EMPLOYMENT AGREEMENT WITH KENNETH H. VOLZ EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER & TREASURER
EXHIBIT
10.9
EMPLOYMENT
AGREEMENT WITH ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
EXECUTIVE
VICE PRESIDENT, CHIEF FINANCIAL OFFICER & TREASURER
This
Employment
Agreement (this “Agreement”) is made and
entered into as of February 12, 2010 and shall be effective April 11, 2010 (the
“Effective Date”), by
and between Warwick
Valley Telephone Company (the “Company”) and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇ (“Executive”).
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1.
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Employment.
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The
Company hereby agrees to employ Executive, and Executive hereby agrees to be
employed by the Company, upon the terms and subject to the conditions set forth
in this Agreement.
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2.
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Term
of Employment.
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(a) The
period of Executive’s employment under this Agreement shall begin as of the
Effective Date and shall continue until April 10, 2012 (the “Initial Term”), and shall be
renewed automatically for successive one-year periods thereafter (each, a “Renewal Period”), unless
Executive or the Company gives written notice of nonrenewal to the other at
least sixty (60) days before the expiration of the Initial Term or any
subsequent Renewal Period.
(b) Notwithstanding
the foregoing, Executive’s employment may be terminated by the Company or by
Executive at any time for any reason.
(c) As used
in this Agreement, the term “Employment Term” refers to
Executive’s period of employment from the Effective Date until the date his
employment terminates.
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3.
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Duties
and Responsibilities.
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(a) The
Company will employ Executive as its Executive Vice President, Chief Financial
Officer and Treasurer. In such capacity, Executive shall perform the
customary duties and have the customary responsibilities of such positions and
such other duties as may be assigned to Executive from time to time by the
President and Chief Executive Officer (the “President”) pursuant to the
President’s properly delegated authority. Executive will exercise his judgment
in accordance with the highest ethical standards.
(b) Executive
agrees to faithfully serve the Company, devote his full working time, attention
and energies to the business of the Company, its subsidiaries and affiliated
entities, and perform the duties under this Agreement to the best of his
abilities.
(c) Executive
agrees (i) to comply with all applicable laws, rules and regulations; (ii) to
comply with the Company’s rules, procedures, policies, requirements, and
directions; and (iii) not to engage in any other business or employment without
the written consent of the Company except as otherwise specifically provided
herein.
(d) Executive
acknowledges that he has received a copy of the Company’s Code of Ethics, that
he has read the Code of Ethics and that this Agreement does not supersede that
policy.
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4.
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Compensation
and Benefits.
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(a) Base Salary. During
the Employment Term, the Company shall pay Executive a base salary at the annual
rate of $250,000 per year or such higher rate as may be determined annually by
the Company (“Base
Salary”). Such Base Salary, less applicable withholdings, shall be paid
in accordance with the Company’s standard payroll practice for
executives.
(b) Annual
Bonus. During the Employment Term, Executive will be eligible
to receive an Annual Bonus each year, as determined in accordance with the
Applicable Plan approved by the Board (or Compensation Committee as the case may
be) for Executive for such year. An example of the Applicable Plan for 2010 is
attached as Appendix A to this Agreement for illustration purposes only.
Subsequent measurement metrics will be determined by the Board (or Compensation
Committee as the case may be) at their sole discretion for 2010 and each
subsequent year. The Board (or Compensation Committee as the case may be) has
the right to change or eliminate the Applicable Plan in its sole discretion at
any time. The Annual Bonus to be paid to Executive in 2011 shall be based on the
Company’s financial performance in 2010, continuing in like progression with the
Annual Bonus to be paid in any year based on the Company’s prior year’s
performance. Such Annual Bonus, less applicable withholdings, shall be paid
within 2.5 months of the end of the taxable fiscal year during which it was
earned. Except as otherwise provided by Section 7, in order to be eligible to
receive payment of any portion of an Annual Bonus, Executive must be actively
employed by the Company on the payment date. Notwithstanding the foregoing,
Executive acknowledges that whether any Annual Bonus is to be paid for a given
year and the amount of that Annual Bonus is completely at the discretion of the
Board (or Compensation Committee as the case may be).
(c) Incentive
Compensation. Executive shall be eligible to receive incentive
compensation (“Incentive
Compensation”) each year, in accordance with the Applicable Plan approved
by the Board (or Compensation Committee as the case may be) for Executive for
such year. The Incentive Compensation shall be in the form of equity-based
awards (stock options and restricted stock of the Company) under the Company’s
incentive compensation plans. An example of the Applicable Plan for 2010 is
attached as Appendix A to this Agreement for illustration purposes only.
Subsequent measurement metrics will be determined by the Board (or Compensation
Committee as the case may be) at their sole discretion for 2010 and each
subsequent year. The Board (or Compensation Committee as the case may be) has
the right to change or eliminate the Applicable Plan in its sole discretion at
any time. The Incentive Compensation to be paid to Executive in 2011 shall be
based on the Company’s financial performance in 2010, continuing in like
progression with the Incentive Compensation to be paid in any year based on the
Company’s prior year performance. Such Incentive Compensation shall be delivered
to Executive within 2.5 months of the end of the taxable fiscal year during
which it was earned. Except as otherwise provided by Section 7, in order to be
eligible to receive payment of any portion of the Incentive Compensation,
Executive must be actively employed by the Company on the payment date.
