Exhibit 10.5
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EMPLOYMENT AGREEMENT
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THIS AGREEMENT ("Agreement") made and entered into this 27th day of
December, 2004 and between WindsorTech, Inc., a Delaware corporation ("Company")
and ▇▇▇▇ ▇▇▇▇▇▇▇ ("Employee"), but effective as of October 1, 2004.
1. Background. Employee is employed by Company as its president and
chief executive officer. The parties desire to enter into a formal employment
agreement governing the terms and conditions of such employment.
TERMS AND CONDITIONS
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2. Employment. Company hereby employs Employee, and Employee hereby
accepts such employment by Company, on the terms and conditions set forth below.
3. Capacity. Employee shall serve as Company's President and Chief
Executive Officer and will be expected to perform duties appropriate to these
executive positions.
4. Term. The term of Employment pursuant to this Agreement shall be for
continuously rolling three (3) year periods unless either party gives the other
party notice that it [the party giving notice] wishes to cease the continuous
rolling term provision feature, with the next contract anniversary (i.e. October
1 of each year) and thereby fix the term for a period of three (3) years from
the next contract anniversary. By way of example, on October 1, 2005, the term
of employment shall be from October 1, 2005 through September 30, 2008; if on
August 1, 2006 the Company, shall have notified Employee that the term is fixed;
Employment shall terminate three years after the next anniversary date, or
September 30, 2009.
Notwithstanding the foregoing, the term of this Agreement may
end prior to the termination date determined under this paragraph 4, or as
provided in paragraphs 11, 12, 13 or 14.
5. Service While Employed. Employee agrees to devote his best efforts,
his full diligence and substantially all of his business time to his duties
hereunder and shall not engage, either directly or indirectly, in any business
or other activity which is competitive with or adverse to the interests or the
business of Company.
6. Items Furnished. Company shall furnish Employee with such private
office, secretarial assistance, and such other facilities, equipment and
services suitable to his position and adequate to perform his duties hereunder.
Employee shall not be relocated by Company without his consent.
7. Compensation, Vacations and Reimbursement. As partial compensation
for his services to Company, Company agrees to pay Employee an annual salary
paid in regular monthly or other agreed upon installments, of not less than four
hundred twenty-four thousand dollars
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($424,000.00) and an annual bonus computed in accordance with Exhibit "A" which
is attached and is a part of this Agreement as amended from time to time. In
addition, Employee may be entitled to receive such bonuses (in addition to that
required under the preceding sentence), incentive compensation, and other
compensation, if any, as the Board of Directors, shall award Employee from time
to time whether in cash, Company stock, stock options, other stock based
compensation, other form of remuneration, or any combination of the foregoing.
All such compensation shall be subject to legally required income and employment
tax withholding. Employee shall be entitled to his regular pay during his
vacations and reimbursement for all reasonable business expenses in accordance
with Company's policies for executive officers.
8. Pension, Welfare and Related Benefits. In addition to the
compensation described in paragraph 7 above, Employee shall be entitled to
participate in such bonus, profit sharing, deferred compensation and pension
plans of Company for which he is eligible and such welfare and fringe benefits
plans and programs of the Company for which he is eligible.
9. Other Benefits. The Company shall pay an annual sum of up to twenty
thousand dollars ($20,000.00) for a club membership. Such amount shall be in
addition to any reimbursement to which Employee is entitled under this
Agreement.
10. Supplemental Compensation. Except as otherwise provided in this
Agreement, upon the termination of Employee's employment with Company, other
than due to his breach of a material provision of this Agreement, or termination
of Employee's employment with the Company as a result of acts of fraud,
dishonesty, deceit, willful and wanton conduct, violation of law or other
similar acts or conduct, in which event Employee shall be due no compensation
pursuant to this paragraph, Employee shall be entitled to receive commencing on
the first day of the next month following the date of the termination of
employment from Company 36 equal monthly payments, each in the amount of the
monthly average of all compensation paid by Company to employee in the twelve
(12) months prior to the date of termination. [By way of example, if employee's
total compensation within the prior twelve (12) month was five hundred thousand
dollars ($500,000.00), then Employee shall receive forty-one thousand six
hundred sixty-six dollars and 66 cents ($41,666.66) per month for thirty-six
(36) consecutive months.] If Employee should die before all or any part of the
above described monthly payments have been made, all payments or all remaining
payments shall be made to his designated beneficiary, if any, otherwise to his
estate. The aggregate amount payable under this paragraph shall be reduced (but
not below zero) by the amount, if any, payable under paragraph 14 and such
reduced amount shall also be payable in 36 equal monthly installments.
