EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 16th day of June, 1997 (the "Effective Date") by and between VITAFORT
INTERNATIONAL CORPORATION, a Delaware corporation (the "Company") and XXXX X.
XXXXXXX, an individual ("Xxxxxxx").
BACKGROUND
----------
A. The Company wishes to employ Xxxxxxx as the Company's Chief Operating
Officer and Chief Financial Officer ("COO/CFO") in accordance with and subject
to the terms and conditions set forth in this Agreement.
X. Xxxxxxx wishes to be so employed.
AGREEMENT
---------
1. EMPLOYMENT. The Company hereby engages and employs Xxxxxxx in the
----------
capacity of COO/CFO as of the Effective Date. The Company's Board of Directors
(the "Board") may also provide such additional designations of title to
Xxxxxxx as the Board, in its discretion, may deem appropriate. Xxxxxxx agrees
to perform the executive duties and functions customarily associated with the
offices of COO/CFO and as specified from time to time by the Board.
Except for legal holidays, vacations and absences due to temporary illness,
Xxxxxxx shall devote his time, attention and energies to the business of the
Company on a full-time basis. Xxxxxxx represents and warrants to the Company
that he is under no restriction, limitation or other prohibition to perform his
duties as described herein.
2. CONDITIONS OF EMPLOYMENT.
------------------------
(a) Term. The term of this Agreement shall commence on the
----
Effective Date hereof and shall continue for a period of two (2) years
thereafter unless earlier terminated as provided herein. Notwithstanding
the foregoing, the "Change in Control" provisions of Section 6 hereof shall
survive termination or expiration of this Agreement.
(b) With Cause. The Company may, at any time, discharge Xxxxxxx
----------
"with cause", whereupon his employment shall terminate immediately upon the
giving of written notice of such discharge. As used in this Agreement, the
term "with cause" shall mean, (i) the conviction of any crime involving
dishonesty or resulting in imprisonment without the option of a fine, (ii)
the continuing material non-observance or the material breach by Xxxxxxx of
any of the material provisions of this Agreement after due written notice
to Xxxxxxx from the Board specifying with particularity the nature of such
non-observance or breach, or (iii) the continuing neglect, failure or
refusal of Xxxxxxx to carry
out the duties properly assigned to him after due written notice to Xxxxxxx
from the Board specifying with particularity the nature of such neglect,
failure or refusal.
(c) Without Cause. The Company may terminate Xxxxxxx "without
-------------
cause" at any time prior to the 91st day after the Effective Date hereof.
(d) Disability. If Xxxxxxx shall at any time be incapacitated or
----------
prevented by illness, injury, accident or other circumstances beyond his
control ("incapacity") from discharging his duties pursuant to this
Agreement for a total of 60 days or more in any 120 consecutive day period,
the Company may by notice in writing to Xxxxxxx given at any time so long
as the incapacity shall continue: (i) discontinue payment in whole or in
part of Xxxxxxx'x base salary on and from such date as may be specified in
the notice until the incapacity shall cease; or (ii) (whether or not
payment shall already have been discontinued as aforesaid) terminate this
Agreement forthwith or on such date as may be specified in the notice.
Subject to the foregoing, Xxxxxxx'x base salary shall, notwithstanding the
incapacity, continue to be paid to Xxxxxxx in accordance with the
provisions of this Agreement in respect of the period of incapacity prior
to such discontinuance or termination.
(e) Death. If Xxxxxxx dies prior to the expiration of the term of
-----
this Agreement, the compensation due him from the Company under this
Agreement shall be the amount which Xxxxxxx would be paid if permanently
disabled, and shall be paid to his executors, administrators, heirs,
personal representatives, successors, and assigns.
3. COMPENSATION.
-------------
(a) Salary. Xxxxxxx'x initial salary level shall be at the rate of
------
$125,000 per annum. This salary level will be reviewed at least annually by
the Board, but will not be reduced without Xxxxxxx'x prior written consent.
