Exhibit 10(s)
SEVERANCE, NONCOMPETITION AND NONDISCLOSURE AGREEMENT
AGREEMENT, dated as of July 19, 2000, between Response USA, Inc., a
Delaware corporation, with its principal address at 3 Executive Campus, 0xx
Xxxxx Xxxxx, Xxxxxx Xxxx, XX 00000 (the "Company") and Xxxxxxx X. Xxxxxx, an
individual with an address at 000 Xxxx Xxxx Xxxxx, Xxxxxxxxx, XX 00000 (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Executive has, prior to the date hereof, been an executive
of the Company pursuant to an Employment Agreement dated as of October 1, 1998,
as amended, between the Executive and the Company (the "Employment Agreement");
and
WHEREAS, the Company is a party to a certain Settlement Agreement dated
as of January 11, 2000 as modified and amended by agreements dated as of
February 1, 2000 and July 19, 2000, respectively (the "Settlement Agreement"),
together with Xxxxxxx Xxxxx, Xxxxxx Xxxxx, the Xxxxxxx Xxxxx and Xxxxxx Xxxxx
Irrevocable Trust U/A January 2, 1998 (the "Trust", and together with Xxxxxx
Xxxxx and Xxxxxxx Xxxxx, collectively, the "Queens"), which provides, INTER
ALIA, for the issuance of 3,705,382 shares of common stock of the Corporation to
the Queens on July 10, 2000 (the "July 2000 Make Up Shares"); and
WHEREAS, in the event there is a Change of Control of the Company (as
defined in the Employment Agreement), the Executive has the right to terminate
the Executive's employment for cause due to a Change of Control pursuant to the
Employment Agreement; and
WHEREAS, upon such termination the Executive is entitled to receive
severance pursuant to the Employment Agreement, but has agreed to receive
payments over time and further agrees to be bound by certain agreements and
covenants as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants hereinafter set forth, the parties hereto hereby agree as
follows:
1. TERMINATION OF EMPLOYMENT; SEVERANCE PAYMENT DUTIES.
(a) Effective July 24, 2000 (the "Termination Date"), the Executive
shall terminate the Executive's employment pursuant to Section 7.1 of the
Employment Agreement for "Cause" (as such term is defined in the Employment
Agreement). The Company hereby waives any notice requirement for termination for
Cause pursuant to the Employment Agreement. Effective on the Termination Date,
the Executive shall resign as an officer of the Company and any subsidiary of
the Company, but shall remain as Chairman of the Board of the Company. All
duties of the Executive shall be assumed by the officers of the Company other
than the Executive. The Executive shall serve as Chairman of the Board, at the
discretion of the Board of the Company, and shall only perform assignments for
the Company as requested by the Chief Executive Officer of the Company or the
Board of Directors of the Company. During the Executive's term as Chairman of
the Board, he shall be reimbursed by the Company for all reasonable out
of-pocket expenses incurred in connection with his attendance at Board meetings
and reimbursed for all other reasonable out-of-pocket business expenses incurred
by Executive in the performance of any duties assigned to him by the Chief
Executive Officer or the Board of Directors provided the Executive submits
complete documentation to the Company
to support such expenses. The Executive may be removed, with or without cause,
by the Board of Directors at any time following the Termination Date. Effective
on the Termination Date, Executive's employment with the Company shall be
terminated and following the Termination Date Executive shall no longer be
employed by the Company or any subsidiary of the Company and shall not be
entitled to any benefits as an executive or employee of the Company, other than
as required by law. On the Termination Date, provided that on or prior to such
date the Board of Directors of the Company shall consist of no more than seven
directors (including Executive), four of whom shall have been designated by the
Queens, the Company shall pay Executive, in full satisfaction of all of the
Company's obligations to Executive under the Employment Agreement, (i) Four
Hundred and Forty-One Thousand Two Hundred and Three Dollars and Thirty-Three
cents ($441,203.33), plus, (ii) commencing on the first day of August 2000 and
continuing on the first day of each succeeding calendar month thereafter, to and
including the first day of July 2002, twenty-four (24) equal monthly payments in
the amount of Thirty-Six Thousand Seven Hundred and Sixty Six Dollars and
Ninety-Four cents ($36,766.94). Exhibit A hereto pursuant to Section 4.3 of the
Employment Agreement sets forth the calculation of the total amounts due
Executive (collectively the "Severance Payment").
