149K
15: EX-10.7 Material Contract HTML 31K
16: EX-14.1 Code of Ethics HTML 120K
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of February4, 2004 by and between Mohen Entertainment Portals, LLC, a New York Limited
Liability Company (the “Company”), and Orville Hagler (“Employee”).
PRELIMINARY
RECITALS
WHEREAS,
the Company is engaged in the business of distributing entertainment over the
Internet and providing Web based music and video portals (the “Business”); and
WHEREAS,
the Company desires to employ Employee, and Employee desires to be employed
by
the Company, in an executive capacity, all under the terms and conditions set
forth herein;
NOW,
THEREFORE, in consideration of the premises, the mutual covenants of the parties
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Employment
1.1Engagement
of Employee.
The
Company agrees to employ Employee as Vice President, Internet Properties and
Employee agrees to accept such employment, all in accordance with the terms
and
conditions of this Agreement.
1.2Duties
and Responsibilities.
During
the Employment Period (as defined herein), Employee will serve as the Company’s
Vice President, Internet Properties and will perform all of the duties and
responsibilities of said office as set forth in the by-laws of the Company
as
the same are in effect from time to time and will perform such other duties
and
responsibilities as the Managing Member shall from time to time reasonable
direct: provided,
however,
that
such duties and responsibilities shall at all times be commensurate with the
position of Vice President of the Company. Employee agrees to serve the Company
diligently and faithfully during the Employment Period and to devote Employee’s
best efforts, highest talents and skills and adequate time and attention to
the
furtherance and success of the Company.
1.3Employment
Period.
Employee’s employment under this Agreement shall be for a period of three (3)
years beginning on the effective date of this Agreement (the “Initial Employment
Period”). After such three (3) years of the Initial Employment Period, this
Agreement shall automatically renew for successive one-year periods (each
one-year period shall be referred to herein as “Renewal Period”) unless either
the Company or Employee, as the case may be, provides written notice to the
other party at least thirty (30) days prior to the termination of any such
period, stating its/his desire to terminate this Agreement. The Initial
Employment Period and each successive Renewal Period shall be referred to herein
together as the “Employment Period.” Notwithstanding anything to the contrary
contained herein, the Employment Period is subject to termination pursuant
to
Section 1.4 below.
1
1.4Termination
of Employment for Cause, Death or Disability.
The
Company has the right to terminate Employee’s employment under this Agreement,
by notice to Employee in writing at any time, for Cause (as hereinafter
defined), and such employment shall automatically terminate upon the death
or
the Disability (as hereinafter defined) of Employee. Any such termination shall
be effective upon the date of service of such notice pursuant to Section 7.7
hereof, in the case of termination for Cause, or immediately upon the death
or
Disability of Employee, and the Employment Period shall terminate as of the
effective date of such termination.
“Cause,”
as used herein, means the occurrence of any of the following
events:
(i) final
non-appealable conviction of (A) a felony or (B) any crime involving moral
turpitude;
(ii) material
willful misconduct of Employee in performing his duties or responsibilities
hereunder after (A) the Company has delivered a written notice to Employee
describing such willful misconduct and (B) employee has failed to cure or take
substantial steps to cure such willful misconduct after a reasonable time
period, as determined by the Board in its reasonable direction (not to be less
than ninety (90) days);
(iii) any
act
by Employee in the course of this employment constituting fraud or
misappropriation of property of the Company or its affiliates; or
(iv) a
material breach by Employee of any of the terms, conditions or covenants set
forth in this Agreement, including Sections 3.2, 3.4, 3.5 or 3.6 of this
Agreement, if (A) written notice is delivered by the Company to Employee
describing such breach and (B) Employee has failed to cure or take substantial
steps to cure such breach after a reasonable time period, as determined by
the
Board in its reasonable discretion (not to be less than ninety (90)
days).
Employee
shall be deemed to have a “Disability” for purposes of this Agreement if he is
unable to perform, by reason of physical or mental incapacity, his material
duties or obligations under this Agreement, with or without reasonable
accommodation, for a total period of (90) days in any three-hundred-sixty (360)
day period. The Board shall determine, according to the facts then available,
whether and when the Disability of the Employee has occurred. Such determination
shall not be arbitrary or unreasonable and the Board will, if possible, take
into consideration the expert medical opinion of a physician chosen by the
Company, after such physician has completed an examination of Employee. Employee
agrees to make himself available for such examination upon the reasonable
request of the Company.