(b) Options. As of the Effective Date, the Company has granted to
-------
Xxxxxxx Three Hundred Thousand (300,000) Incentive Stock Options ("ISOs")
pursuant to the Company's 1995 Stock Option Plan (the "Option Plan"). The
Company represents and warrants that the Option Plan has been duly approved
by the Company's shareholders. The exercise price for all of the ISOs (the
"Exercise Price") shall equal one hundred percent (100%) of the fair market
value ("FMV") of the Company's common stock on the Effective Date. Xxxxxxx
may exercise vested ISOs at any time after six (6) months from the
Effective Date and on or prior to the earlier of (i) the fifth (5th)
anniversary of the Effective Date, or (ii) ninety (90) days after
termination of Xxxxxxx'x employment. Subject to Sections 5(c) and 6(m)(v)
hereof, the ISOs shall vest in accordance with the following vesting
schedule (with a view toward complying with the limitations set forth in
Section 422A of the Internal Revenue Code, as amended):
VESTING DATE NUMBER OF ISOs (CALCULATION)
---------------------------------------- -----------------------------------
* 91 days after the Effective Date ($100,000 / Exercise Price)
2
* First Anniversary of the Effective ($100,000 / Exercise Price)
Date
* Second Anniversary of the Effective ($100,000 / Exercise Price)
Date
* January 1, 2000 All remaining unvested ISOs (if any)
In the event the foregoing calculations result in a fractional
ISO amount, the number of vested ISOs shall be rounded down to the nearest
----
whole number.
(c) Vacation. Xxxxxxx shall receive four (4) weeks paid vacation
--------
each year which shall be taken in accordance with the Company's vacation
policy, or from time to time at the option of Xxxxxxx. Xxxxxxx shall also
receive all the paid holidays observed by the Company.
(d) Insurance. The Company shall, at its expense, provide Xxxxxxx
---------
and his immediate family with comprehensive medical insurance coverage at
least comparable to the coverage provided to the Company's other executive
officers. The Company shall also maintain Directors and Officers (D&O)
insurance which shall cover Xxxxxxx with reasonable coverages and policy
limits. The Company shall further provide, at its expense, "key-man"
Accidental Death Insurance with a face value of One Million Dollars
($1,000,000) to be divided equally between the Company, on the one hand,
and Xxxxxxx'x designated beneficiary or estate, on the other hand. Xxxxxxx
represents and warrants that, for purposes of securing such "key-man
insurance", he is not aware of any medical condition that would cause the
insurance premiums to be materially higher than for a normal male of his
age.
(e) Expense Reimbursements and Allowances. Xxxxxxx shall be
-------------------------------------
reimbursed for all reasonable out-of-pocket expenses in accordance with the
Company's established policies applicable to executive officers. In this
regard, the Company will reimburse Xxxxxxx for all travel-related expenses,
including without limitation all travel to and from his home in Louisiana.
The Company shall also provide a car allowance of Five Hundred Dollars
($500) per month to defray the cost of business automobile expense.
(f) Indemnification. The Company shall indemnify Xxxxxxx, to the
---------------
maximum extent then permitted by applicable law, from and against any and
all claims, actions, suits, losses, fines, judgments, interest, costs and
expenses (including without limitation actual attorney's fees and
disbursements) arising out of or relating to Xxxxxxx'x actions or omissions
as an officer, director (if ever applicable) or employee of the Company
and/or any affiliate of the Company and/or as a trustee or fiduciary of any
plan, trust or other program established by the Company. This Section 3(f)
shall survive termination or expiration of this Agreement.
3
(g) Attorney's Fees. Upon execution and delivery hereof, the
---------------
Company shall pay to Xxxxxxx full reimbursement of the attorney's fees and
disbursements incurred by Xxxxxxx in the preparation, negotiation,
execution and delivery of this Agreement.
4. CONFIDENTIALITY. Xxxxxxx agrees to hold in confidence and not
---------------
disclose, publish or disseminate to any third party any of the company's trade
secrets or proprietary information. This section 4 shall survive termination or
expiration of this agreement. Xxxxxxx agrees further to execute the company's
standard form confidentiality agreements if their terms are customary and
reasonable.
5. SEVERANCE. Except in the context of a "change in control" wherein the
---------
amount and nature of xxxxxxx'x xxxxxxxxx arrangements shall be solely and
exclusively governed and controlled by section 6 hereof (and this section 5
shall have no relevance), the following severance arrangements are agreed to by
the parties.
(a) 90-Day Provision. The Company and Xxxxxxx may each
----------------
unilaterally terminate this Agreement and Xxxxxxx'x employment, with or
without cause, at any time upon written notice on or prior to the 90th day
after the Effective Date ("90-Day Termination"). In the event of a 90-Day
Termination, no severance pay shall be due or payable to Xxxxxxx.