Notwithstanding the foregoing, Executive acknowledges that whether any Incentive
Compensation is to be paid for a given year and the amount of that Incentive
Compensation is completely at the discretion of the Board (or Compensation
Committee as the case may be).
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(d) Benefit Plans, Fringe Benefits and
Vacation. Executive shall be eligible to participate in any
401(k) savings plan generally made available by the Company to other executives
in accordance with the eligibility requirements of such plans and subject to the
terms and conditions set forth in such plans, except for any pension benefit.
Executive shall be eligible to participate in any health and welfare plans made
available to other executives, including, but not limited to, any medical and
dental benefits plan, life insurance plan, short-term and long-term disability
plans, or other executive benefit or fringe benefit plan. Executive will also be
eligible to receive at least four (4) weeks of vacation per calendar year,
accrued and earned on a daily basis, as well as other types of paid time-off
(e.g., holidays, personal days, absence due to illness, etc.) according to the
Company’s vacation and paid time-off policy.
(e) Housing and Travel
Allowance. Executive has affirmed his plan to maintain a
residence in the community served by the Company. To defray the costs to
Executive of this additional residence, and the cost of occasional commutes
between his current home and Company offices, the Company will provide Executive
with a Housing and Travel Allowance of $4,800 per month for the duration of his
employment under this Agreement. The Company shall also pay Executive a tax
gross-up benefit on the Housing and Travel Allowance in an amount such that,
after the withholding of all federal and state income and employment taxes with
respect to the Housing and Travel Allowance and the tax gross-up benefit,
Executive will be in the same after-tax economic position that Executive would
have been in had the Housing and Travel Allowance not been subject to such
taxes. The Housing and Travel Allowance and tax-gross up benefit for a given
month shall be paid to Executive on the first day of such month, or as soon as
administratively practicable thereafter, but in no event later than the end of
that month.
(f) Expense
Reimbursement. The Company shall promptly reimburse Executive
for the ordinary and necessary business expenses incurred by Executive in the
performance of the duties under this Agreement in accordance with the Company’s
customary practices applicable to executives, provided that such expenses are
incurred and accounted for in accordance with the Company’s expense
reimbursement policy. Reimbursement shall be made as soon as administratively
practicable following Executive’s submission of the necessary documents and
receipts required under the Company’s expense reimbursement policy, but in no
event later than December 31st of the
calendar year following the calendar year in which the expense was
incurred.
(g) Concession. Executive
will be provided with paid PDA or mobile phone service for one electronic
device, as well as concession Telephone and Toll Service, DSL Internet Service
and in territory Digital TV service benefits consistent with those available to
other executives.
(h) Indemnification. Executive
will be covered by the Company’s standard Director’s and Officer’s
Indemnification Agreement, providing for indemnification consistent with the New
York Business Corporation Law and the Company’s by-laws.
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5.
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Termination
of Employment.
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Executive’s
employment may be terminated by the Company or by Executive at any time for any
reason. Upon termination, Executive shall be entitled to receive the
compensation and benefits described in Section 7. Executive’s employment will
terminate under the following conditions:
(a) Death. Executive’s
employment shall terminate upon Executive’s death.
(b) Total
Disability. The Company may terminate Executive’s employment
upon his becoming Totally Disabled. For purposes of this Agreement, Executive
shall be “Totally
Disabled” if Executive is physically or mentally incapacitated so as to
render Executive incapable of performing his usual and customary duties under
this Agreement without reasonable accommodation. Executive’s receipt of
disability benefits under the Company’s long-term disability plan, if any, or
receipt of Social Security disability benefits shall be deemed conclusive
evidence of Total Disability for purpose of this Agreement; provided, however,
that in the absence of Executive’s receipt of such longterm disability benefits
or Social Security benefits, the Company may, in its reasonable discretion (but
based upon appropriate medical evidence), determine that Executive is Totally
Disabled.
(c) Termination
by the Company for Cause.
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(i)
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The
Company may terminate Executive’s employment for Cause at any time after
providing written notice to
Executive.
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(ii)
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For
purposes of this Agreement, the term “Cause” shall mean any
of the following: (A) conviction of a crime or a nolo contendere plea
involving the alleged commission by Executive of a felony or of a criminal
act involving, in the good faith judgment and sole discretion of the
Board, fraud, dishonesty, or moral turpitude; (B) deliberate and continual
refusal to perform employment duties reasonably requested by the Board
after fifteen (15) days’ written notice by certified mail of such failure
to perform, specifying that the failure constitutes cause (other than as a
result of vacation, sickness, illness or injury); (C) fraud or
embezzlement as determined by the Board; (D) gross misconduct or gross
negligence in connection with the business of the Company or an affiliate
which has a substantial adverse effect on the Company or the affiliate; or
(E) breach of the terms of the confidentiality, non-solicitation and
non-competition provisions of Section
9.
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(iii)
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Regardless
of whether Executive’s employment initially was considered to be
terminated for any reason other than Cause, Executive’s employment will be
considered to have been terminated for Cause for purposes of this
Agreement if the Board subsequently determines that Executive engaged in
an act constituting Cause during the Employment Period or Executive
breached the terms of the terms of the confidentiality, non-solicitation
and non-competition provisions of Section 9 after his
termination.
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(d) Termination by the Company Without
Cause. The Company may terminate Executive’s employment at any
time under this Agreement without Cause after providing written notice to
Executive.