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2.Compensation
and Benefits.
2.1Salary.
In
consideration of Employee performing his duties under this Agreement, the
Company will pay Employee a base salary at a rate of
one-hundred-thirty-nine-thousand dollars ($139,000) per fiscal year (the “Base
Salary”) for the period commencing April 1, 2004 dependent upon securing
adequate financing of the Company. The Base Salary of Employee shall be review
on an annual basis by the Compensation Committee of the Board (the “Compensation
Committee”) in the beginning of each fiscal year of the Employment Period. The
Base Salary shall be payable in accordance with the Company’s regular payroll
practices for salaried employees. If the Employment Period is terminated
pursuant to Section 1.4 above, then the Base Salary for any partial year will
be
prorated based on the number of days elapsed in such year during which services
were actually performed by Employee.
2.2Bonus.
During
the Employment Period, Employee shall be eligible to earn an annual optional
cash bonus in an amount to be determined by the Compensation Committee in its
sole discretion, provided
the
Compensation Committee determines that Employee has met the objectives
established by the Compensation Committee for Employee at the beginning of
each
fiscal year and subject to a determination by the Compensation Committee that
the Company’s financial position prudently allows for the payment of such bonus
amount. All bonuses awarded to Employee hereunder shall be payable in accordance
with the Company policy. Nothing in this Section shall be construed to prohibit
Employee from participating in other such non-cash bonus plans (including,
without limitation, stock option plans) as may be subsequently adopted and
approved by the Company.
2.3Benefits
and Vacation.
Employee will be eligible to participate in and receive such group insurance
plans, other fringe benefit plans and vacation as the Company makes available
to
similarly situated employees, term life insurance, any applicable pension
program, and four (4) weeks paid vacation per year.
2.4Compensation
After Termination of Employment.
(a) If
the
Company shall terminate Employee’s employment during the Employment Period for
any reason (other than pursuant to Section 1.4 of this Agreement ), Employee
shall be entitled to receive severance compensation equal to the sum of (A)
continuance of his Base Salary (which, solely for purposes of this Section
2.4
shall be deemed to include the value of all benefits and perquisites provided
pursuant to Sections 2.3 and 2.5) and Deemed Bonus (as defined below) for a
period of three (3) months commencing on the effective date of termination
of
Employee’s employment (the “Severance Period”), (B) (i) if permitted under
Company’s group health, life and disability coverage (“Insurance Coverage”),
continuation at the cost of Company of Employee’s coverage thereunder (subject
to such changes in coverage as shall apply to Company’s employees generally) or
(ii) if not so permitted, reimbursement by the Company of the premiums for
group
health insurance coverage otherwise payable by Employee under COBRA for the
first eighteen (18) months of the Severance Period and other comparable
replacement coverage procure by Employee thereafter until the end of the
Severance Period or until other employment is obtained that provides comparable
coverage, whichever occurs first, and (C) his pro
rata
bonus, as determined by the Compensation Committee in its good faith judgment
in
accordance with Section 2.2, for the portion of any fiscal year prior to the
termination date ((A), (B) and (C) collectively, the “Severance Benefits”). The
Severance Benefits payable under (A) and (B) (ii) above shall be paid in equal
installments on the Company’s normal payroll payment dates occurring during the
Severance Period; provided,
however,
in the
even Employee terminates his employment for Good Reason after a Change of
Control (as defined below), the Company shall pay Employee the total sum of
the
Severance Benefits in one lump sum payment in an amount equal to the sum of
the
amount described in (C) above and the present value (determined as of the date
of payment which shall be no later than thirty (30) days after the Change of
Control) of the aggregate Severance Benefits payable under (A) and (B)(ii)
above, discounted at a rate equal to the rate of interest (as reported in the
Wall
Street Journal)
borne
by obligation of the United States of America having a maturity of three (3)
years. It shall be a condition to Employee’s right to receive the Severance
Benefits that (i) Employee shall execute and deliver to the Company a written
separation agreement, in form and substance satisfactory to the Company, which
agreement shall, among other things, contain (X) a general release by Employee
of all claims arising out of Employee’s employment or termination of employment,
(Y) a covenant by Employee to cooperate with the Company in prosecuting or
defending any litigation involving third parties and (Z) a covenant by Employee
not to disparage the Company, and (ii) Employee shall be in compliance with
all
of Employee’s obligation which survive termination hereof, including without
limitation, those arising under Section 3 and 4 hereof. The Severance Benefits
are intended to be in lieu of all other payments to which Employee might
otherwise be entitled in respect of termination of Employee’s employment without
Cause. Employee shall not be required to seek other employment during the
Severance Period and his acceptance of alternate employment during the Severance
Period shall not reduce in any way the Company’s obligation to pay Severance
Benefits, except with respect to insurance coverage. Except as expressly
provided above in this Section 2.4(a), no fringe or other employee benefits
shall be payable during or after the Severance Period.