(b) With Cause. In the event the Company terminates this Agreement
----------
and Xxxxxxx'x employment "with cause" pursuant to Section 2(b) hereof, no
severance pay shall be due or payable to Xxxxxxx.
(c) Without Cause. In the event that, after 90 days from the
-------------
Effective Date, the Company terminates Xxxxxxx'x employment "without
cause," Xxxxxxx'x ISOs shall immediately vest, Xxxxxxx'x insurance benefits
shall be continued for six (6) months, and Xxxxxxx shall be entitled to six
(6) months' severance pay (payable on termination). The Company shall,
however, have no further obligation to pay any other salary, bonus, accrued
vacation or other amounts attributable to the period after termination of
this Agreement.
(d) Disability/Death. No severance pay shall be due or payable in
----------------
the of Xxxxxxx'x employment termination as a result of his death or as a
result of his incapacity (as defined in Section 2(d)) hereof.
6. CHANGE IN CONTROL PROVISIONS.
----------------------------
(a) Survival. The provisions of this Section 6 shall (i) survive
--------
this Agreement and shall continue one (1) day past termination of Xxxxxxx'x
employment, and (ii) only become effective upon a "Change in Control," as
defined below. No termination or expiration of this Agreement shall limit,
alter or otherwise affect Xxxxxxx'x continuing rights hereunder with
respect to the benefits and rights afforded to him as provided herein.
4
(b) Background. The Company believes that because of its position
----------
in the industry, financial resources and historical operating results there
is a possibility that the Company may become the subject of a Change in
Control (as defined below), either now or at some time in the future.
The Company believes that it is in the best interest of the
Company and its respect to any pending or threatened Change in Control of
the Company and to assure that the Company will have the continued
dedication and availability of Xxxxxxx, notwithstanding the possibility,
threat or occurrence of a Change in Control. The Company believes that
these goals can best be accomplished by alleviating certain of the risks
and uncertainties with regard to Xxxxxxx'x financial and professional
security that would be created by a pending or threatened Change in Control
and that inevitably would distract Xxxxxxx and could impair his ability to
objectively perform his duties for and on behalf of the Company.
Accordingly, the Company believes that it is appropriate and in the best
interest of the Company and its shareholders to provide to Xxxxxxx
compensation arrangements upon a Change in Control that lessen Xxxxxxx'x
financial risks and uncertainties and that are reasonably competitive with
those of other corporations.
With these and other considerations in mind, the Board has
authorized the Company to enter into these arrangements with Xxxxxxx to
provide the protections set forth herein following a Change in Control.
(c) Purpose. The purpose of these arrangements is to provide that,
-------
in the event of a "Change of Control" (as defined in Paragraph (e) below),
Xxxxxxx shall become entitled to receive certain additional benefits, as
described herein, in the event of his termination.
(d) Notice of Termination; Date of Termination.
------------------------------------------
(i) Any termination of Xxxxxxx'x employment by the Company
or by Xxxxxxx shall be communicated by a written notice to the other
party hereto (the "Notice of Termination"). The Notice of Termination
shall indicate the specific termination provision in this Agreement
that is applicable and is being relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision so indicated.
(ii) "Date of Termination" shall mean:
(x) If Xxxxxxx'x employment is terminated pursuant
to Section 2(d) hereof because of his
"incapacity," the date specified in the Notice
of Termination;
(y) If Xxxxxxx' employment is terminated by Xxxxxxx
pursuant to Paragraph (k) of this Section 6, the
date specified in the Notice of Termination; and
5
(z) If Xxxxxxx'x employment is terminated for any
other reason, the date specified in the Notice
of Termination.