(e) Termination by
Executive. Executive may terminate his employment under this
Agreement after providing thirty (30) days’ written notice to the
Company.
(f) Expiration of Initial Term or Renewal
Period. In the event that either party gives written notice of
non-renewal of the Initial Term or a Renewal Period, as applicable, pursuant to
Section 2, Executive’s employment shall terminate upon the expiration of the
Initial Term or Renewal Period.
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6.
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Return
of Property and Information.
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Executive
agrees that when his employment with the Company ends, he will immediately
return to the Company all property, data, information and knowledge which are in
his possession or under his control, including without limitation all documents,
forms, correspondence, financial records and forecasts, operation manuals,
notebooks, reports, proposals, computer programs, software, software
documentation, employee handbooks, supervisor’s manuals, lists of clients and
referral sources, client data, and all copies thereof, relating in any way to
the business of the Company, whether relating to the Company directly or to a
client of the Company, made or obtained by Executive during his employment with
the Company, whether or not such data, information, or knowledge constitute
confidential or trade secret information.
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7.
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Compensation
Following Termination of
Employment.
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(a) Termination for Any
Reason. Upon termination of Executive’s employment for any
reason under this Agreement, Executive (or his designated beneficiary or estate,
as the case may be) shall be entitled to receive the following
compensation:
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(i)
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Earned but Unpaid
Compensation. The Company shall pay Executive any
accrued but unpaid Base Salary for services rendered through the date of
termination, any appropriately documented and accrued but unpaid expenses
required to be reimbursed under this Agreement, and any unused vacation
accrued to the date of termination.
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(ii)
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Other Compensation and
Benefits. Except as may be provided under this
Agreement, any benefits to which Executive may be entitled through the
date of Executive’s termination pursuant to the plans, policies and
arrangements referred to in Section 4(d) shall be determined and paid in
accordance with the terms of such plans, policies and arrangements, and
except as otherwise provided by this Agreement, Executive shall have no
right to receive any other compensation, or to participate in any other
plan, arrangement or benefit, with respect to future periods after such
termination or resignation.
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(b) Termination by the Company Without
Cause not in Connection With a Change in Control. In the event
Executive’s employment is terminated without Cause before a Change in Control
(as defined by Section 7(c)(iii)) or more than twenty-four (24) months after a
Change in Control, if Executive executes the Release and Waiver required by
Section 8 and such Release and Waiver is not revoked on or before the expiration
of the revocation period thereof, and Executive has complied with the return of
property and information provision set forth in Section 6, then in addition to
the payments to be made pursuant to Section 7(a), the Company shall
also:
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(i)
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Severance
Pay. Pay to Executive severance pay in an amount equal
to 100% of his Base Salary in effect as of the date of his termination of
employment. Payment of such Severance Pay shall be made in a lump sum as
soon as administratively practicable after the date of Executive’s
termination (or if required by Section 409A, on the six (6) month
anniversary of his termination), but no later than ninety (90) days
thereafter, and not before the expiration of the revocation period for the
Release and Waiver.
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(ii)
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Annual
Bonus. Pay to Executive the target amount of the Annual
Bonus under the Applicable Plan for the year in which the termination of
Executive’s employment occurs. Payment of such Annual Bonus shall be made
in a lump sum as soon as administratively practicable after the date of
Executive’s termination (or if required by Section 409A, on the six (6)
month anniversary of his termination), but no later than ninety (90) days
thereafter, and not before the expiration of the revocation period for the
Release and Waiver.
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(iii)
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Benefits
Continuation. Continue to provide Executive and his
family for the one-year period following Executive’s termination with the
health and welfare benefits, including, but not limited to, benefits under
any medical and dental benefits plan, life insurance plan, short-term and
long-term disability plans, or other executive benefit or fringe benefit
plan, which Executive and his family were receiving as of the date of
Executive’s termination. The Company shall provide such benefits at the
same cost to Executive as the cost, if any, charged to Executive for those
benefits at the time of his termination. To the extent that the provision
of such benefits at the Company’s expense during the six (6) month period
following Executive’s termination would violate the requirements of
Section 409A, then Executive shall be required to pay to the Company the
Company portion of the cost of such benefits during such six (6) month
period, and the Company shall reimburse Executive for the amounts so paid
by Executive on the six (6) month anniversary of his termination, or as
soon as administratively practicable thereafter, but no later than ninety
(90) days thereafter.
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(c) Termination by the Company Without
Cause or by Executive for Good Reason in Connection With a Change in
Control.
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(i)
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In
the event Executive’s employment is terminated by the Company without
Cause, or by Executive for Good Reason, within the twenty-four (24) month
period following a Change in Control, if Executive executes the Release
and Waiver required by Section 8 and such Release and Waiver is not
revoked on or before the expiration of the revocation period thereof, and
Executive has complied with the return of property and information
provision set forth in Section 6, then in addition to the payments to be
made pursuant to 7(a), but subject to Section 7(c)(iv), the Company shall
also:
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(A)
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Severance
Pay. Pay to Executive severance pay in an amount equal
to 150% of his
Base Salary at its highest level in effect from the date of the Change in
Control through his termination of employment. Payment of such Severance
Pay shall be made in a lump sum as soon as administratively practicable
after the date of Executive’s termination (or if required by Section 409A,
on the six (6) month anniversary of his termination), but no later than
ninety (90) days thereafter, and not before the expiration of the
revocation period for the Release and
Waiver.
