EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is made effective this 14th day of October, 2002 (the
"Effective Date"), by and between Recom Managed Systems, Inc., a Delaware
corporation ("Company"), and Xxxxxx X. Xxxx, ("Executive").
TERMS AND CONDITIONS
In consideration of the premises and the mutual covenants and agreements
set forth below, the parties agree as follows:
1. Employment. Executive agrees to serve as Chief Executive Officer of
Company, and as Chairman of the Company's Board of Directors, for the term of
this Agreement, subject to the terms set forth in this Agreement and the
provisions of the Bylaws of Company.
2. Compensation. As compensation for his services during the term of
this Agreement, Executive shall receive the amounts and benefits set forth in
this Section 2 all effective as of the Effective Date unless otherwise
specified:
(a) Salary. The Executive will receive an annual base salary of $1
("Base Salary"). However, this base salary may be reviewed and adjusted by the
Board in light of the Company's performance following the one year anniversary
of this Agreement.
(b) Bonus. Participation in the Company's management bonus plan,
with bonus payments to be determined and paid pursuant to Schedule A attached
hereto ("Bonus"). The Executive will not be entitled to a minimum bonus. The
Executive agrees that any bonus payment is contingent upon its performance
objectives being met in full accordance with generally accepted accounting
principles and in accordance with the Company's Guiding Principles.
(c) Employee Benefits. Participation in the employee benefit plans
maintained by the Company and in other benefits provided by Company and in
other benefits provided to senior executives as contained which may include
medical, hospitalization, dental, long-term care and life insurance programs.
Executive shall, to the extent eligible, be entitled to participate at a
level commensurate with his position in all employee benefit, welfare and
retirement plans and programs, as well as equity plans, provided by the
Company to its senior executives in accordance with the terms thereof as in
effect from time to time. Notwithstanding the forgoing, the Company and
Executive acknowledge that some of the above referenced benefits may not yet
be in effect, including the Company's medical plan. Until such medical plan
is established, the Company agrees to reimburse Executive for his current
individual medical plan, for him and his family, in the amount not to exceed
$2,000.00 per month.
(d) Perquisites. The Company shall provide to Executive, at the
Company's cost, all perquisites to which other senior executives of the
Company are entitled to receive and such other perquisites which are suitable
to the character of Executive's position with the Company and adequate for the
performance of his duties hereunder as Chief Executive Officer. To the extent
consistent with any applicable state or federal laws, the Company shall not
treat such amounts as income to Executive.
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(e) Business and Entertainment Expenses. Upon submission of
appropriate documentation in accordance with its policies in effect from time
to time, the Company shall pay or reimburse Executive for all business
expenses which Executive incurs in performing her duties under this Agreement,
including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership in
various professional, business, and civic associations and societies in which
Executive participates in accordance with the Company's policies in effect
from time to time.
(f) Flexible Time Off. Executive shall be entitled to paid time
off in accordance with the standard written policies of the Company with
regard to senior executives, but in no event less than twenty-five (25) days,
per calendar year.
(g) Automobile Allowance. Executive shall be entitled to a monthly
automobile allowance in the amount of $1,200.00
3. Equity. It is acknowledged that Executive has been granted 700,000
shares of restricted common stock ("Restricted Stock") as of the Effective
Date of this Agreement with specific terms and conditions provided in the
relevant documentation including the Restricted Stock Agreement attached
hereto as Exhibit A. It is acknowledged that shares of the Restricted Stock
will vest at a rate of 8.33% or 58,333 shares per quarter from the Effective
Date of this Agreement so that the Restricted Shares will be 100% vested on
the third anniversary of the Effective Date of this Agreement, conditioned
upon Executive's continued employment with the Company as of each vesting
date. Executive shall be entitled to all cash dividends paid on the Restricted
Stock. If there is (i) any stock dividend, stock split or other change in the
Restricted Stock, or (ii) any merger or sale of all or substantially all of
the assets or other acquisition of the Company, any and all new, substituted
or additional securities attributable to the Restricted Stock shall be
included thereafter as "Restricted Stock" for purposes of this Agreement.
4. Term. This Agreement and Executive's employment under this Agreement
shall be effective as of the Effective Date and shall continue for a term
ending on October 14, 2006 (the "Term"). This Agreement and Executive's
employment may be terminated by either party prior to the end of the Term upon
60 days' prior written notice to the other party, provided that, in the event
of such termination, Company shall be obligated to make the payments and
provide the benefits described in Section 6 below.