(e) Change in Control. As used in this Agreement, the phrase
-----------------
"Change in Control" shall mean:
(i) Except as provided by Paragraph (iii) hereof, the
acquisition by any person, entity or "group", within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%)
or more of the combined voting power of the then outstanding
securities entitled to vote generally in the election of directors of
the Company; or
(ii) Individuals who, as of the Effective Date hereof,
constitute the Board of Directors of the Company (as of the Effective
Date hereof the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board of Directors of the Company, provided
that any person becoming a director subsequent to the Effective Date
hereof whose election, or nomination for election by the Company's
shareholders, is or was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company with any other
person, entity or corporation, other than
(y) a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding or by
being converted into voting securities of
another entity) more than sixty percent (60%) of
the combined voting power of the securities
entitled to vote generally in the election of
directors of the Company or such other entity
outstanding immediately after such merger or
consolidation, or
(z) a merger or consolidation effected to implement
a recapitalization of the Company (or similar
transaction) in which no person, entity or group
(other than any employee benefit plan of any of
the Company) acquires beneficial ownership of
forty percent (40%) or more of the combined
voting power of the securities entitled to vote
generally in
6
the election of directors of the Company outstanding
immediately after such merger or consolidation; or
(iv) Approval by the stockholders of the Company of a plan
of complete liquidation of the Company or an agreement for the sale or
other disposition by the Company of all or substantially all of such
Company's assets .
(f) Effect of a Change in Control. In the event of a Change of
-----------------------------
Control, Paragraphs (g) through (n) of this Section 6 shall become
applicable to Xxxxxxx.
(g) Voluntary Resignation.
----------------------
In the event that Xxxxxxx'x employment with the Company
terminates as a result of his voluntary resignation for other than "Good
Reason" (as defined in Paragraph (k) below), Xxxxxxx shall be entitled to
no "Severance Payment" (as defined in Paragraph (l) below) and no
additional benefits (as provided in Paragraph (m) below). For purposes of
this Agreement, the term "voluntary resignation" shall not include a
resignation which is tendered by Xxxxxxx pursuant to the request of the
Company's Board or management ("Management"). A resignation tendered
pursuant to the request of the Board or Management shall, for purposes of
this Agreement, be deemed and treated as an involuntary termination and
Xxxxxxx'x entitlement to the Severance Payment and additional benefits as
described in Paragraphs (l) and (m) below shall depend upon whether the
Board's request was based on "cause" (as defined in Section 2(b) hereof) or
was not based on "cause."
(h) Involuntary Termination for Cause/Disability/Death.
--------------------------------------------------
In the event that Xxxxxxx'x employment with the Company is
terminated by the Company "with cause" (as defined in Section 2(b) hereof),
as a result of Xxxxxxx'x "incapacity" (as defined in Section 2(d) hereof,
or as a result of his death, Xxxxxxx shall not be entitled to the Severance
Payment or additional benefits described in Paragraphs (l) and (m) below.
(The preceding sentence shall not, however, prohibit or prevent Xxxxxxx
from accepting severance pay or benefits if and to the extent the Company
determines, in its sole discretion, to make severance pay or benefits
available.)
If Xxxxxxx'x employment shall be properly terminated with cause
or as a result of his "incapacity" or death, the Company shall pay Xxxxxxx
(or his estate) his full salary, accrued benefits, and other amounts
legally owing to Xxxxxxx through the Date of Termination. The Company shall
thereafter have no further obligations to Xxxxxxx (or his estate) under
this Section 6.
(i) Involuntary Termination Without Cause.
--------------------------------------
In the event that Xxxxxxx'x employment with the Company is
terminated by the Company without cause following, or within four (4)
months prior to, a Change in
7
Control, Xxxxxxx shall be entitled to the Severance Payment and additional
benefits described in Paragraphs (l) and (m) below.
(j) Voluntary Retirement.
--------------------
For purposes of this Agreement, "Retirement" shall mean
termination of Xxxxxxx'x employment, with his voluntary consent, in
accordance with the Company's retirement policy (including early
retirement) generally applicable to its salaried employees or in accordance
with any retirement arrangement established with respect to him with
Xxxxxxx'x voluntary consent.
In the event of Xxxxxxx'x voluntary Retirement, the Company
shall have no obligation to make or provide the Severance Payment or
additional benefits described in Paragraphs (l) and (m) below.
(k) Termination of Employment by Xxxxxxx For Good Reason.