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(B)
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Annual
Bonus. Pay to Executive 150% of the target amount of the
Annual Bonus under the Applicable Plan for the year in which the
termination of Executive’s employment occurs. Payment of such Annual Bonus
shall be made in a lump sum as soon as administratively practicable after
the date of Executive’s termination (or if required by Section 409A, on
the six (6) month anniversary of his termination), but no later than
ninety (90) days thereafter, and not before the expiration of the
revocation period for the Release and
Waiver.
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(C)
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Equity Vesting
Acceleration. Accelerate the vesting of and the lapsing
of restrictions on any unvested or restricted equity compensation (e.g.,
stock options, restricted stock,
etc.).
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(D)
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Benefits
Continuation. Continue to provide Executive and his
family for the one-year period following Executive’s termination with the
health and welfare benefits, including, but not limited to, benefits under
any medical and dental benefits plan, life insurance plan, short- term and
long-term disability plans, or other executive benefit or fringe benefit
plan, which Executive and his family were receiving as of the date of
Executive’s termination. The Company shall provide such benefits at the
same cost to Executive as the cost, if any, charged to Executive for those
benefits at the time of his termination. To the extent that the provision
of such benefits at the Company’s expense during the six (6) month period
following Executive’s termination would violate the requirements of
Section 409A, then Executive shall be required to pay to the Company the
Company portion of the cost of such benefits during such six (6) month
period, and the Company shall reimburse Executive for the amounts so paid
by Executive on the six (6) month anniversary of his termination, or as
soon as administratively practicable thereafter, but no later than ninety
(90) days thereafter.
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(ii)
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“Good
Reason.” For
purposes of this Agreement, the term “Good Reason” shall
mean the occurrence of any of the following in connection with a Change in
Control, without Executive’s express written consent: (A) the assignment
of duties to Executive materially inconsistent with Executive’s current
authorities, duties, responsibilities and status; (B) any reduction in
Executive’s title, position, or reporting lines; (C) the relocation of
Executive to an office or location more than seventy-five (75) miles from
the office or location of Executive’s work as of the date of the Change in
Control; (D) requiring Executive to travel on Company business to a
substantially greater extent than required as of the date of the Change in
Control; or (E) the reduction in Executive’s Base Salary as in effect on
the date of the Change in Control.
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(iii)
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“Change in
Control.” For
purposes of this Agreement, the term “Change in Control”
shall mean the happening of any of the
following:
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(A)
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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”) becomes
the beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 25% or more of either (1) the then outstanding common
shares of the Company (the “Outstanding Company Common
Shares”) or (2) 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
such beneficial ownership shall not constitute a Change in Control if it
occurs as a result of any of the following acquisitions of securities: (I)
any acquisition directly from the Company, (II) any acquisition by the
Company or any corporation, partnership, trust or other entity controlled
by the Company (a “Subsidiary”), (III)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Subsidiary, (IV) any acquisition by an
underwriter temporarily holding Company securities pursuant to an offering
of such securities, (V) any acquisition by an individual, entity or group
that is permitted to, and actually does, report its beneficial ownership
on Schedule 13-G (or any successor schedule); provided that, if any such
individual, entity or group subsequently becomes required to or does
report its beneficial ownership on Schedule 13D (or any successor
schedule), then, for purposes of this paragraph, such individual, entity
or group shall be deemed to have first acquired, on the first date on
which such individual, entity or group becomes required to or does so
report, beneficial ownership of all of the Outstanding Company Common
Stock and Outstanding Company Voting Securities beneficially owned by it
on such date, or (VI) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (I ), (2) and (3) of Section 7(c)(iii)(C) are satisfied.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the “Subject Person”)
became the beneficial owner of 25% or more of the Outstanding Company
Common Shares or Outstanding Company Voting Securities as a result of the
acquisition of Outstanding Company Common Shares or Outstanding Company
Voting Securities by the Company which, by reducing the number of
Outstanding Company Common Shares or Outstanding Company Voting
Securities, increases the proportional number of shares beneficially owned
by the Subject Person; provided, that if a Change in Control would be
deemed to have occurred (but for the operation of this sentence) as a
result of the acquisition of Outstanding Company Common Shares or
Outstanding Company Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the beneficial
owner of any additional Outstanding Company Common Shares or Outstanding
Company Voting Securities which increases the percentage of the
Outstanding Company Common Shares or Outstanding Company Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall
then be deemed to have occurred; or
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(B)
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Individuals
who, as of the date of this Agreement, 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 either an actual or threatened election
contest or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board, including by reason of
agreement intended to avoid or settle any such actual or threatened
contest or solicitation; or
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(C)
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The
consummation of a reorganization, merger, statutory share exchange,
consolidation, or similar corporate transaction involving the Company or
any of its direct or indirect Subsidiaries (each a “Business Combination”)
in each case, unless, following such Business Combination, (1) the
Outstanding Company Common Shares and the Outstanding Company Voting
Securities immediately prior to such Business Combination, continue to
represent (either by remaining outstanding or being converted into voting
securities of the resulting or surviving entity or any parent thereof)
more than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled
to vote generally in the election of directors, as the case may be, of the
corporation resulting from Business Combination (including, without
limitation, a corporation that, 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), (2) no Person (excluding