(b) During the period commencing on the Termination Date and ending on
the earlier of (i) July 1, 2002, or (ii) such date as Executive may cease to be
a member of the Board of Directors of the Company other than as a result of his
resignation and unwillingness to continue to serve, Executive shall, as
requested by the Chief Executive Officer or the Board of Directors of the
Company, use his commercially reasonable best efforts to assist the Company and
its subsidiaries in monitoring, maintaining and continuing the Company's banking
relationships with XxXxxx Xxxxx Capital Holdings Corporation ("XxXxxx"), in
monitoring all aspects of the Company's prior acquisition and disposition
transactions and in consulting with and advising the Company and its
subsidiaries with respect thereto and with respect to potential acquisitions,
financings and investment alternatives. Executive will devote a maximum of Fifty
(50%) percent of normal working time to the foregoing purpose for the first four
(4) months following the Termination Date, Twenty-Five (25%) percent of such
time for the succeeding two months, and thereafter such time as the Company
shall request but not to exceed 16 hours per month plus such time as may be
reasonably requested by the Company of Executive to assist the Company in the
defense or prosecution of any claims or litigation described on Schedule 5(a)
attached hereto or otherwise arising with respect to actions or omissions
occurring prior to the Termination Date. Executive shall not be entitled to any
compensation, including, without limitation, stock options, for his services as
a director and Chairman of the Board. In the event Executive shall obtain other
employment, such employment shall not interfere with the performance of
Executive's duties hereunder.
(c) The Company, at any time without prior notice or penalty, subject
to prior approval by the Board of Directors, may prepay the amounts otherwise
due to Executive under this Agreement. The Company shall be obligated to make
full prepayment to Executive within 10 (ten) days following the closing of the
Company's sale of all or substantially all of its assets, if it merges with
another entity which is not controlled by the Company, or if more than 50% of
its outstanding common stock is acquired by any person or entity, other than the
Queens. The Company shall be obligated to make a partial prepayment to Executive
in the event of the final approval of, and funding received by the Company from
XxXxxx in an amount over $5 million solely in connection with, the contract to
provide goods and services to the City of New York. Such prepayment shall
consist of 50% of all amounts funded by XxXxxx in excess of $5 million
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in connection with the contract. Such amounts shall be placed in escrow for the
benefit of Executive, PROVIDED HOWEVER that if the costs to the Company in
connection with the contract exceed $4 million, the Company shall be entitled to
reimbursement from the escrow fund of each dollar expended by the Company in
excess of $4 million for such costs. The parties hereby acknowledge that this
provision shall be unenforceable against the Company if it is determined to
result in a breach of any current or future loan covenant of the Company in
favor of XxXxxx.
(d) Any check, draft, money order, or other instrument given in payment
of all or any portion of the obligations set forth by this Agreement shall not
constitute payment under this Agreement or diminish any rights of the Executive
except to the extent actual cash proceeds of such instruments are actually and
unconditionally received by the Executive and applied to the indebtedness as
provided in this Agreement. All payments shall be made in good and collected
funds available to the Executive on or before the respective due dates. If any
check or other negotiable instrument tendered as payment for any payment due
under this Agreement is returned as uncollected, the Company shall pay, an
additional $100.00 fee for each check or instrument so returned.
(e) If at any time the Company shall fail to pay any installment due to
Executive under this Agreement when due and such amount shall remain unpaid for
a period in excess of twenty (20) days following written notice of such default
to the Company, in addition to any other rights or remedies that Executive shall
have with respect to such failure to make timely payment under this Agreement,
the Company shall be liable to pay on demand a late charge (the "Late Charge"),
to the extent permitted by law, equal to five percent (5%) of each such late
installment or part thereof.
(f) If the Executive engages counsel to collect any of the obligations
of the Company under the terms of this Agreement or to enforce performance of
the agreements, conditions, covenants, provisions, or stipulations of this
Agreement and Executive receives a final, non-appealable judgment against the
Company, the Executive's reasonable out-of-pocket costs, expenses and counsel
fees, shall be paid to the Executive by the Company, within ten (10) days after
demand.
(g) The occurrence and continuance of any of the following events or
conditions shall, except as otherwise expressly provided below, without notice
or demand except as indicated below; constitute an "Event of Default" under this
Agreement:
(i) Failure by the Company to pay the Executive any
sums within twenty (20) days following the receipt by the
Company of written notice from the Executive that such sums
are due and payable, whether for principal, interest, fees,
costs, charges, or otherwise, and whether upon stated
maturity, acceleration, or otherwise, due under this
Agreement;
(ii) Any dissolution, liquidation, merger,
consolidation, or termination of existence of the Company,
except a merger or consolidation involving the Company where
the Company is the surviving entity or where the surviving
entity expressly assumes the obligations of this Agreement in
writing in form and substance reasonably acceptable to the
Executive; or
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(iii) Institution of any proceedings by or against
the Company under any bankruptcy, insolvency, debt adjustment,
debtor rehabilitation, or similar statute, whether state or
federal, and such proceedings shall have continued
undischarged and unstayed for ninety (90) days after the
commencement thereof, the appointment of a judicial officer or
representative for the Company or for the Company's property,
including without limitation, a receiver trustee, conservator,
liquidator, sequestrator, custodian, or other similar judicial
officer or representative.