5. Termination. Executive's employment hereunder may be terminated
during its Term under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive
months, and within thirty (30) days after written Notice of Termination is
given after such six (6) month period, Executive shall not have returned to
the substantial performance of his duties on a full-time basis, the Company
shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
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(c) Cause. The Company shall have the right to terminate Executive's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within ninety (90) days after Executive has actual knowledge of the
occurrence of an event giving rise to such,
(e) Without Cause. The Company shall have the right to terminate
Executive's employment hereunder without Cause by providing Executive with a
Notice of Termination at least thirty (30) days prior to such termination, and
such termination shall not in and of itself be, nor shall it be deemed to be,
a breach of this Agreement.
(f) Without Good Raason. Executive shall have the right to terminate
his employment hereunder without Good Reason by providing the Company with a
Notice of Termination at least thirty (30) days prior to such termination, and
such termination shall not in and of itself be, nor shall it be deemed to be,
a breach of this Agreement.
6. Termination procedure.
(a) Notice Of Termination. Any termination of Executive's employment
by the Company or by Executive during the Employment Period (other than
termination pursuant to Section 5(a)) shall be communicated by written Notice
of Termination to the other party hereto in accordance with Section 15. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 5(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
7. Compensation upon termination or during disability. In the event
Executive is disabled or his employment terminates during the Term, the
Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 7 constitute liquidated damages for termination of his employment
during the Employment Period.
(a) Termination By Company Without Cause Or By Executive For Good
Reason. If Executive's employment is terminated by the Company without Cause
or by Executive for Good Reason:
(i) within five (5) days following such termination, the Company
shall pay to Executive (A) his Base Salary and Bonus earned and/or accrued,
but unpaid through the Date of Termination, as soon as practicable following
the Date of Termination, and (B) a pro rata portion of Executive's annual
bonus for the fiscal year in which Executive's Date of Termination occurs in
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an amount at least equal to (1) Executive's target Bonus amount, multiplied by
(2) a fraction, the numerator of which is the number of days in the fiscal
year in which the Date of Termination occurs through the Date of Termination
and the denominator of which is three hundred sixty-five (365) (the "Pro-Rated
Bonus"); and
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a period
of three (3) years following the Date of Termination the medical,
hospitalization, dental, long-term care and life insurance programs in which
Executive, his spouse and his dependents were participating immediately prior
to the Date of Termination at the level in effect and upon substantially the
same terms and conditions (including without limitation contributions required
by Executive for such benefits) as existed immediately prior to the Date of
Termination;
(iii) the Company shall reimburse Executive for any reasonable
monthly expenses incurred, but not paid prior to such termination of
employment; and
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with the
terms and provisions of any agreements, plans or programs of the Company; and
(b) Cause Or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and accrued
Bonus through the Date of Termination, as soon as practicable following the
Date of Termination; and
(ii) the Company shall reimburse Executive for any reasonable
monthly expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
(c) Disability. During any period that Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full
Compensation as set forth in Section 2 until his employment is terminated
pursuant to Section 5(b). In the event Executive's employment is terminated
for Disability pursuant to Section 5(b):
(i) the Company shall pay to Executive (A) his Base Salary,
Bonus and accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, (B) his Pro-Rated Bonus and (C)
Continued Benefits for one (1) year; and
(ii) the Company shall reimburse Executive for any reasonable
monthly expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
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(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be, in the
amount of Executive's Base Salary, Bonus and accrued vacation pay through the
Date
(ii) the Company shall reimburse Executive's beneficiary,
legal representatives, or estate, as the case may be, for any reasonable
monthly expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive's beneficiary, legal representatives or
estate, as the case may be, shall be entitled to any other rights,
compensation and benefits as may be due to any such persons or estate in
accordance with the terms and provisions of any agreements, plans or programs
of the Company.
8. Gross-Up
(a) In the event it shall be determined that any payment or
distribution by the Company or other amount with respect to the Company to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8 (a "Payment"), is (or will be) subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are (or will be) incurred by the Executive with
respect to the excise tax imposed by Section 4999 of the Code with respect to
the Company (the excise tax, together with any interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), or it is found that
Executive's grant of Restricted Stock is subject to the imposition of tax
under the Code or any interest or penalties are (or will be) incurred by the
Executive with respect to the Restricted Stock (cumulatively "Additional
Tax"), the Executive shall be entitled to receive an additional cash payment
(a "Gross-Up Payment") from the Company in an amount equal to the sum of the
Additional Tax and an amount sufficient to pay the cumulative taxes and all
cumulative income taxes (including any interest and penalties imposed with
respect to such taxes) relating to the Gross-Up Payment so that the net amount
retained by the Executive is equal to all payments to which Executive is
entitled pursuant to the terms of this Agreement (excluding the Gross-Up
Payment) or otherwise less income taxes (but not reduced by the Additional Tax
or by income taxes attributable to the Gross-Up Payment).