the Company, any employee benefit plan (or related trust) of the Company,
a Subsidiary or such corporation resulting from such Business Combination
or any parent or a subsidiary thereof, and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 25% or more of the Outstanding Company Common
Shares or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such Business Combination (or any parent thereof) or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (3) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination (or any parent thereof) were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such Business Combination;
or
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(D)
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The
consummation of the sale, lease, exchange or other disposition of all or
substantially all of the assets of the Company, unless such assets have
been sold, leased, exchanged or disposed of to a corporation with respect
to which following such sale, lease, exchange or other disposition (1)
more than 50% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation (or any parent thereof)
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Shares and Outstanding Company Voting
Securities immediately prior to such sale, lease, exchange or other
disposition in substantially the same proportions as their ownership
immediately prior to such sale, lease, exchange or other disposition of
such Outstanding Company Common Shares and Outstanding Company Voting
Shares, as the case may be, (2) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or a Subsidiary of
such corporation or a subsidiary thereof and any Person beneficially
owning, immediately prior to such sale, lease, exchange or other
disposition, directly or indirectly, 25% or more of the Outstanding
Company Common Shares or Outstanding Company Voting Securities, as the
case may be) beneficially owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common stock of such
corporation (or any parent thereof) and the combined voting power of the
then outstanding voting securities of such corporation (or any parent
thereof) entitled to vote generally in the election of directors, and (3)
at least a majority of the members of the board of directors of such
corporation (or any parent thereof) were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such sale, lease, exchange or other disposition of assets of
the Company; or
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(E)
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Approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
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(iv)
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Potential Section 280G
Adjustment. In the event that any amount or benefit to
be paid or provided to Executive pursuant to Section 7(c)(i), taken
together with any amounts or benefits otherwise paid or provided to
Executive by the Company or any affiliated company (collectively, the
“Covered
Payments”), would be an “excess parachute
payment,” as defined in Section 280G of the Internal Revenue Code
and the related Treasury Regulations and other guidance issued thereunder,
and would thereby subject Executive to the tax imposed under Section 4999
of the Internal Revenue Code (the “Excise Tax”), then the
Company shall either (A) make the Covered Payment to Executive without
adjustment and subject to the Excise Tax, or (B) reduce the Covered
Payments to the maximum amount that may be paid without Executive becoming
subject to the Excise Tax (such reduced amount, the “Payment Cap”),
whichever provides the greater net after-tax benefit to Executive. In the
event that the reduction of the Covered Payments will provide Executive
with the greater net after-tax benefit, Executive shall have the right to
designate which of the payments and benefits otherwise provided for in
Section 7(c)(i) that he will receive in connection with the application of
the Payment Cap.
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(d) Termination of
Employment. For purposes of this Section 7, the term “termination of employment”
and words of similar import shall mean a “separation from service” as
defined by Section 409A, and this Section 7 shall be interpreted and
administered consistent with such definition.
(e) No Mitigation; No Set-Off Against
Severance Benefits. Executive shall not be required to
mitigate damages or the amount of any payment or benefits provided for under
Section 7 by seeking other employment or otherwise, nor shall the amount of any
payment or benefits provided for in Section 7 be reduced by any compensation
earned by Executive as a result of employment by another employer after the date
of termination of Executive’s employment with the Company, except as otherwise
provided by the confidentiality, non-solicitation and non-competition provisions
of Section 9. In addition, the Company’s obligations under this Agreement shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against
Executive.
11
|
8.
|
Release
and Waiver.
|
(a) In
exchange for the additional consideration under Section 7 to which Executive
would not otherwise be entitled, Executive shall generally and completely
release the Company, its subsidiaries and affiliates, and its directors,
officers, executives, shareholders, partners, agents, attorneys, predecessors,
successors, insurers and assigns from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring at any time prior to or at
Executive’s termination. Such general release shall include, but shall not be
limited to: (i) all claims arising out of or in any way related to Executive’s
employment with the Company or the termination of that employment; (ii) all
claims related to Executive’s compensation or benefits from the Company,
including salary, bonuses, incentive compensation, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, restricted
stock, or any other ownership or equity interests in the Company, or its
subsidiaries or affiliates under all State and federal statutes such as the Fair
Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement
and Income Security Act, the New York Labor Law and any similar State or local
statute, regulation or order; (iii) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing;
(iv) all tort claims, including claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (v) all federal,
state, and local statutory claims, including claims for discrimination,
harassment, retaliation, attorneys’ fees, or other claims arising under, for
example, the Age Discrimination in Employment Act (the “ADEA”), Title VII of the
Civil Rights Act of 1964, as amended, the Rehabilitation Act of 1973, the
Americans With Disabilities Act, the Equal Pay Act, the Family Medical Leave
Act, the New York Human Rights Law and any similar State or local statute,
regulation or order. Notwithstanding the foregoing, Executive shall not be
required to release the Company or its subsidiaries or affiliates from: (A) any
obligation to indemnify Executive pursuant to the articles and bylaws of the
Company, any valid fully executed indemnification agreement with the Company,
any applicable directors and officers liability insurance policy, and applicable
law; or (B) any obligations to make payments to Executive under Section 7.
Executive shall be required to represent that he has no lawsuits, claims or
actions pending in his name, or on behalf of any other person or entity, against
the Company or its subsidiaries or affiliates, or any other person or entity
subject to the release to be granted under this Section.