3
(b) If
Employee shall voluntarily terminate his employment for Good Reason (as defined
below) or be terminated without Cause during the Employment Period, Employee
shall be entitled to receive the same Severance Benefits as are provided for
in
Section 2.4(a) above, subject to all of the terms and conditions set forth
in
said Section.
(c) For
purposes of this Agreement, “Good Reason” shall mean, so long as Employee has
not been guilty of the conduct giving rise to the right to terminate Employee
for Cause, (i) the removal of Employee from such position or the assignment
to
Employee of any additional duties or responsibilities or a reduction in
Employee’s duties or responsibilities which, in either case, are inconsistent
with those customarily associated with such position or an adverse change in
the
Employee’s reporting lines; (ii) the Company’s requiring Employee to be based at
any office or location other than in the metropolitan New York City, New York
area, except for travel reasonably required in the performance of Employee’s
duties; (iii) any decrease in the Employee’s compensation; (iv) a material
breach of this Agreement by the Company if written notice is delivered to the
Company describing such breach an it fails to cure after a reasonable period
of
time (not to exceed ninety (90) days); or (v) the termination by the Company
of
any employee benefit plan in which the Employee is participating unless such
plan is terminated as to all managerial employees of the Company.
4
(d) For
purposes of this Agreement, a “Change of Control” of the Company shall be deemed
to have occurred on the first of any of the following:
(i) The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more
of either (A) the then-outstanding shares of Class A Shares of the Company
(the
“Outstanding Company Shares”) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally
in
the election of directors (the “Outstanding Company Voting Securities”);
provided,
however,
that
for the purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the Company
other than in connection with the acquisition by the Company or its affiliates
of a business, (B) any acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, (D) any acquisition by a lender
to
the Company pursuant to a debt restructuring of the Company, or (D) any
acquisition by a lender to the Company, or (E) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B)
and
(C) of subsection (iii) of this Section 2.4(d);
(ii) If
any
individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided,
however,
that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual
or
threatened solicitation of proxies or consents by or on behalf of a Person
other
than the Board;
5
(iii) Consummation
of a reorganization, merger or consolidation of the Company or any direct or
indirect subsidiary of the Company or sale of other disposition of all or
substantially all of the assets of the Company (a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Shares and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than sixty percent (60%) of, respectively, the
then
and the combined voting power of the then Outstanding Company Shares Outstanding
Company Voting Securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (which shall include for these purposes, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Shares and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination
or
any employee benefit plan or related trust) of the Company or such corporation
resulting from such Business Combination and any person beneficially owning,
immediately prior to such Business Combination, directly or indirectly,
thirty-percent (30%) or more of the Outstanding Company Shares or Outstanding
Voting Securities, as the case may be, beneficially owns, directly or
indirectly, thirty-percent (30%) or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were members of
the
Incumbent Board at the time of the execution of the initial agreement or of
the
action of the Board, providing for such Business Combination; or
(iv) Approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company other than to a corporation which would satisfy the requirements
of
clauses (A), (B) and (C) of Subsection (iii) of this Section 2.4(d), assuming
for this purpose that such liquidation or dissolution was a Business
Combination.
6
(e) For
purposes of this Agreement, “Deemed Bonus” means an amount equal to the higher
of (A) the bonus paid or payable to Employee under Section 2.2 for the fiscal
year immediately proceeding the fiscal year in which termination of employment
occurs and (B) the maximum bonus payable to Employee under Section 2.2, as
reasonably determined by the Compensation Committee, for the fiscal year in
which termination of employment occurs.