(b) Subject to the provisions of subsection (c) of this Section 8,
all determinations required to be made under this Section 8, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at the determination,
shall be made by a nationally recognized certified public accounting firm
selected by the Company with the consent of the Executive, which should not
unreasonably be withheld (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 30 days
after the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. All fees and expenses of
the Accounting Firm shall be borne solely by the Company. The Company, as
determined in accordance with this Section 8, shall pay any Gross-Up Payment
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to the Executive within five days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Additional Tax is
payable by the Executive, it shall so indicate to the Executive in writing.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of uncertainty in the application of Section 4999
of the Code and / or the determination of value as related to the Restricted
Stock at the time of the initial determination by the Accounting Firm, it is
possible that Gross-Up Payments that the Company should have made will not
have been made (an "Underpayment"), consistent with the calculations required
to be made hereunder. In the event the Company exhausts its remedies in
accordance with subsection (c) of this Section 8 and the Executive thereafter
is required to make a payment of any Additional Tax, the Accounting Firm shall
determine the amount of Underpayment that has occurred and the Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require a Gross-Up
Payment (that has not already been paid by the Company). The notification
shall be given as soon as practicable but no later than ten business days
after the Executive is informed in writing of the claim and shall apprise the
Company of the nature of the claim and the date on which the claim is
requested to be paid. The Executive shall not pay the claim prior to the
expiration of the 30-day period following the date on which the Executive
gives notice to the Company or any shorter period ending on the date that any
payment of taxes with respect to the claim is due. If the Company notifies the
Executive in writing prior to the expiration of the 30-day period that it
desires to contest the claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to the claim;
(ii) take any action in connection with contesting the claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
the claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest the claim; and
(iv) permit the Company to participate in any proceedings
relating to the claim.
The Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for
any Additional Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of the representation and payment of
costs and expenses. Without limitation of the forgoing provisions of this
Section 5, the Company shall control all proceedings taken in connection with
the contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority in respect of the claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute the contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine. If the Company directs the Executive to pay the claim and xxx for a
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refund, the Company shall advance the amount of the payment to the Executive,
on an interest-free basis, and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Additional Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
the advance or with respect to any imputed income with respect to the advance;
and any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested
amount is claimed to be due shall be limited solely to the contested amount.
The Company's control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to subsection (c) of this Section 8, the Executive
becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Company's compliance with the requirements of
subsection (c) of this Section 8, promptly pay to the Company the amount of
the refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to subsection (c) of this Section 8, a
determination is made that the Executive shall not be entitled to any refund
with respect to the claim and the Company does not notify the Executive in
writing of its intent to contest the denial of refund prior to the expiration
of 30 days after the determination, then the advance shall be forgiven and
shall not be required to be repaid and the amount of the advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Definitions. For purposes of this Agreement, the following
definitions shall apply:
(a) The "Board" shall mean the Board of Directors of Company.
(b) The "Incumbent Board" shall mean the members of the Board as of
the date of this Agreement and any person becoming a member of the Board
hereafter whose election, or nomination for election by Company's
shareholders, 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 Company).
(c) "Change in Control" shall mean:
(i) The acquisition (other than from Company) by any person,
entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (excluding, for this purpose, any employee benefit plan of
Company or its subsidiaries which acquires beneficial ownership of voting
securities of Company) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of Common Stock or the combined voting power of Company's
then outstanding voting securities entitled to vote generally in the election
of directors; or
(ii) The failure for any reason of individuals who constitute
the Incumbent Board to continue to constitute at least a majority of the
Board; or
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(iii) Approval by the stockholders of Company of a
reorganization, merger, consolidation, in each case, with respect to which the
shares of Company voting stock outstanding immediately prior to such
reorganization, merger or consolidation do not constitute or become exchanged
for or converted into more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of Company or of the sale of all or substantially all of the
assets of Company.