(b) Executive
shall acknowledge that: (i) he is knowingly and voluntarily waiving and
releasing any rights he may have under the ADEA; (ii) that the consideration
given for the waiver and release (i.e., the additional consideration to be
provided under Section 7) is in addition to anything of value to which he is
already entitled; and (iii) that he has been advised, as required by the ADEA,
that: (A) his waiver and release does not apply to any rights or claims that may
arise after the date that he signs such release; (B) he should consult with an
attorney prior to signing the release (although he may choose voluntarily not to
do so); (C) he has twenty-one (21) days from the date he receives the proposed
release to consider the release (although he may choose voluntarily to sign it
earlier); (D) he has seven (7) days following the date he signs the release to
revoke the release by providing written notice of his revocation to the Board;
and (E) the release will not be effective until the date upon which the
revocation period has expired, which will be the eighth day after the date that
the release is signed by Executive.
12
(c) The
claims included in this release and waiver do not include vested rights,
if any, under any qualified retirement plan in which Executive participates, and
his COBRA, unemployment compensation and worker’s compensation rights, if any.
Nothing in this release shall be construed to constitute a waiver of: (i) any
claims Executive may have against the Company that arise from acts or omissions
that occur after the effective date of this Release; (ii) Executive’s right to
file an administrative charge with any governmental agency concerning the
termination of that employment; or (iii) Executive’s right to participate in any
administrative or court investigation, hearing or proceeding. Executive agrees,
however, to waive and release any right to receive any individual remedy or to
recover any individual monetary or non-monetary damages as a result of any such
administrative charge or proceeding. In addition, this release does not affect
Executive’s rights as expressly created by this Agreement, and does not limit
his ability to enforce this Agreement.
|
9.
|
Executive
Covenants.
|
(a) Non-Disclosure of Confidential
Information and Trade Secrets.
|
(i)
|
During
the course of Executive’s employment with the Company, Executive will
acquire and have access to Confidential Information and Trade Secrets
belonging to the Company, its affiliates, subsidiaries, divisions and
joint ventures (collectively referred to as the “Company” throughout
and for purposes of this Section 9). Such Confidential Information and
Trade Secrets include, without limitation, business and technical
information, whatever its nature and form and whether obtained orally, by
observation, from written materials or otherwise, as for example: (A)
financial and business information, such as information with respect to
costs, commissions, fees, profits, profit margins, sales, markets, mailing
lists, accounts receivables and accounts payables, pricing strategies,
strategies and plans for future business, new business, product or other
development, potential acquisitions or divestitures, and new marketing
ideas; (B) marketing information, such as information on markets, end
users and applications, the identity of the Company’s customers, vendors,
suppliers, and distributors, their names and addresses, the names of
representatives of the Company’s customers, vendors, distributors or
suppliers responsible for entering into contracts with the Company, the
Company’s financial arrangements with its distributors and suppliers, the
amounts paid by such customers to the Company, specific customer needs and
requirements, leads and referrals to prospective customers; and (C)
personnel information, such as the identity and number of the Company’s
employees, personal information such as social security numbers, skills,
qualifications, and abilities. Executive acknowledges and agrees that the
Confidential Information and Trade Secrets are not generally known or
available to the general public, but have been developed, complied or
acquired by the Company at its great effort and expense and for commercial
advantage and, therefore, takes every reasonable precaution to prevent the
use or disclosure of any part of it by or to unauthorized persons.
Confidential Information and Trade Secrets can be in any form or media,
whether oral, written or machine readable, including electronic
files.
|
13
|
(ii)
|
Executive
agrees he will not, while associated with the Company and for so long
thereafter as the pertinent information or documentation remains
confidential, directly or indirectly use, disclose or disseminate to any
other person, organization or entity or otherwise use any Confidential
Information and Trade Secrets, except as specifically required in the
performance of Executive’s duties on behalf of the Company or with prior
written authorization from the
Board.
|
(b) Non-Solicitation of
Customers. Executive acknowledges and agrees that during the
course of and solely as a result of employment with the Company, he will come
into contact with some, most or all of the Company’s customers and will have
access to Confidential Information and Trade Secrets regarding the Company’s
customers, distributors and suppliers. Consequently, Executive covenants and
agrees that in the event of the termination of his employment, whether such
termination is voluntary or involuntary, Executive will not, for a period of
twelve (12) months following such termination, directly or indirectly, solicit
or initiate contact with any customer, former customer or prospective customer
of the Company for the purpose of selling products or services to the customer
competitive with the products or services purchased by the customer from the
Company. This restriction shall apply to any customer, former customer or
prospective customer of the Company with whom Executive had contact or about
whom Executive obtained Confidential Information or Trade Secrets during his
employment with the Company. For the purposes of this Section, “contact” means interaction
between Executive and the customer or then prospective customer which takes
place to further the business relationship, or making sales to our performing
services for the customer or prospective customer on behalf of the Company. This
restriction will not apply when a former employee who is not working in a
competitive capacity responds to a request for proposal on behalf of his new
employer who is not engaged in the same or similar businesses as the
Company.