Notwithstanding the foregoing, if Employee terminates his employment pursuant to
the second sentence of paragraph 12, he shall be due no compensation under this
Paragraph.
11. Disability.
(a) In the event Employee shall become disabled and be unable to
perform his services in accordance with the terms of this
Agreement, he shall be entitled to
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full salary, all additional salary and benefits during the
first twelve (12) month period of his disability.
(b) In the event disability shall extend for a period beyond
twelve (12) consecutive months or twelve (12) months in any
twenty-four (24) consecutive month period, Employee then shall
be entitled to receive only such compensation as may be
provided by way of disability income insurance procured by
Employer on Employee, if any, the premiums for which were paid
by Employer.
(c) For the purpose of this paragraph, the term "full salary"
shall mean one-twelfth (1/12) of the twelve (12) months in
total compensation paid to Employee immediately prior to the
onset of his disability.
(d) In the event Employer pays premiums on disability income
insurance for which Employee is the insured, either as the
owner of such insurance or on behalf of Employee, and by
virtue of being disabled, Employee shall be considered to have
been paid by Employer towards (all payments made by said
insurance will be credited toward any sums due from the
Company to Employee) fulfilling its obligations to Employee as
such obligations are described in this Paragraph.
(e) Insurance benefits received by Employee with respect to
policies which he owns individually and on which he personally
has paid premiums shall in no way affect the terms of this
Agreement.
(f) After a disability or a series of disabilities has continued
for a period of twelve (12) consecutive months or for twelve
(12) months in any twenty-four (24) consecutive month period,
Employee's employment shall terminate, whereupon he shall have
no further rights to compensation under this agreement except
the right to be considered an employee of the Company with
respect to health insurance for Employee and his family (for
so long as Employee's Disability shall exist) hereto and
except the right to receive disability insurance proceeds with
respect to insurance policies for which he is the insured, the
premiums for which were paid by Employer.
(g) The term "disability" as used in this Paragraph is defined as
the inability of Employee to substantially perform the
employment obligations as herein set forth due to mental or
physical illness or accident.
12. Termination Upon Retirement or Notice. From and after the time
Employee attains age 65, he may retire at any time by notifying Company at least
120 days prior to his intended retirement date or be retired by Company upon at
least two years notice. In addition, Employee may terminate his employment at
any time after December 31, 2005, upon six (6) months prior notice. If a notice
of termination has been given under this paragraph, and the Agreement is
terminated under another provision if this Agreement, such as by death ("Other
Termination Provision") prior to the
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date of such termination under this paragraph, then the Agreement shall be
deemed to have been terminated pursuant to the Other Termination Provision.
13. Default. In the event that either party fails to perform material
provision of this Agreement and such failure continues for 15 days after
notification from the non-breaching party, the non-breaching party may terminate
this Agreement by notice to the breaching party. Such termination shall be
without prejudice to any rights or remedies which the non-breaching party may
have.
14. Change in Control. Notwithstanding any other provision of this
Agreement, should a "change of control" occur, Employee, at his sole option and
discretion, may terminate his employment under this Agreement at any time within
one year after such change of control upon 15 days notice. In the event of such
termination, Company shall pay to Employee a severance payment ("Severance
Payment") equal to: (a) three times the then current bonus due or pro rata
portion thereof and (b) three times the base amount as defined in Section
280G(b)(3) of the Code minus $1.00. Notwithstanding the foregoing, (a) if the
Severance Payment and any other amounts payable by Company to Employee are
parachute payments under Code Section 280G (collectively, "Parachute Payments")
and, (b), if reducing the Severance Payment would eliminate the tax provided for
in Code Section 4999 ("Section 4999 Tax") which would otherwise be applicable to
the Parachute Payments, and (c) if, because of such elimination, the net amount
of the Parachute Payments (total payments minus Section 4999 Tax) would be
greater than such net amount without reduction, then the Severance Payment shall
be reduced by the smallest amount required to eliminate the imposition of the
Section 4999 Tax. The foregoing determination shall be made by Company's Board
of Directors and this determination shall be binding upon Company and Employee.