(d) "Good Reason" shall mean:
(i) Without the express written consent of the Executive, the
assignment to Executive of any duties inconsistent in any respect with
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 1 above, or any other action by Company which results in a diminution
of such position, authority, duties or responsibilities, including any
diminution of position due to Executive's becoming head of a division of a
larger company rather than Chairman and Chief Executive Officer; or
(ii) A Change in Control occurs; or
(iii) Without the express written consent of the Executive, a
reduction in the overall level of Executive's compensation or benefits as
provided in Section 2, including, but not limited to, the alteration of the
formula for calculating the target bonus payment described in Section 2(b),
above, in a manner that results in a lower value for such benefit; or
(iv) The Company breaches this Agreement; or
(v) The Company fails to have Directors and Officers
insurance in place after December 1, 2002. (Notwithstanding, the parties
agree that it will be Executive's responsibility to use his best efforts to
keep such insurance in full force and effect after it has been secured
throughout the term hereof); or
(vi) Without the express written consent of the Executive, the
failure of Executive to be Chairman of the Board of Directors or the
nomination by the Board of a Chairman (or person serving in a similar
capacity) of a person other than Executive or the failure of the Board to
appoint the Executive to the chairman or co-chair of the Finance Committee of
the Board, except to the extent that applicable law or regulation requires
otherwise.
The Company will have 15 days after receiving written notice from Executive
specifying the grounds for Good Reason to cure a Good Reason event or omission
under this subsections 8(d).
(e) "Disability" shall mean the total and permanent inability of
Executive due to illness, accident or other physical or mental incapacity to
perform the usual duties of his employment under this Agreement, as determined
by a physician selected by Company and acceptable to Executive or Executive's
legal representative, which agreement as to acceptability shall not be
unreasonably withheld.
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(f) "Cause" shall be defined solely as (i) Executive's conviction
of a felony or of any crime involving moral turpitude, and affirmance of such
conviction following the exhaustion of any appeals; (ii) willful refusal of
Executive to substantially perform all of his duties and responsibilities, or
Executive's persistent willful neglect of duty or chronic, willful unapproved
absenteeism other than for a temporary or permanent Disability, which remains
uncured following thirty days after written notice of such alleged Cause by
the Board of Directors; or (iii) any material and substantial breach by
Executive of other terms and conditions of this Agreement, which, in the
reasonable, good faith judgment of the Board of Directors, has a material
adverse financial effect on the Company or on Executive's ongoing abilities to
carry out his duties under this Agreement and which remains uncured following
thirty days after written notice of such alleged Cause by the Board of
Directors.
10. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California.
11. Indemnification. The Company agrees to indemnify the Executive
pursuant to the indemnification agreement attached hereto at Exhibit B.
12. Confidential Information. Executive agrees to enter into the
Company's standard Confidential Information and Invention Assignment Agreement
(the "Confidential Information Agreement") upon commencing employment
hereunder.
13. Non-Compete; Non-Solicit.
(a) The parties hereto recognize that Executive's services are
special and unique and that the level of compensation and the provisions
herein for compensation under Section 2 are partly in consideration of and
conditioned upon Executive's not competing with the Company, and that
Executive's covenant not to compete or solicit as set forth in this Section 13
during and after employment is essential to protect the business and good will
of the Company.
(b) Executive agrees that during the term of employment with the
Company and for a period of twenty-four (24) months thereafter (the "Covenant
Period"), Executive shall not render services for any of the three (3)
organizations designated by the Board in a writing delivered to Executive
within thirty (30) days after the Employment Commencement Date (the
"Prohibited List"). The Prohibited List may be changed by the Board from time
to time (but there may never be more than three (3) entities listed) by
written notice to Executive, such notice to be effective only if Executive's
commencement of rendering services for such entity is ninety (90) or more days
after the giving of such notice. The scope of the non-competition clause
under any equity plan, benefit plan or other plan, agreement or arrangement of
the Company shall not be deemed to prohibit Executive's actions or, except as
pursuant to a provision in a Company plan or grant agreement that precludes
future vesting or exercisability at the time competition is entered into,
serve as a basis for any reduction or forfeiture of benefits or payments
thereunder unless such actions violate this Section 13(b) of this Agreement.
(c) During the Covenant Period, Executive shall not, directly or
indirectly, disrupt, damage or interfere with the operation or business of the
Company by soliciting or recruiting its employees for Executive or others, but
the foregoing shall not prevent Executive from giving references.
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(d) During the Covenant Period, Executive shall not, without prior
written authorization from the Company, violate the agreement entered into
pursuant to Section 11 hereof.