----------------------------------------------------
(i) Xxxxxxx may terminate his employment for "Good
Reason." For purposes of this Agreement, "Good Reason" will exist if
any one or more of the following occur:
(v) Failure by the Company to honor any of its
material obligations under this Agreement; or
(w) Any purported termination by the Company of
Xxxxxxx'x employment that is not effected pursuant to a Notice
of Termination satisfying the requirements of Paragraph (d)
above and, for purposes of this Agreement, no such purported
termination shall be effective; or
(x) Failure to elect or reelect or otherwise to
maintain Xxxxxxx to or in the office or the position (or a
substantially equivalent office or position) in the Company
that Xxxxxxx held as of the date hereof, or the removal of or
failure to reelect Xxxxxxx as a Director of the Company, if
Xxxxxxx shall have been a Director of the Company immediately
prior to such removal or failure to reelect; or
(y) Xxxxxxx'x overall compensation or perquisites
are reduced or adversely modified in any material respect, or
Xxxxxxx'x authority or duties are materially changed, in either
case without the prior and voluntary written consent of
Xxxxxxx, which change is not fully remedied within ten (10)
calendar days after receipt by the Company of written notice
from Xxxxxxx identifying such change(s). For purposes of this
Agreement, Xxxxxxx'x authority or duties shall be conclusively
considered to have been "materially changed" if, without
Xxxxxxx'x express and voluntary written consent, there is any
substantial diminution or adverse modification in Xxxxxxx'x
title, status, overall position, responsibilities,
8
reporting relationship, general working environment (including without
limitation secretarial and staff support, offices, and frequency and
mode of travel); or
(z) A change in circumstances significantly affecting
Xxxxxxx'x position, including without limitation a change in the scope
of the business or other activities for which he was responsible as of
the Effective Date of this Agreement, and, as a result thereof,
Xxxxxxx has been rendered substantially unable to carry out, has been
substantially hindered in the performance of, or has suffered a
substantial reduction in any of the authorities, powers, functions,
responsibilities or duties attached to the position held by Xxxxxxx as
of the date hereof, which situation is not fully remedied within ten
(10) calendar days after written notice to the Company from Xxxxxxx of
such determination.
(iii) In the event of termination of employment by Xxxxxxx for Good
Reason following, or within six (6) months prior to, a Change in Control,
Xxxxxxx shall be entitled to the Severance Payment and additional benefits
as described in Paragraphs (l) and (m) below.
(l) Severance Payment.
-----------------
(i) If Xxxxxxx'x employment is terminated following, or within six
(6) months prior to a Change in Control, as a result of an involuntary
termination without cause, Xxxxxxx'x termination of employment for Good
Reason, or as a result of any other reason except for Xxxxxxx'x voluntary
resignation (as set forth in Paragraph (g) above), Xxxxxxx'x voluntary
Retirement (as set forth in Paragraph (j) above) or Xxxxxxx'x death or
"incapacity" (as set forth in Section 2(d) hereof), then Xxxxxxx'x
termination shall be deemed to be a "Qualifying Termination." In the event
of a Qualifying Termination, the Company shall be obligated to make the
"Severance Payment" to Xxxxxxx. For purposes of this Agreement, the
"Severance Payment" shall equal (y) one-half ( 1/2) of Xxxxxxx'x
"Compensation" if the Change in Control and Qualifying Termination both
occur within nine (9) months of the Effective Date hereof, and (z) one and
one-half (1-1/2) times Xxxxxxx'x "Compensation" in the event either the
Change in Control or the Qualifying Termination occur at any time after the
nine month anniversary of the Effective Date hereof. Xxxxxxx shall be
entitled to receive the Severance Payment in a cash lump sum within five
(5) calendar days after the later of Xxxxxxx'x Date of Termination or the
date of the Change in Control.
(ii) For purposes of this Agreement, Xxxxxxx'x "Compensation" shall
equal the sum of (1) Xxxxxxx'x highest annual salary rate with the Company
within the three-year period ending on Xxxxxxx'x Date of Termination, plus
(2) the "Bonus Increment." The Bonus Increment shall equal the annualized
average of
9
all bonuses and incentive compensation payments other than stock options
paid or payable to Xxxxxxx during the three-year period immediately before
Xxxxxxx'x Date of Termination under all of the Company's bonus and
incentive compensation plans or arrangements.
(iii) In lieu of a cash lump sum, Xxxxxxx may, in his sole
discretion, elect to receive the Severance Payment in equal annual
installments over three (3) years (or such lesser number of years as
Xxxxxxx may elect). Such installments shall be paid to Xxxxxxx on each
anniversary of Xxxxxxx'x Date of Termination, beginning with the first such
anniversary and continuing on each such anniversary thereafter until fully
paid. Such election to receive the Severance Payment in installments may be
made and/or revoked by Xxxxxxx at any time prior to the termination of his
employment by providing written notice to the Board of such election. Any
such election by Xxxxxxx to receive the Severance Payment in installments
that has been made and not revoked prior to Xxxxxxx'x termination shall,
effective the date of such termination, be irrevocable and binding on all
parties hereto.