The amount determined under the foregoing provisions of this paragraph shall be
payable no later than one month after the effective date of the Employee's
termination of employment. A change in control means: (a) the acquisition by any
person or entity, other than Company or a "related entity," of (i) more than 20%
without the approval of the Board of the outstanding shares of Company's voting
stock on a diluted and/or converted basis through a tender offer, exchange offer
or otherwise or (ii) more than 50% with the approval of the Board of the
outstanding shares of Company's voting stock on a diluted and/or converted basis
through a tender offer, exchange offer or otherwise; (b) the sale or other
disposition of all or substantially all of Company's assets unless shareholders
of Company prior to such sale or disposition own at least 50% of the voting
stock on a diluted and/or converted basis of the purchaser, and the purchaser
assumes Company's obligations under this Agreement; (c) a merger or
consolidation involving Company which results in Company not being the surviving
parent corporation or after which shareholders of the Company own less than 50%
of the voting stock on a diluted and/or converted basis of the surviving entity;
or (d) any time during any two-year period in which individuals who constituted
3/5 of the Members , the Board at the start of such period (except in the case
of a transaction described in a(i) or (c)), shall no longer constitute at least
3/5th of the Board of Directors of the Company; provided however, that Employee
shall not have voted for removal of said member(s) of the Board of Directors,
except in the event of removal "for cause". Further, it shall not be deemed a
change in control as a result of a change of directors via annual election(s)
unless said change in the Board of Directors was effectuated as a result of a
shareholder vote at an annual meeting of the Company and Employee voted to
retain the removed
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directors. A "related entity" is the parent, a subsidiary or any employee
benefit plan (including a trust forming a part of such a plan) maintained by
Company, its parent or a subsidiary.
15. Non-Competition. For a three (3) year period from and after
termination of Employee's employment for any reason other than death, Employee
shall not engage, directly or indirectly, either on his own behalf or on behalf
of any other person, firm, corporation or other entity, in any business
competitive with the business of Company, at the time of termination of
Employee's employment, or own more than 5% of any such firm, corporation or
other entity. In addition, Employee must furnish Company with such information
as Company shall from time to time request in order to determine that Employee
is in compliance with the requirements of the preceding provisions of this
paragraph. The payments to be made under paragraph 10 are conditioned upon
Employee's complying with the provisions of this paragraph. In the event that
such provisions are not complied with, then, in addition to all other rights and
remedies which Company may have ( and which Employee agrees shall include
equitable relief), Company may suspend such payments for any period of time in
which Employee is not in compliance with the preceding provisions of this
paragraph. Employee agrees that the restrictions of this paragraph are
reasonable and required to protect the legitimate business interests of Company.
16. Nondisclosure; Return of Records. Employee will not, except as
authorized by Company, publish or disclose to others, or use for his own
benefit, or authorize anyone else to publish or disclose or use, or copy or make
notes of any secret, proprietary, or confidential information or knowledge of
data or trade secrets of or relating to the business activities of Company which
may come to Employee's knowledge during his employment with the Company. Upon
termination of Employee's employment for any reason, Employee will deliver to
Company, without retaining any copies, notes or excerpts, all records, notes,
data, memoranda, and all other documents or materials made or compiled by
Employee, or made available to him by Company during his employment, which are
in Employee's possession and/or control and which are the property of Company
and/or which relate to Employee's employment or the business activities of
Company.
17. Confidential Business Information - Defined. Employee recognizes,
acknowledges, and agrees that the courses of treatment, supplies, documents,
lists, files, records, data, and any other information developed, acquired or
used by the Company in its business, including all information developed and
acquired by Employee in the course of his relationship with the Company as it
may exist from time to time, are considered confidential.
18. Confidential Business Information - Admissions. Employee admits
that such Confidential Business Information is a valuable, special, and unique
asset of the Company's business that gives the Company advantage over its actual
and potential competitors, and Employee further admits and agrees that:
a. Company has implemented such practices and measures as are
reasonably necessary to preserve and to protect the confidentiality of such
Confidential Business Information;
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b. Employee, by reason of the trust relationship arising
between him and the Company, owes the Company a fiduciary duty to preserve and
protect such Confidential Business Information from all unauthorized disclosure
or unauthorized use;
c. Such Confidential Business Information constitutes "trade
secrets";
d. Unauthorized disclosure or unauthorized use of such
Confidential Business Information would irreparably injure the Company.
19. Confidential Business Information - Prohibited Acts. Employee
understands and agrees that all such Confidential Business Information is to be
preserved and protected, is not to be disclosed or made available, directly or
indirectly, to third persons for purposes unrelated to the business objectives
of the Company without prior written authorization and is not to be used,
directly or indirectly, for any purpose unrelated to the business objectives of
the Company.