(f) If
the
Company shall terminate Employee’s employment during Employment Period pursuant
to Section 1.4, the Company shall have no further obligations hereunder or
otherwise with respect to Employee’s employment from and after the termination
or expiration date (except payment of Employee’s Base Salary accrued through the
date of termination or expiration), and the Company shall continue to have
all
other rights available hereunder (including, without limitation, all rights
under Section 3 and 4 hereof at law or in equity); provided that if Employee’s
employment terminates by reason of Employee’s death or disability, Employee or
Employee’s estate shall have the right to exercise Employee’s stock options for
a period of twenty-four (24) months thereafter and all options shall be
immediately exercisable.
(g) For
the
avoidance of doubt, Severance Benefits shall not be payable if Employee’s
employment is terminated by reason of his death or Disability, but shall
continue to be payable during the Severance Period if his employment is
terminated without Cause or if he resigns with Good Reason and he subsequently
dies or becomes disabled.
2.5Reimbursement
for Expenses.
The
Company shall reimburse Employee for all authorize reasonable out-of-pocket
expenses incurred by Employee for travel, lodging, meals and miscellaneous
and
other expenses on behalf of the Company upon presentation of an itemized list
of
such expenses, and, to the extent requested by the Company, receipts and
invoices evidencing such expenses. In addition, the Company shall provide
Employee the following benefits:
(a) the
cost
of compact disks and digital video disks for use in Employee’s work and research
in the internet entertainment business;
(b) annual
membership in a health club of Employee’s choice;
(c) annual
tax preparation services and advice;
(d) broadband
internet and digital cable access in his home, to support his research in the
internet entertainment business.
(i) The
Company is and will be engaged in the Business during the Employment Period
and
thereafter;
(ii) Employee
is one of a limited number of persons who will manage the Business;
(iii) Employee
will occupy a position of trust and confidence with the Company as of the date
of this Agreement, and during the Employment Period and during Employee’s
employment under this Agreement, Employee will become familiar with the
Company’s proprietary and confidential information concerning the Company and
the Business;
(iv) The
agreements and covenants contained in this Section 3 are essential to protect
the Company and the goodwill of the Business and are a condition precedent
to
the Company’s entering into this Agreement;
(v) Employee’s
employment with the Company has special, unique and extraordinary value to
the
Company and the Company would be irreparably damaged if Employee were to provide
services to any person or entity in violation of this provisions of this
Agreement; and
(vi) Employee
has means to support himself and his dependents other than by engaging in the
Business as conducted by the Company during the Restrictive Period (as defined
herein) (the “Restricted Business”) and the provisions of this Section 3 will
not impair such ability.
3.2Non-Compete.
Employee hereby agrees that during the Employment Period and through the period
ending with the second anniversary of the last day of the Employment Period
(collectively, the “Restrictive Period”), he shall not (except on behalf of the
Company during the Employment Period) for any reason whatsoever, directly or
indirectly, whether individually or as a officer, director, shareholder, owner,
partner, joint venturer, employee, independent contractor, consultant or advisor
to or of any entity, or in any other capacity:
(i) engage,
participate or invest in any business which is competitive with the Business
anywhere in the United States of America (the “Territory”); provided,
however,
that
nothing contained herein shall be construed to prevent Employee from investing
in up to 2% of the outstanding stock of any competing corporation that is
widely-traded and listed on a recognized national, international or regional
securities exchange or traded in the U.S. over-the-counter market, but only
if
Employee is not actively involved in and does not render consulting or
employment services to the business of said corporation.
8
(ii) sell
or
provide any competitive products or services to or solicit for the purpose
of
selling or providing any competitive products or services to, any person or
entity that was a customer of the Company at any time during the one-year period
ending on the last day of the Employment Period (the “Termination Date”) or that
was actively being solicited by the Company to become a customer of the Company
at any time during such period,
(iii) solicit
for employment or engagement, or influence or induce to leave the Company’s
employment, or knowingly cause to be employed or engaged, any person who is
employed or engaged by the Company in a managerial capacity on the Termination
Date or during the Restrictive Period, unless such person has been out of the
employ of the Company for at least one-hundred-eighty (180) days;
or
(iv) enter
into, or call upon or request non-public information for the purpose of entering
into, an Acquisition Transaction with any entity with respect to which Company
made an offer or proposal for, or entered into discussions or negotiations
for,
or evaluated with the intent of making a proposal for, an Acquisition
Transactions, within the six (6) month period immediately preceding the
Termination Date.