In the event that at the time of Xxxxxxx'x Qualifying Termination
there is not in effect an election by Xxxxxxx to receive the Severance
Payment in installments, such Severance Payment shall be paid to Xxxxxxx in
a single cash lump sum. In the event that Xxxxxxx has made an appropriate
election to receive the Severance Payment in annual installments, and
Xxxxxxx becomes entitled to such Severance Payment as provided in this
Agreement, then such Severance Payment, to the extent at any time unpaid
and/or deferred, shall be deemed to bear interest at the base or prime rate
in effect from time to time as publicly announced by Bank of America NT&SA
(the "Prime Rate"). Accrued interest shall be due and payable together with
each annual installment of the Severance Payment.
(m) Additional Benefits.
-------------------
(i) In the event of a Qualifying Termination, the Company agrees
and covenants that Xxxxxxx and his dependents shall be entitled to continue
to participate in all benefit programs which had been made available to
Xxxxxxx before the Qualifying Termination including without limitation, any
and all medical insurance, dental insurance, vision insurance, life
insurance, disability insurance, retirement and/or pension plans and other
benefit programs of the Company and/or its affiliates. These programs shall
be continued for the benefit of Xxxxxxx and his dependents at no cost to
Xxxxxxx or his dependents, except to the extent of Xxxxxxx'x income tax
payable thereon because tax rules require the inclusion of the value of
such benefits in Xxxxxxx'x income. The programs shall be continued in the
same way and at the same level as immediately prior to the Qualifying
Termination, and shall continue for the benefit of Xxxxxxx and his
dependents for eighteen (18) months (the "Benefit Period"). In the event
that participation in any such plan or program is barred or unavailable for
any reason,
10
the Company shall arrange to provide Xxxxxxx and his dependents, at the
expense of the Company, with benefits substantially comparable to those
which he and his dependents were entitled to receive under such plans and
programs as were in effect immediately prior to the time of the Qualifying
Termination.
(ii) In the event of a Qualifying Termination, Xxxxxxx or his
successors may, at the expense of the Company, utilize the reasonable
services of accountants and attorneys of his or their choice for assistance
in interpreting and enforcing this Agreement as well as for preparation of
his tax returns for the year of the Qualifying Termination and for each
other year all or any portion of which is included within the Benefit
Period.
(iii) In the event of a Qualifying Termination, Xxxxxxx shall be
entitled, at the expense of the Company, to "Automobile Benefits" during
the entire term of the Benefit Period. For purposes hereof, "Automobile
Benefits" shall include a $500 per month allowance to defray automobile
expenses and costs.
(iv) In the event any perquisite or benefit enjoyed by Xxxxxxx or
his dependents is reduced or eliminated within six (6) months before a
Qualifying Termination, then for all purposes of this Agreement, the
perquisite or benefit as was in effect prior to such reduction or
elimination shall be deemed to have been in place immediately prior to the
Date of Termination.
(v) In the event of a Qualifying Termination, all of Xxxxxxx'x
unvested stock options and equity-based incentives shall immediately vest
and be fully exerciseable.
(n) Indemnification for Golden Parachute Excise Tax.
-----------------------------------------------
(i) In the event that it shall be determined that any payment,
benefit or distribution provided, or to be provided, by the Company (or by
any person whose actions result in a Change in Control or any person
affiliated with the Company or such person) to or for the benefit of
Xxxxxxx under the terms of this Agreement, or under any other agreement,
plan or arrangement with the Company (or with any person whose actions
result in a Change in Control or any person affiliated with the Company or
such person), would be subject to any excise tax imposed pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended, or any
comparable provision of state law (an "Excise Tax"), the Company agrees
that it will promptly pay or cause to be paid to Xxxxxxx, in addition to
any other payments made or required to be made pursuant to the terms of
this Agreement, an additional amount in cash (a "Gross-Up Payment") equal
to the sum of (i) the amount of such Excise Tax plus (ii) all Attributable
Taxes and Penalties. For purposes of this Agreement, "Attributable Taxes
and Penalties" means all taxes, interest and penalties, including, without
limitation, any federal, state and local income taxes and any Excise Taxes,
which become payable by Xxxxxxx as a result of the receipt of the Gross-Up
Payment or the assessment of any Excise Tax
11
against Xxxxxxx. It is intended that under this provision the Company will
indemnify Xxxxxxx in such a manner that Xxxxxxx shall not suffer any loss
or expense by reason of the assessment of any Excise Tax or the
reimbursement of Xxxxxxx for payment of any such Excise Tax.