20. Confidential Business Information - Continuing Obligations.
Employee understands and agrees that his obligations under this Confidentiality
Agreement, specifically including the obligations to preserve and protect and
not to disclose (or make available to third persons) or use for purposes
unrelated to the business objectives of the Company, without prior written
authorization of the Company, continue indefinitely and do not, under any
circumstances or for any reason, cease upon termination of Employee's
relationship with the Company; and that such Confidential Business Information
shall remain the sole property of the Company.
21. Confidential Business Information - Proprietary Interest. Employee
understands and agrees that all such Confidential Business Information is and
shall remain, at all times, the sole property of the Company; that he obtains no
proprietary interest in any Confidential Business Information developed or
acquired in the course of his relationship with the Company; and that it shall
be no defense to enforcement of this Confidentiality Agreement that Employee or
any third-party acting on his behalf or direction, developed or acquired, in
whole or in part, the Confidential Business Information disclosed or used
without authorization.
22. Confidential Business Information - Remedies. If an action should
have to be brought by the Company to enforce the provisions of this
Confidentiality Agreement, Employee recognizes, acknowledges, and agrees that
the Company shall be entitled to all remedies at law and/or equity, all without
the need of bond. All such remedies shall be cumulative and not exclusive.
23. Company. For purposes of this Agreement, the Company means
WindsorTech, Inc. and all parent subsidiaries and affiliates.
24. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Company and any successors or assigns of Company, and Employee,
his heirs, personal representatives and assigns, except that Employee's
obligations to perform services and rights to receive payment therefore shall be
non-assignable and nontransferable.
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25. Entire Agreement: Modification. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter and
supersedes all prior or contemporaneous agreements not set forth in this
agreement. This Agreement may not be modified other than by an agreement in
writing signed by each of the parties.
26. Waiver. Any failure by either party to enforce any provision of
this Agreement shall not operate as a waiver of such provision or any other
provision. Any waiver by either party of any breach of any provision of this
Agreement shall not operate as a waiver of any other breach of such provision or
any other provision of this agreement.
27. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not effect the other provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
28. Paragraph Headings. Paragraph headings throughout this Agreement
are solely for the convenience of the parties and shall not be construed as a
part of any section or as modifying the contents of any section.
29. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida.
30. Notices. All notices under this Agreement shall be personally
delivered, sent certified mail, postage prepaid, to Company at its corporate
office and to Employee at his principal residence, or sent by telecopy.
31. Modification. In the event that any provision of this Agreement is
invalid or unenforceable, it shall be modified to the extent required to be
valid and enforceable and only to such extent. If it cannot be so modified, then
it shall be deemed to have been deleted from this Agreement but such deletion
shall not affect the remaining terms and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Company Employee:
WindsorTech, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇
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By:
Title:
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EXHIBIT "A"
WINDSORTECH, INC.
Bonus Plan
For Year 2004
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2004 Corporate Goals: Category % of Bonus
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1. Raise a minimum of $2.0 million, either through debt
or capital or a combination thereof. A 25%
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2. Complete an acquisition of one or more companies
with cumulative EBITDA of $1,000,000 B 25%
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3. Achieve ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ (▇▇) of 30%
compared to 2003. C 10%
--------------------------------------------------------------- --------------- ------------------
4. Achieve Business Plan EBT of $1,111,824 D 40%
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Compensation Objectives:
1. To 09/30/04 (end of current contract) Base Salaries and bonus bases as
follows:
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Name Salary* Bonus Base**
------------------------------------ ----------------------- -------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Chairman $300,000 $150,000
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2. Bonus plan kicks in after achieving at least 85% of the above goals, and is payable as follows:
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Amount of Bonus Base
% of Goal Achieved Payable Cumulative Bonus Paid
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85.0% 10% 10%
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85.1 - 90.0% 10% 20%
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90.1 - 95.0% 10% 30%
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95.1 - 100.0% 10% 40%
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100.1 - 105.0% 25% 65%
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105.1 - 110.0% 25% 90%
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110.1 - 115.0% 30% 120%
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115.1 - 120.0% 35% 155%
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The Bonus due is calculated as follows: Multiply the "% of Goal Achieved" by the
percentage in the "Cumulative Bonus Paid" column. This computation is done
independently for each corporate goal then added up to calculate the total bonus
to be paid.
* 10/-1/04 - 12/31/04 Base Salary is per new contract.
** 10/01/04 - 12/31/04 Bonus Base is $400,000.00
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