For
purposes of this Agreement, an “Acquisition Transaction” means a merger
consolidation, purchase of material assets, purchase of a material equity
interest, tender offer, recapitalization, accumulation of shares, proxy
solicitation or other business combination.
3.3Other
Business Activities.
The
parties hereto acknowledge that Employee engages in, and may continue to engage
in, other business activities (including, without limitation, serving on the
board of directors of non-affiliated entities and engaging in civic and
political activities) so long as such business activities shall not violate
Section 3.2 and shall not interfere with Employee’s performance of his duties
and responsibilities hereunder.
3.4Intellectual
Property Rights.
Employee will promptly communicate, disclose and transfer to the Company free
of
all encumbrances and restrictions (and will execute and deliver any papers
and
take any action at any time deemed reasonably necessary by the Company to
further establish such transfer) all of Employee’s right, title and interest in
and to all ideas, discoveries, inventions and improvements relating to the
Business created, originated, developed or conceived of by Employee solely
or
jointly with others during the term of Employee’s employment hereunder, whether
or not during normal working hours. Employee agrees that all right, title and
interest in and to all such ideas, discoveries, inventions and improvements
shall belong solely to the company, whether or not they are protected or
protectible under applicable patent, trademark, service mark, copyright or
trade
secret laws. Employee agrees that all work or other material containing or
reflecting any such ideas, discoveries, inventions or improvements shall be
deemed work made for hire as defined in Section 101 of the Copyright Act, 17
U.S.C §101. Such transfer shall include all patent rights, copyrights, trademark
and service mark rights, and trade secret rights (if any) to such ideas,
discoveries, inventions and improvements in the United States and in all other
countries. Employee further agrees, at the expense of the Company to take all
such reasonable actions and to execute and deliver all such assignments and
other lawful papers relating to any aspect of the prosecution of such rights
in
the United States and all other countries as the Company may request at any
time
during the Employment Period or after termination thereof.
9
3.5Interference
with Relationships.
Other
than in the performance of his duties hereunder, during the Restrictive Period,
Employee shall not, directly or indirectly, as employee, agent, consultant
stockholder, director, co-partner or in any other individual or representative
capacity solicit or encourage any present or future customer, supplier or other
third party to terminate or otherwise alter his, her or its relationship with
the Company with respect to the Restricted Business.
3.6Confidential
Information.
Other
than in the performance of his duties hereunder, during the Restrictive Period
and thereafter, Employee shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, directly or
indirectly furnish, make available or disclose to any third party or use for
the
benefit of himself or any third party, any Confidential Information. As used
in
this Agreement, “Confidential Information” shall mean any information relating
to the business or affairs of the Company or the Business, including, but not
limited to, information relating to financial statements, employees, customers,
suppliers, pricing, marketing, equipment, programs, strategies, analyses, profit
margins, or other proprietary information of or used by the Company or any
subsidiary of Company in connection with the Business; provided,
however,
that
Confidential Information shall not include any information which is in the
public domain or becomes known to the industry through no wrongful act on the
part of Employee. Employee acknowledges that the Confidential Information is
vital, sensitive, confidential and proprietary to the Company.
3.7Blue
Pencil.
If any
court of competent jurisdiction shall at any time deem the Restrictive Period
too lengthy or the Territory too extensive, the other provisions of this Section
3 shall nevertheless stand, the Restrictive Period herein shall be deemed to
be
the longest period permissible by law under the circumstances and the Territory
herein shall be deemed to comprise the largest territory permissible by law
under the circumstances. The court in each case shall reduce the time period
and/or territory to permissible duration or size.
3.8Return
of Company Materials upon Termination.
Employee acknowledges that all price lists, sales manuals, catalogs, binders,
customer lists and other customer information, supplier lists and other supplier
information, financial information, memoranda, correspondence and other records
or documents including information stores on computer disks or in computer
readable form, containing Confidential Information prepared by Employee or
coming into Employee’s possession by virtue of Employee’s employment by the
Company is and shall remain the property of the Company and that upon
termination of Employee’s employment hereunder, Employee shall return
immediately to the Company all such items in Employee’s possession, together
with all copies thereof.
10
3.9Remedies.