(ii) In determining the amount of any Gross-Up Payment payable
pursuant to Paragraph (i) above, Xxxxxxx shall be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made, and state and
local taxes at the highest marginal rates of taxation for such year in the
state and locality of Xxxxxxx'x residence. For such purposes, federal
income taxes shall be determined net of the maximum reduction in such
federal income taxes that could be obtained from the deduction of such
state and local taxes.
(iii) Within 30 days after Xxxxxxx'x Date of Termination, a mutually
agreed upon nationally recognized accounting firm (the "Accounting Firm"),
shall make a determination as to whether any Excise Tax should be reported
and paid by Xxxxxxx for any period or periods by reason of any payment,
benefit or distribution under this Agreement or under any other agreement,
plan or arrangement with the Company (or with any person whose actions
result in a Change in Control or any person affiliated with the Company or
such person). If the Accounting Firm determines that any Excise Tax should
be reported and paid by Xxxxxxx, the Accounting Firm shall also determine
the amount of such Excise Tax and the amount of the Gross-Up Payment
required to be paid to Xxxxxxx by the Company with respect to such Excise
Tax. In such event, the Company shall, within five (5) business days after
such determination, pay or cause to be paid to Xxxxxxx the amount of the
Gross-Up Payment with respect to the Excise Tax as determined by the
Accounting Firm, and Xxxxxxx shall report and pay the Excise Tax as so
determined. If the Accounting Firm determines that no Excise Tax should be
reported and paid by Xxxxxxx, it shall furnish Spencer with its opinion
that there is substantial authority not to report any Excise Tax, and
Xxxxxxx shall prepare and file his tax returns in accordance with such
advice until such time as the Internal Revenue Service (the "IRS") or any
applicable state taxing authority shall notify Xxxxxxx that such manner of
reporting is improper. The Company shall be responsible for all fees and
expenses connected with the determinations by the Accounting Firm pursuant
to this Paragraph (n).
(iv) In the event that Xxxxxxx is at any time required to pay any
Excise Tax (or any interest or penalties with respect to any Excise Tax) in
addition to any amount determined pursuant to Paragraph (iii) by reason of
any payment, benefit or distribution under this Agreement or under any
other agreement, plan or arrangement with the Company (or with any person
whose actions result in a Change in Control or any person affiliated with
the Company or such person), within five (5) business days after Xxxxxxx
notifies the Company of such required additional Excise Tax (or additional
interest or penalties) the Company shall pay
12
or cause to be paid to Xxxxxxx x Xxxxx-Up Payment determined with respect
to such additional Excise Tax (and any such additional interest and
penalties). In the event that Xxxxxxx receives any refund of any Excise Tax
with respect to which Xxxxxxx has previously received a Gross-Up Payment
hereunder, Xxxxxxx shall promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto).
(v) Xxxxxxx agrees to notify the Company in a timely manner in the
event of any audit or other proceeding by the IRS or any state taxing
authority in which the IRS or the state taxing authority asserts that any
Excise Tax should be assessed against Xxxxxxx and to cooperate with the
Company (at the Company's sole cost and expense) in contesting any such
proposed assessment with respect to such Excise Tax (a "Proposed
Assessment"). Xxxxxxx agrees not to settle any Proposed Assessment without
the consent of the Company. If, however, Xxxxxxx'x tax liability for any
year cannot be finally resolved principally by reason of a failure to
settle a Proposed Assessment, Xxxxxxx may demand that the Company settle
the Proposed Assessment. If the Company does not settle the Proposed
Assessment, or does not consent to allow Xxxxxxx to settle the Proposed
Assessment, within ten (10) days following such demand, the Company shall
indemnify and hold harmless Xxxxxxx (i) with respect to any additional
interest and/or penalties that Xxxxxxx is required to pay by reason of the
delay in finally resolving Xxxxxxx'x tax liability and (ii) with respect to
any taxes, interest and penalties that Xxxxxxx is required to pay by reason
of any indemnification payment under this Paragraph.