(e) Executive agrees that the Company would suffer an irreparable
injury if Executive was to breach the covenants contained in Sections 13(b),
(c) or (d) and that the Company would by reason of such breach or threatened
breach be entitled to injunctive relief in a court of appropriate jurisdiction
and Executive hereby stipulates to the entering of such injunctive relief
prohibiting Executive from engaging in such breach.
(f) If any of the restrictions contained in this Section 13 shall
be deemed to be unenforceable by reason of the extent, duration or
geographical scope or other provisions thereof, then the parties hereto
contemplate that the court shall reduce such extent, duration, geographical
scope or other provision hereof and enforce this Section 13 in its reduced
form for all purposes in the manner contemplated hereby.
14. Assignment. This Agreement will be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive
upon Executive's death and (b) any successor of the Company. Any such
successor of the Company will be deemed substituted for the Company under the
terms of this Agreement for all purposes. For this purpose, "successor" means
any person, firm, corporation or other business entity which at any time,
whether by purchase, merger or otherwise, directly or indirectly acquires all
or substantially all of the assets or business of the Company. None of the
rights of Executive to receive any form of compensation payable pursuant to
this Agreement may be assigned or transferred except by will or the laws of
descent and distribution. Any other attempted assignment, transfer,
conveyance or other disposition of Executive's right to compensation or other
benefits will be null and void.
15. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given (i) on the
date of delivery if delivered personally, (ii) one (1) day after being sent by
a well established commercial overnight service, or (iii) four (4) days after
being mailed by registered or certified mail, return receipt requested,
prepaid and addressed to the parties or their successors at the following
addresses, or at such other addresses as the parties may later designate in
writing:
If to the Company:
Recom Managed Systems, Inc.
0000 Xxxxxx Xxxxxx, Xxxxxxxxx
Xxxxxx Xxxx, XX 00000
Attn: Board of Directors
If to Executive:
Xxxxxx X. Xxxx
at the last residential address known by the Company.
16. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
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17. Arbitration.
(a) Executive agrees that any dispute or controversy arising out
of, relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall be
settled by binding arbitration to be held in Los Angeles, California in
accordance with the National Rules for the Resolution of Employment Disputes
then in effect of the American Arbitration Association (the "Rules"). The
arbitrator may grant injunctions or other relief in such dispute or
controversy. The decision of the arbitrator will be final, conclusive and
binding on the parties to the arbitration. Judgment may be entered on the
arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply California law to the merits of
any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings will be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. The Executive hereby
consents to the personal jurisdiction of the state and federal courts located
in California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are
participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF
THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO,
DISCRIMINATION CLAIMS.
18. Integration Clause. This Agreement constitutes the entire Agreement
between the parties pertaining to the subject matter contained herein and
supersedes all prior and contemporaneous agreements, representations and
understandings -- whether oral, written or both -- of the parties with respect
to the subject matter hereof. In the case of this particular Agreement, there
have been no prior or contemporaneous agreements, representations and
understandings between or among the parties hereto, and the only agreement
that formed the topic of negotiations and discussions is contained herein. The
parties agree that this Agreement may not be modified and that no attempted
modification by the parties shall be binding upon either party hereto unless
contained in a written instrument executed by the party to be charged.
Accordingly, this Agreement may not be so modified by a writing that is
unsigned by the party to be charged and this Agreement may not be modified by
any oral amendment, oral agreement or other oral modification. In fact, any
oral amendment or written modification that remains unsigned by the party to
be charged is invalid in that the parties intend that there is no
consideration for any future promises that are not contained in writing and
the parties hereto specifically agree that this be the case.
19. Governing Law. This Agreement will be governed by the laws of the
State of California (with the exception of its conflict of laws provisions).
Page 11
20. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by their duly authorized officers, as of the day and
year first above written.
[Remainder of Page Intentionally Left Blank]
Page 12
Schedule A
Bonus Computation
Cash Bonus Compensation
Period Calculation
-------------------------------- ---------------------------------------
Effective Date through Month 12 No Cash Bonus is Available
Month 13 through Month 24 Executive is entitled to receive ten
percent (10%) of the Company's after tax
earnings not Taking into account
extraordinary expenses.
Month 25 through Month 36 Executive is entitled to receive fifteen
percent (15%) of the Company's after tax
earnings not taking into account
extraordinary expenses.