Employee acknowledges and agrees that the covenants set forth in this Section
3
(collectively, the “Restrictive Covenants”) are reasonable and necessary for the
protection of the Company’s business interests, that irreparable injury will
result to the Company if Employee breaches any of the terms of said Restrictive
Covenants, and that in the event Employee breaches or threatens to breach any
such Restrictive Covenants, the Company will have no adequate remedy of law.
Employee accordingly agrees that in the event Employee breaches or threatens
to
breach any such Restrictive Covenants, the Company will have no adequate remedy
of law. Employee accordingly agrees that in the even Employee breaches or
threatens to breach any of the Restrictive Covenants, the Company shall be
entitled to immediate temporary injunctive and other equitable relief, without
bond and without the necessity of showing actual monetary damages. In addition,
if Employee is otherwise entitled to receive Severance Benefits and breaches
any
of the terms of the Restrictive Covenants, Employee will not be entitled to
the
payment of any further Severance Benefits hereunder. Nothing contained herein
shall be construed as prohibiting the Company from pursing any other remedies
available to it for such breach or the threat of such a breach by Employee,
including the recovery of any other damages which it is able to
prove.
3.10Company.
For
purposes of this Section 3, the term “Company” shall include the Company and its
respective subsidiaries, affiliates, assignees and any successors in interest
of
the Company or its subsidiaries.
4.Effect
of Termination.
If
Employee or the Company should terminate Employee’s employment for any reason,
then, notwithstanding such termination, those provisions contained in Sections
3.2, 3.4, 3.5 and 3.6 hereof shall remain in full force and effect.
5.Income
Tax Treatment.
Employee and the Company acknowledge that it is the intention of the Company
to
deduct all amounts paid under Section 2 hereof as ordinary and necessary
business expenses for federal, state, and local income tax purposes. Employee
agrees and represents that he will treat all such amounts as required pursuant
to all applicable tax laws and regulations, and should he fail to report such
amounts as required, he will indemnify and hold the Company harmless from and
against any and all taxes, penalties, interest, costs and expenses, including
reasonable attorneys’ and accounting fees and costs, which are incurred by
Company directly or indirectly as a result thereof.
6.Excise
Tax.
6.1 This
Section 6 shall apply in the event that the Employee becomes entitled (without
regard to this Section 6) to one or more payments or rights (which payments
or
rights shall include, without limitation, the vesting of an option or other
non-cash benefit or property), whether pursuant to the terms of this Agreement
or any other plan, arrangement, or agreement with the Company or any affiliated
company (collectively, the “Total Payments”) which would be subject (in whole or
in part) to the excise tax imposed by Section 4999 of the Code (or any similar
tax as may hereafter be imposed) (the “Excise Tax”).
11
6.2 In
the
event that the Total Payments cause the Employee’s “parachute payments” within
the meaning of Section 280G(h)(2) of the Code (the “Parachute Payments”) to
equal or to exceed three times the Employee’s “base amount” within the meaning
of Section 280G(b)(3) of the Code (the “Trebled Base Amount”) by an amount which
is not greater than ten-percent (10%) of the Trebled Base Amount, the Total
Payments shall be reduced (or eliminated) such that no portion of the Total
Payments is subject to the Excise Tax. Reductions shall be made first to those
Total Payments arising under the terms of this Agreement.
6.3 In
the
event that the Total Payment cause the Parachute Payments to exceed
one-hundred-ten-percent (110%) of the Trebled Base Amount, the Company shall
pay
to the Employee at the time specified below, an additional amount determined
as
set forth below (the “Gross-up Payment”). The Gross-up Payment shall be made
only with respect to the amount which equals fifty-percent (50%) of the
Employee’s “excess parachute payments” subject to the Excise Tax (the “Subject
Amount”). For the avoidance of doubt, no Gross-up Payment shall be made with
respect to the remaining fifty-percent (50%) of the amount described in the
preceding sentence. The Gross-up Payment shall be an amount such that the net
amount retained by Employee with respect to the Subject Amount after reduction
for any Excise Tax on the Subject Amount and any federal, state and local income
or employment tax and Excise Tax payable by the Employee on the Gross-up Payment
hereunder (provided that such amount is actually paid when due) shall be equal
to the Subject Amount.