(o) Non-Exclusivity of Rights.
--------------------------
Nothing in this Agreement shall prevent or limit Xxxxxxx'x continuing
or future participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its affiliated companies. Amounts
which are vested benefits or which Xxxxxxx is otherwise entitled to receive
under any plan or program of the Company or any of its affiliated companies
at or subsequent to the date of any termination shall be payable in
accordance with such plan or program except as otherwise provided herein.
7. MISCELLANEOUS.
-------------
(a) No Assignment. Neither party may assign this Agreement without
-------------
the prior written consent of the other.
(b) Complete Agreement. This Agreement contains the entire
------------------
agreement of the parties with respect to the subject matter hereof and
supersedes all previous oral and written agreements and all contemporaneous
oral negotiations, commitments, writings and understandings.
13
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the internal laws of the State of California.
(e) Modifications and Waivers. No waiver or modification of this
-------------------------
Agreement shall be binding unless it is in a writing signed by both parties
hereto.
(f) Severability. In the event any provision or provisions of this
------------
Agreement is or are to be held invalid, the remaining provisions of this
Agreement shall not be affected thereby.
(g) Legal Fees. If any legal action, arbitration or other
----------
proceeding is brought for the enforcement of this Agreement, or because of
any alleged dispute, breach or default in connection with this Agreement,
the successful or prevailing party shall be entitled to recover all of its
costs incurred in such action or proceeding, including without limitation
its actual attorneys' fees and disbursements, in addition to any other
relief to which it may be entitled.
(h) Construction. The language of this Agreement shall be
------------
construed simply and according to its fair meaning, and shall not be
construed for or against any party hereto as a result of the source of its
draftsmanship.
(i) Notices. All notices and other communications required or
-------
permitted under this Agreement shall be in writing, served personally on,
or mailed by certified or registered United States mail to, the party to be
charged with receipt hereof. Notices and other communications served by
mail shall be deemed given hereunder seventy-two (72) hours after deposit
of such notice or communication in the United States Post Office as
certified or registered mail with postage prepaid and duly addressed to the
receiving party at the address set below such party's signature hereon, or
at such other address as such party has designated in a written notice
given as provided herein.
(j) Arbitration. Any controversy or claim arising out of or
-----------
relating to this Agreement, or an alleged breach of this Agreement, shall
be settled by arbitration administered by JAMS/ENDispute, and judgment on
the award rendered by the arbitrator(s) may be entered in the Superior
Court in and for the County of Los Angeles, California. In case of a
dispute, any party may commence arbitration by giving written notice to the
others of its desire to do so. Each party hereto agrees that service of
process for an arbitration proceeding will be deemed completed when a
notice of another party's desire to arbitrate is received by such party.
Each party hereby agrees that any such arbitration shall be held in the
County of Los Angeles, California and consents to the jurisdiction of the
Superior Court in and for the County of Los Angeles for entering of any
judgment. The arbitrator shall have authority equal to that of a Superior
Court Judge to grant equitable relief in an action pending in Los Angeles
County Superior Court in
14
which all parties have appeared. Judgment upon the Arbitrator's award may
be entered as if after trial in accordance with California law. Should any
party fail to pay fees as required, any other party may advance the same
and shall be entitled to a judgment from the arbitrator in the amount of
such fees plus interest. Any award issued by the arbitrator shall bear
interest at the judgment rate in effect in the State of California from the
date determined by the arbitrator.
(k) Notices. Any notice or communications required or permitted to
-------
be given to the parties hereto shall be delivered personally or be sent by
United States registered or certified mail, postage prepaid and return
receipt requested, and addressed or delivered as follows, or as such other
addresses the party addressed may have substituted by notice pursuant to
this Section:
(i) If to the Company:
Vitafort International Corporation
1800 Avenue of the Stars, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
(ii) If to Xxxxxxx:
Xxxx X. Xxxxxxx
0 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the Effective Date.
"COMPANY" "XXXXXXX"
VITAFORT INTERNATIONAL CORPORATION XXXX X. XXXXXXX
By: By:
------------------------------- ---------------------------
Xxxx Xxxxxxx, President Xxxx X. Xxxxxxx
15