(c) Non-Compete. Executive
acknowledges that his services are special and unique, and compensation is
partly in consideration of and conditioned upon Executive not competing with
Company, and that a covenant on Executive’s part not to compete is essential to
protect the business and good will of the Company. Accordingly, except as
hereinafter provided, Executive agrees that for twelve (12) months after the
termination of his employment, Executive shall not be engaged or interested as a
director, officer, stockholder (except as provided herein), employee, partner,
individual proprietor, lender or in any other capacity, in any business, which
competitive with the business of the Company as conducted at the time of
Executive’s termination and which involves Executive’s knowledge, actions or
assistance within the counties of Westchester, Rockland, Ulster, Orange, Duchess
and ▇▇▇▇▇▇▇▇ in New York and Sussex, Bergen and Passaic in New Jersey; however,
this restriction will not apply to new kinds of business in which Executive may
engage in the future, after such termination, unless Executive has been actively
engaged in the development or otherwise involved in such business while an
employee of the Company. In addition, Executive agrees that for this same twelve
(12) months, he shall not recruit or recommend any other person who is or was an
employee of the Company while Executive was also an employee, to any business
which is competitive with the business of Executive as conducted at the time of
Executive’s termination and which involves Executive’s knowledge, actions or
assistance within the counties of Westchester, Rockland, Ulster, Orange, Duchess
and ▇▇▇▇▇▇▇▇ in New York and Sussex, Bergen and Passaic in New Jersey. Nothing
herein shall prohibit Executive from investing in any securities of any
corporation which is in competition with the Company, whose securities are
listed on a national exchange or traded in the over-the-counter market if
Executive shall own less than 5% of the outstanding securities of such
operation.
14
(d) Enforcement of
Covenants. Executive acknowledges and agrees that compliance
with the covenants set forth in this Section 9 is necessary to protect the
Confidential Information and Trade Secrets, business and goodwill of the
Company, and that any breach of this Section 9 will result in irreparable and
continuing harm to the Company, for which money damages may not provide adequate
relief. Accordingly, in the event of any breach or anticipatory breach of
Section 9 by Executive, the Company and Executive agree that the Company shall
be entitled to the following particular forms of relief as a result of such
breach, in addition to any remedies otherwise available to it at law or equity:
(i) injunctions, both preliminary and permanent, enjoining or restraining such
breach or anticipatory breach, and Executive hereby consents to the issuance
thereof forthwith and without bond; and (ii) recovery of all reasonable sums and
costs, including attorneys’ fees, incurred by the Company to enforce the
provisions of this Section 9.
|
10.
|
Withholding
of Taxes
|
The
Company shall withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local or other taxes.
|
11.
|
No
Claim Against Assets.
|
Nothing
in this Agreement shall be construed as giving Executive any claim against any
specific assets of the Company or as imposing any trustee relationship upon the
Company in respect of Executive. The Company shall not be required to establish
a special or separate fund or to segregate any of its assets in order to provide
for the satisfaction of its obligations under this Agreement. Executive’s rights
under this Agreement shall be limited to those of an unsecured general creditor
of the Company and its affiliates.
|
12.
|
Executive
Acknowledgement.
|
Executive
acknowledges that he has had the opportunity to discuss this Agreement with and
obtain advice from his private attorney, has had sufficient time to and has
carefully read and fully understands all of the provisions of this Agreement,
and is knowingly and voluntarily entering into this Agreement.
|
13.
|
Successors
and Assignment.
|
(a) Except as
otherwise provided in this Agreement, this Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns.
(b) The
Company shall require any successor or successors (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Company, by agreement in form and substance
satisfactory to Executive, to acknowledge expressly that this Agreement is
binding upon and enforceable against the Company in accordance with the terms
hereof, and to become jointly and severally obligated with the Company to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession or successions had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement by the
Company.
15
(c) The
rights and benefits of Executive under this Agreement are personal to him and no
such right or benefit shall be subject to voluntary or involuntary alienation,
assignment or transfer; provided, however, that nothing in this Section 13 shall
preclude Executive from designating a beneficiary or beneficiaries to receive
any benefit payable on his death.
|
14.
|
Entire
Agreement; Amendment.
|
This
Agreement shall supersede any and all existing oral or written agreements,
representations, or warranties between Executive and the Company (or any of its
subsidiaries or affiliated entities) relating to the terms of Executive’s
employment, except for the Company’s Code of Ethics and the Director’s and
Officer’s Indemnification Agreement. This Agreement may not be amended except by
a written agreement signed by both parties.
|
15.
|
Governing
Law.
|
This
Agreement shall be governed by and construed in accordance with the domestic
substantive laws of the State of New York, without giving effect to any
conflicts or choice of laws rule or provision that would result in the
application of the domestic substantive laws of any other
jurisdiction.
|
16.
|
Section
409A.
|
The
parties intend that this Agreement and the payments and benefits to be provided
hereunder satisfy the requirements of Section 409A, and this Agreement shall be
administered and interpreted consistent with such intention.
|
17.
|
Notices.
|
Any
notice, consent, request or other communication made or given in connection with
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
|
To
the Company:
|
|
Attention:
President and CEO
|
|
▇▇
▇▇▇▇ ▇▇▇▇▇▇
|
|
▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|
To
Executive:
|
|
At
the address set forth below
|
16
|
18.
|
Miscellaneous.
|
(a) 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 thereof or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
(b) Severability. If
any term or provision of this Agreement is declared illegal or unenforceable by
any court of competent jurisdiction and cannot be modified to be enforceable,
such term or provision shall immediately become null and void, leaving the
remainder of this Agreement in full force and effect.
(c) Headings. Section
headings are used herein for convenience of reference only and shall not affect
the meaning of any provision of this Agreement.