Month 37 through Month 48 Executive is entitled to receive fifteen
percent (15%) of the Company's after tax
earnings not Taking into Account
extraordinary expenses.
In addition to any Cash Bonus Compensation as stated above, the Company agrees
that it will grant to Executive, within 10 days of the occurrence of a
triggering event, as described below, shares of Restricted Stock as provided
for in the metrics below, if at the time of the grant, Executive is an
Employee of the Company. The grant will be made subject to a restricted stock
agreement (the "Restricted Stock Agreement"), in substantially the form of
Exhibit A.
Non-Cash Bonus Compensation
Trigger Event Restricted Stock Grant
-------------------------------- --------------------------------------
The Company qualifies, is listed, Executive shall be granted 200,000
and begins trading on the NASDAQ shares of the Company's Common Stock
National Market, NYSE or American
Stock Exchange.
The occurrence of a change in Executive shall receive stock in
control as defined in section 8 an amount which is the lesser of:
of this Agreement 200,000 shares of Common Stock; or
shares having a market value of
$5,000,000
Page 13
EXHIBIT A
Restricted Stock Agreement
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, dated as of October 14, 2002 ("Grant Date") by and
between Recom Managed Systems, Inc., a Delaware Corporation ("Company"), and
Xxxxxx X. Xxxx ("Employee"), is entered into as follows:
WHEREAS, the Compensation Committee of the Board of Directors of the
Company ("Committee") determined that the Employee be granted shares of the
Company's $.001 par value Common Stock ("Stock") subject to the restrictions
stated below, as reflected in the terms and conditions contained in the
Employment Agreement by and between the Employee and the Company made as of
October 14, 2002 (the "Employment Agreement") and as hereinafter set forth;
WHEREAS, the Company and Employee acknowledge and agree that Company: (i)
is a development stage start-up business; (ii) has no market capitalization of
any significance; (iii) has no operations; (iv) has no staff that can perform
the services described herein; and (v) although it currently intends to
develop devices and products, does not have the current capability to do so
for a variety of reasons including, but not limited to, the lack of seed
financing necessary to maintain appropriate staffing and developmental levels
to enable it to achieve its business plan.
WHEREAS, the Company and Employee further acknowledge and agree that as a
result of the Company's current state and condition as described in these
recitals, the Stock granted herein has a diminimus value and for all intents
and purposes is worthless as of the date hereof:
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of Stock.
Subject to the terms and conditions of this Agreement and of the Plan,
the Company hereby grants to the Employee 700,000 shares of Stock.
2. Vesting Schedule.
The interest of the Employee in the Stock shall vest quarterly at a rate
of 8.33% per 3 month period as to one-third of such Stock shall be vested on
the first anniversary of the Grant Date, and as to an additional one-third on
each succeeding anniversary date, so as to be 100% vested on the third
anniversary thereof, conditioned upon the Employee's continued employment with
the Company as of each vesting date. Notwithstanding the foregoing, the
interest of the Employee in the Stock shall vest as to:
(a) 100% of the then unvested Stock upon the Employee's termination of
employment due to death, a "Disability Termination" (as defined in the
Employment Agreement), involuntary termination by the Company other than for
"Cause" (as defined in the Employment Agreement) or voluntary termination by
the Employee for "Good Reason" (as defined in the Employment Agreement); or
Page 14
(b) 100% of the then unvested Stock upon a "Change of Control" (as
defined in the Employment Agreement); or
(c) In the event the Company has not secured a Directors and Officer's
policy and Errors and Omissions insurance policy within 90 days of Employee
joining the company
3. Restrictions.
(a) The Stock or rights granted hereunder may not be sold, pledged or
otherwise transferred until the Stock becomes vested in accordance with
Section 2. The period of time between the date hereof and the date Stock
becomes vested is referred to herein as the "Restriction Period."
(b) If the Employee's employment with the Company is terminated by the
Company for Cause or voluntarily by the Employee (other than for Good Reason),
the balance of the Stock subject to the provisions of this Agreement which
have not vested at the time of the Employee's termination of employment shall
be forfeited by the Employee, and ownership transferred back to the Company.
4. Legend.
All certificates representing any shares of Stock of the Company subject
to the provisions of this Agreement shall have endorsed thereon the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS
CORPORATION."
5. Escrow.
The certificate or certificates evidencing the Stock subject hereto shall
be delivered to and deposited with the Secretary of the Company as Escrow
Agent in this transaction. The Stock may also be held in a restricted book
entry account in the name of the Employee. Such certificates or such book
entry shares are to be held by the Escrow Agent until termination of the
Restriction Period, when they shall be released by said Escrow Agent to the
Employee.