6.4 For
purposes of determining whether any of the Total Payments will be subject to
the
Excise Tax, the amount of any Excise Tax and the amount of any Gross-up
Payment:
(a) The
Total
Payments shall be treated as Parachute Payments and all “excess parachute
payments” within the meaning of Section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax, unless, and except that to the extent that, in
the
written opinion of independent legal counsel, compensation consultants or
auditors of nationally recognized standing (“Independent Advisors”) selected by
the Company and reasonably acceptable to Employee, the Total Payments (in whole
or in part) do not constitute Parachute Payments, of such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess
of the base amount within the meaning of Section 280G(b)(3) of the Code or
are
otherwise not subject to the Excise tax;
(b) The
amount of the Total Payments which shall be treated as subject to the Excise
Tax
shall be equal to the lesser of (i) the total amount of the Total Payments,
and
(ii) the total amount of “excess parachute payments” within the meaning of
Section 280G(b)(1) of the Code (after applying Section 6.4(a) above);
and
12
(c) The
value
of any non-cash benefits or any deferred payment or benefit shall be determined
by the Independent Advisors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
In
the
event that the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder al the time the Gross-up Payment is made, Employee
shall repay to the Company at the time that the amount of such reduction in
Excise Tax is finally determined (but, if previously paid to the taxing
authorities, not prior to the time the amount of such reduction is refunded
to
Employee or otherwise realized as a benefit by Employee) the portion of the
Gross-up payment that would not have been paid if such Excise Tax had been
utilized in initially calculating the Gross-up Payment, plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time the Gross-up Payment is made (including
by
reason of any payment the existence or amount of which cannot be determined
at
the time of the Gross-up Payment), the Company (i) shall make an additional
Gross-up Payment to Employee at the time that the amount of such excess if
finally determined and (ii) shall indemnify and hold Employee harmless from
any
and all liabilities arising as a direct result of such excess (plus any interest
and penalties payable with respect to such excess).
The
Gross-up Payment provided for above shall be paid in full thirty (30) days
(or
such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any other
portion thereof) are subject to the Excise Tax; provided,
however,
that if
the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to Employee on such
day
an estimate, as determined by the Independent Advisors, of the minimum amount
of
such Gross-up Payment and shall pay the remainder of such payment (together
with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon
as
the amount thereof can be determined. In the event that the amount of the
estimated Gross-up Payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to Employee,
payable on the fifth day after demand by the Company (together with interest
at
the rate provided in Section 1274(b)(2)(B) of the Code). If more than one
Gross-up Payment is made, the amount of each Gross-up Payment shall be computed
so as not to duplicate any prior Gross-up Payment.
Employee
shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of the Gross-up
Payment (the “Claim”). Such notification shall be given as soon as practicable
but no later than ten (10) business days after Employee is informed in writing
of the Claim and shall apprise the Company of the nature of the Claim and the
date on which such Claim is requested to be paid. Employee shall not pay such
Claim prior to the expiration of the thirty (30) day period following the date
on which it gives such notice to the Company (or such shorter period ending
on
the date that any payment of taxes with respect to such Claim is due). If the
Company notifies Employee in writing prior to the expiration of such period
that
it desires to contest such Claim, Employee shall:
13
(i)
give
the Company any information reasonably requested by the Company relating
to such Claim;
(ii)
take
such action in connection with contesting the Claim as the Company
shall
reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such Claim
by
an attorney reasonably selected by the
Company;
(iii)
cooperate
with the Company in good faith in order effectively to contest the
Claim;
and
(iv)
permit
the Company to participate in any proceedings relating to the
Claim;
provided,
however,
that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest
and
shall indemnify and hold Employee harmless, on all after-tax basis, for any
Excise Tax or income or employment tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of
costs
and expenses. Without limiting the foregoing provisions of this Section 6,
the
Company shall control all proceedings taken in connection with such contest
and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of
the Claim and may, at its sole option, either direct Employee to pay the Excise
Tax claimed and sue for a refund or contest the Claim in any permissible manner,
and Employee agrees to prosecute such contest to a final determination before
any administrative tribunal, in a court of initial jurisdiction and in one
or
more appellate courts, as the Company shall determine; provided,
however,
that if
the Company directs Employee to pay any Excise Tax claimed to be due and sue
for
a refund, the Company shall advance the amount of such payment to Employee,
on
an interest-free basis, and shall indemnify and hold Employee harmless, on
an
after-tax basis, from any Excise Tax or income or employment tax (including
income or employment tax or interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and furtherprovided
that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Employee with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest of the Claim shall be limited, to the extent possible,
to
issues with respect to which a Gross-up Payment would be payable hereunder
and
the Employee shall be entitled, to the extent possible, to settle or contest,
as
the case may be, any other issue raised by the Internal Revenue Service or
any
other taxing authority. If, after the receipt by Employee of an amount advanced
by the Company pursuant to this Section 6, Employee becomes entitled to receive
any refund with respect to such Claim, Employee shall (subject to the Company’s
complying with the requirements of this Section 6) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Employee of an amount
advanced by the Company pursuant to this Section 6, a final determination is
made that Employee shall not be entitled to any refund with respect to such
Claim and the Company does not notify Employee in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-up Payment required to be paid.