(d) Rules of
Construction. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) Authority to Enter into this
Agreement. The officer of the Company whose signature appears
below has been authorized to enter into this Agreement on behalf of the
Company.
(f) Counterparts. This
Agreement may be executed in any number of counterparts, each of which so
executed shall be deemed to be an original, and such counterparts will together
constitute but one agreement.
In Witness
Whereof, the parties hereto have duly executed this Agreement as of the
day and year set forth below.
|
Executive
|
||
|
/s/ ▇▇▇▇▇
▇. ▇▇▇▇▇
|
/s/ ▇▇▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
▇▇▇▇▇
▇. ▇▇▇▇▇
|
▇▇▇▇▇▇▇
▇. ▇▇▇▇
|
|
|
President,
Chief Executive Officer
|
Executive
Vice President, Chief Financial Officer &
Treasurer
|
17
APPENDIX
A
Illustration
of Annual Bonus and Incentive Compensation (Long Term Incentive Plan) —
CFO
Annual Bonus Performance
Matrix:
The
performance matrix below will be used to calculate the Payout Factor amounts.
The Payout Factor amounts will be applied to both the Target Annual Bonus and
the Target Incentive Compensation amounts.
Target Annual
Bonus:
Target
Annual Bonus Amount: 50% x [base salary of
$250,000] = $125,000
Actual
Annual Bonus Payout: [Target Annual Bonus Amount of
$125,000] x [calculated Payout Factor]
Methodology:
Target
Financial Metrics will be determined for each year by the Board of Directors on
behalf of the Company and in collaboration with the CEO.
The
matrix below reflects both the elements of performance that will be evaluated
and the weightings associated with each Financial Metric to determine the
applicable payout factor that will be used to calculate the Annual Bonus and
Incentive Compensation amounts.
|
Financial
Metric
|
Weighting
|
Result
|
Target
|
Actual/Target
|
Payout
Factor
|
|
A
|
B
|
C
|
(B/C)
|
A
x (B/C)
|
|
|
Revenue
|
0.25
|
TBD
|
$▇▇▇
|
▇▇▇
|
TBD
|
|
EBITDA
|
0.25
|
TBD
|
$▇▇▇
|
▇▇▇
|
TBD
|
|
Free
Cash Flow
|
0.25
|
TBD
|
$▇▇▇
|
▇▇▇
|
TBD
|
|
Net
Income
|
0.15
|
TBD
|
$▇▇▇
|
▇▇▇
|
TBD
|
|
BOD
Discretion
|
0.10
|
NA
|
NA
|
NA
|
TBD
|
|
Total
|
1.00
|
Total
Payout Factor
|
Illustrative Example: By way of
illustration only,
assume the following Financial Metric targets: (1) Revenue: $30,000,000; (2)
EBITDA: $5,000,000; (3) Free Cash Flow: $2,000,000; and (4) Net Income:
$6,000,000. Assume the following actual financial results for the
fiscal year: (1) Actual Revenue: $28,000,000; (2) Actual EBITDA: $4,000,000; (3)
Actual Free Cash Flow: $1,500,000; and (4) Actual Net Income: $5,000,000. The
resulting payout factor calculations would be calculated as
follows:
18
|
Financial
Metric
|
Weighting
|
Result
|
Target
|
Actual/Target
|
Payout
Factor
|
|
A
|
B
|
C
|
(B/C)
|
A
x (B/C)
|
|
|
Revenue
|
0.25
|
$28,000,000
|
$30,000,000
|
.9333
|
.▇▇▇▇
|
|
▇▇▇▇▇▇
|
0.25
|
$ 4,000,000
|
$ 5,000,000
|
.8000
|
.2000
|
|
Free
Cash Flow
|
0.25
|
$ 1,500,000
|
$ 2,000,000
|
.7500
|
.1875
|
|
Net
Income
|
0.15
|
$ 5,000,000
|
$ 6,000,000
|
.8333
|
.1250
|
|
BOD
Discretion
|
0.10
|
N/A
|
N/A
|
N/A
|
.1000
|
|
Total
|
1.00
|
.8458
|
Based
upon this illustration, which also assumes the BOD Discretionary component is
paid out in the full 10% amount, the actual Annual Bonus to be paid would be
based on a payout factor of .8458 and result in an Annual Bonus of $125,000 x
..8458 or $105,729
Notwithstanding
the foregoing matrix, in the event that the actual results / target results for
Revenue and Net Income are less than .9000 (90%) then the payout factor
attributable to those metrics of measurement will be zero, respectively.
Likewise, in the event that the actual results / target results for EBITDA and
Free Cash Flow are less than .7500 (75%) then the payout factor attributable to
those metrics of measurement will be zero, respectively. This methodology will
also be applied to Incentive Compensation payout in the same
manner.
Incentive Compensation (Long
Term Incentive Plan) Component:
|
Ø
|
Target
Incentive Compensation Component
|
|
Stock
Options:
|
25,000
|
|
Restricted
Shares:
|
5,000
|
Applying
the same methodological approach used to determine the Annual Bonus payout as
shown above would result in an Incentive Compensation payout of:
|
Stock
Options:
|
25,000 x
.8458 = 21,146
|
|
Restricted
Shares:
|
5,000
x .8458 = 4,229
|
For
calculating both the Annual Bonus and the Incentive Compensation, the Board of
Directors retains the sole discretion to award compensation, if any, under this
Appendix A.
19