6. Employee Shareholder Rights.
During the Restriction Period, the Employee shall have all the rights of
a shareholder with respect to the Stock except for the right to transfer the
Stock, as set forth in Section 3 and except as set forth in Section 7.
Accordingly, the Employee shall have the right to vote the Stock and to
receive any cash dividends paid to or made with respect to the Stock.
Page 15
7. Changes in Stock.
In the event that as a result of (a) any stock dividend, stock split or
other change in the Stock, or (b) any merger or sale of all or substantially
all of the assets of other acquisition of the Company, and by virtue of any
such change the Employee shall in his capacity as owner of unvested shares of
Stock which have been awarded to him (the "Prior Stock") be entitled to new or
additional or different shares or securities, such new or additional or
different shares or securities shall thereupon be considered to be unvested
Stock and shall be subject to all of the conditions and restrictions which
were applicable to the Prior Stock pursuant to this Agreement.
8. Disability Termination or permanent and total disability of Employee.
In the event of a Disability Termination or permanent and total
disability of the Employee, any unpaid but vested Stock shall be paid to the
Employee if legally competent or to a legally designated guardian or
representative if the Employee is legally incompetent.
9. Death of Employee.
In the event of the Employee's death after the vesting date but prior to
the payment of Stock, said Stock shall be paid to the Employee's estate or
designated beneficiary.
10. Taxes.
The Employee shall be liable for any and all taxes, including withholding
taxes, arising out of this grant or the vesting of Stock hereunder. The
Employee may elect to satisfy such withholding tax obligation by having the
Company retain Stock having a fair market value equal to the Company's minimum
withholding obligation .
11. Miscellaneous.
(a) The Company shall not be required (i) to transfer on its books any
shares of Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement, or (ii) to
treat as owner of such shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such shares shall have been so
transferred.
(b) The parties agree to execute such further instruments and to take
such action as may reasonably be necessary to carry out the intent of this
Agreement.
(c) Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon delivery to the Employee at her
address then on file with the Company.
(d) Neither the Plan nor this Agreement nor any provisions under either
shall be construed so as to grant the Employee any right to remain in the
employ of the Company.
(e) This Agreement and the Employment Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof.
[Remainder of Page Intentionally Left Blank]
Page 16
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
COMPANY:
Recom Managed Systems, Inc.
By: /s/ Xxxxxx Xxxxxx
Its:
EMPLOYEE:
Xxxxxx X. Xxxx
By: /s/ Xxxxxx X. Xxxx
Its:
Page 17
EXHIBIT B
Company Indemnification Agreement
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this day,
October 14, 2002, by and between Recom Managed Systems, Inc., a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxx. ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and
coverage of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers
and directors of the Company may not be willing to continue to serve as
officers and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors
of the Company and to indemnify its officers and directors so as to provide
them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while
an officer or director or by reason of the fact that Indemnitee is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action or proceeding
if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that (i) Indemnitee did
Page 18
not act in good faith and in a manner which Indemnitee reasonably believed to
be in the best interests of the Company, or (ii) with respect to any criminal
action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while
an officer or director or by reason of the fact that Indemnitee is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) and, to the fullest
extent permitted by law, amounts paid in settlement, in each case to the
extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in the best
interests of the Company and its shareholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company in the performance of
Indemnitee's duty to the Company and its shareholders unless and only to the
extent that the court in which such action or proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for expenses
and then only to the extent that the court shall determine.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced
in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of
any such action or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemni fied by the Company
as authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within twenty (20) days following delivery of a written
request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim made against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received three business days after the
date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
Page 19
(c) Procedure. Any indemnification provided for in Section 1 shall
be made no later than forty-five (45) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or
under any provision of the Company's Articles of Incorporation or Bylaws
providing for indemnification, is not paid in full by the Company within
forty-five (45) days after a written request for payment thereof has first
been received by the Company, Indemnitee may, but need not, at any time
thereafter bring an action against the Company to recover the unpaid amount of
the claim and, subject to Section 13 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of
bringing such action. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in connection with any
action or proceeding in advance of its final disposition) that Indemnitee has
not met the standards of conduct which make it permissible under applicable
law for the Company to indemnify Indemnitee for the amount claimed, but
Indemnitee shall be entitled to receive interim payments of expenses pursuant
to Subsection 2(a) unless and until such defense may be finally adjudicated by
court order or judgment from which no further right of appeal exists. It is
the parties' intention that if the Company contests Indemnitee's right to