14
7.Miscellaneous.
7.1Life
Insurance.
The
Company may at its discretion and at any time apply for and procure as owner
and
for its own benefit and at its own expense, insurance on the life of Employee
in
such amounts and in such form or forms as the Company may choose. Employee
shall
cooperate with the Company in procuring such insurance and shall, at the request
of the Company, submit to such medical examinations, supply such information
and
execute such documents as may be required by the insurance company or companies
to whom the Company has applied for such insurance. Employee shall have no
interest whatsoever in any such policy or policies, except that, upon the
termination of Employee’s employment hereunder, Employee shall have the
privilege of purchasing any such insurance from the Company for an amount equal
to the actual premiums thereon previously paid by the Company.
7.2Assignment.
No
party hereto may assign or delegate any of its rights or obligations hereunder
without the prior written consent of the other party hereto; provided,
however,
that
the Company shall have the right to assign all or any part of its rights and
obligations under this Agreement (i) to any affiliate of the Company to which
the Business of the company is assigned at any time, any subsidiary or affiliate
of the Company or any surviving entity following any merger or consolidation
of
any of those entities with any entity other than the company or (ii) in
connection with the sale of the Business by the Company. Except as otherwise
expressly provided herein, all covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure
to
the benefit of the respective legal representative, heirs, successors and
assigns of the parties hereto whether so expressed or not.
7.3Entire
Agreement.
Except
as otherwise expressly set forth herein, this Agreement and all other agreements
entered into by the parties hereto on the date hereof set forth the entire
understanding of the parties, and supersede and preempt all prior oral or
written understandings and agreements, with respect to the subject matter
hereof.
7.4Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition
or
invalidity, without invalidating the remainder of this Agreement.
15
7.5Amendment;
Modification.
No
amendment or modification of this Agreement and no waiver by any party of the
breach of any covenant contained herein shall be binding unless executed in
writing by the party against whom enforcement of such amendment, modification
or
waiver is sought. No waiver shall be deemed a continuing waiver or a waiver
in
respect of any subsequent breach of default, either of a similar or different
nature, unless expressly so stated in writing.
7.6Governing
Law.
THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS
AGREEMENT SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PROVISIONS THEREOF REGARDING CONFLICT OF LAWS.
7.7Notices.
All
notices, demands or other communications to be given or delivered hereunder
or
by reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been properly served if (a) delivered personally,
(b) delivered by a recognized overnight courier service, (c) sent by
certified or registered mail, return receipt requested and first class postage
prepaid, or (d) sent by facsimile transmission followed by a confirmation copy
delivered by a recognized overnight courier service the next business day.
Such
notices, demands and other communications shall be sent to the addresses
indicated below:
or
to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party. Date of
service of such notice shall be (i) the date such notice is personally
delivered or sent by facsimile transmission (with issuance by the transmitting
machine of a confirmation of successful transmission), (ii) three business
days after the date of mailing if sent by certified or registered mail or
(iii) one business day after date of delivery to the overnight courier if
sent by overnight courier.
7.8Counterparts.
This
Agreement may be executed in one of more counterparts, each of which shall
be
deemed an original, but all of which taken together shall constitute one and
the
same Agreement.
7.9Descriptive
Headings; Interpretation.
The
descriptive headings in this Agreement are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement. The use of the word “including” in this
Agreement shall be by way of example rather than by limitation. The Preliminary
Recitals set forth above are incorporated by reference into this
Agreement.
7.10No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties hereto to express their mutual interest, and no rule of strict
construction will be applied against any party hereto.
17
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and year first above written.