indemnification, the question of Indemnitee's right to indemnification shall
be for the court to decide, and neither the failure of the Company (including
its Board of Directors, any com mittee or subgroup of the Board of Directors,
independent legal counsel, or its shareholders) to have made a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual deter mination by the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee has
or has not met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice
of a claim pursuant to Section 2(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on
behalf of the Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume
the defense of such proceeding, with counsel approved by Indem xxxxx, which
approval shall not be unreasonably withheld, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by
the Company, the Company will not be liable to Indemnitee under this Agreement
for any fees of counsel subsequently incurred by Indemnitee with respect to
the same proceeding, provided that (i) Indemnitee shall have the right to
employ his counsel in any such proceeding at Indemnitee's expense; and (ii) if
(A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be
a conflict of interest between the Company and Indemnitee in the conduct of
any such defense or (C) the Company shall not, in fact, have employed counsel
to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
Page 20
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the
Company's Articles of Incorporation, the Company's By-laws or by statute. In
the event of any change, after the date of this Agreement, in any applicable
law, statute or rule which expands the right of a California corporation to
indemnify a member of its board of directors or an officer, such changes shall
be, ipso facto, within the purview of Indemnitee's rights and Company's
obligations, under this Agreement. In the event of any change in any
applicable law, statute or rule which narrows the right of a California
corporation to indemnify a member of its Board of Directors or an officer,
such changes, to the extent not otherwise required by such law, statute or
rule to be applied to this Agreement shall have no effect on this Agreement or
the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Articles of Incorporation, its By-laws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though he may have ceased to serve in such capacity at the time
of any action or other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any
civil or criminal action or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
of such expenses, judgments, fines or penalties to which Indemnitee is
entitled.
5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification
to a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall,
maintain a policy or policies of insurance with reputable insurance companies
providing the officers and directors of the Company with coverage for losses
from wrongful acts, or to ensure the Company's performance of its
indemnification obligations under this Agreement. In all policies of
directors' and officers' liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees,
Page 21
if Indemnitee is not an officer or director but is a key employee.
Notwithstanding the foregoing, the Company shall maintain such insurance. In
the event such insurance laps or the Company is no longer able to maintain
such coverage in place, the Executive, at his sole discretion, may terminate
his employment with such termination deemed for Good Cause as defined under
his Employment Agreement. Notwithstanding any provision hereof to the
contrary, the Company shall have until December 1, 2002 to get such insurance
in place and in full force and effect. After such date, the Executive shall
use reasonable efforts to assist the Company in keeping such insurance in full
force and effect.
7. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach
of this Agreement. The provisions of this Agreement shall be severable as
provided in this Section 7. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted
by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.
8. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions
or transactions from which a director may not be relieved of liability under
the California General Corporation Law.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or
bringing of such suit; or
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy
of directors' and officers' liability insurance maintained by the Company; or
(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
Page 22
9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the California General
Corporation Law, such provisions shall not be effective unless and until the
Company's Articles of Incorporation authorize such additional rights of
indemnification. In all other respects, the balance of this Agreement shall be
effective as of the date set forth on the first page and may apply to acts or
omissions of Indemnitee which occurred prior to such date if Indemnitee was an
officer, director, employee or other agent of the Company, or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, at
the time such act or omission occurred.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a con stituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants,
or beneficiaries.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the
Company under this Agreement or to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including attorneys' fees, incurred by Indemnitee in defense of such
action (including with respect to Indemnitee's counterclaims and cross-claims
Page 23
made in such action), unless as a part of such action the court determines
that each of Indemnitee's material defenses to such action were made in bad
faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of
such receipt, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action
instituted under this Agreement shall be brought only in the state courts of
the State of California.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California as
applied to contracts between California residents entered into and to be
performed entirely within California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
COMPANY:
Recom Managed Systems, Inc.
By: /s/ Xxxxxx Xxxxxx
Its:
INDEMNITEE:
Xxxxxx X. Xxxx
By: /s/ Xxxxxx X. Xxxx
Its:
Page 24
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
COMPANY:
Recom Managed Systems, Inc.
By: /s/ Xxxxxx Xxxxxx
Its:
EXECUTIVE:
Xxxxxx X. Xxxx
By: /s/ Xxxxxx X. Xxxx
Its:
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