Upon the occurrence of an Event of Default, all sums due under this
Agreement shall, at the option of the Executive, become immediately due and
payable without notice or demand on the Company and without requiring any
recourse against any person or property liable for paying or securing the sums
due under this Agreement, and thereupon, the Executive shall have all rights and
remedies provided under this Agreement. Upon the occurrence and continuance of
an Event of Default under this Agreement, a rate of interest equal to five
percent (5%) per annum shall be charged on the unpaid balance of the amounts
owed by the Company ("Default Rate.") Upon the occurrence of an Event of Default
and the entry of a judgment against the Company under this Agreement, the
interest rate to be paid by Company on the amount due under this Agreement shall
continue at the Default Rate and the Executive may recover all reasonable costs
of suit and other reasonable expenses in connection therewith, including
reasonable attorneys fees for collection, together with interest on all of the
foregoing, including without limitation, interest at the Default Rate, and after
the date of any sheriff's sale until actual payment is made by the sheriff to
the Executive of the full amount due to the Executive.
2. NON-COMPETITION
(a) In consideration of the mutual covenants contained herein and in
consideration of the Severance Payment, Executive agrees that neither Executive
nor his affiliates shall, for a period of three (3) years following the
Termination Date (the "Non-Compete Period") Participate In (as defined below)
any business which competes directly or indirectly with the business of the
Company in the United States. For the purposes of this Section 2, the term
"business of the Company" shall include, without limitation, the business of the
Company being conducted or actively pursued, including without limitation,
business related to telemedicine, telematics, medication timers and dispensers,
medical monitoring, Wander Watch(R), personal tracking and personal response
systems, as of the date hereof or at any time during the period commending on
the Termination Date and ending July 1, 2002. Notwithstanding the foregoing,
Executive is permitted to own a 1% or less interest in any publicly-held
corporation that competes with the Company. For purposes of this Agreement
"affiliates" shall include the spouse, children, parents, grandparents and other
lineal descendants of the Executive.
(b) Without limiting the scope of the foregoing paragraph, neither the
Executive nor his affiliates shall, for a period of three (3) years following
the Termination Date, directly or indirectly, (i) solicit for employment or
employ, or assist any other person, firm, corporation or other entity in
soliciting for employment or employing, any person who is or was a management
employee of the Company at any time during the one (1) year period prior to any
activity which is restricted in this clause (i), PROVIDED HOWEVER, that such
restriction shall not apply to the Executive's solicitation of former Company
employee Xxxxxx Xxxxxxx, (ii) solicit the business of, or assist any other
person, firm, corporation or other entity in soliciting the business of, any
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customer or supplier of the Company in the business of the Company, (iii) accept
or cause to authorize, directly or indirectly, to be accepted for or on behalf
of Executive or any other person, firm or corporation, business from any
customer of the Company, or (iv) use the trade names, trademarks or trade dress
of any of the products of the Company or any substantially similar trade names,
trademarks or trade dress likely to cause, or having the effect of causing
confusion in the minds of manufacturers, customers, suppliers or retail outlets
or the public generally.
(c) As used in this Agreement, the term "Participate In" shall mean to
participate, directly or indirectly, in any capacity whatsoever, whether
compensated or not, for its own benefit or for, with or through any other
person, firm, corporation or other entity, in the ownership, management,
operation or control of, or to be connected as an officer, director, associate,
executive, owner, partner, proprietor, consultant, principal, agent,
shareholder, investor, creditor, co-venturer, independent contractor or
otherwise with, or acquiesce in the use of his name in connection with the
business of, any other person, firm, corporation or other entity.
(d) For the purposes of Sections 2 and 3 of this Agreement, the
term "Company" shall include all subsidiaries of the Company.
3. NONDISCLOSURE, NONDISPARAGEMENT AND COOPERATION.
(a) Executive acknowledges that, as an Executive of the Company he has
had access to, and has become aware of, certain proprietary information relating
to the Company. As used in this Agreement, the term "Confidential Information"
shall mean all information relating to the business, operations, management,
customers, suppliers, Executives, finances, plans, forecasts, strategies,
condition and prospects of the Company, except for such information that is:
(i) at the time of disclosure, publicly known through no
wrongful act of Executive;
(ii) approved for disclosure by the Company's written
authorization;
(iii) is disclosed as required by judicial action; or
(iv) in the public domain or which is generally known
otherwise than as a result of the breach of an
obligation of confidentiality to the Company.
The Executive and his affiliates shall keep confidential and not
disclose or otherwise reveal to any person, firm, corporation or other entity,
or otherwise use or permit others to use or disclose, any Confidential
Information which Executive may at any time possess.
(b) In the event that the Executive is required by applicable law or
legal process to disclose any Confidential Information concerning the Company,
the Executive agrees to provide the Company with immediate notice of such
requirement in order to enable the Company to seek an appropriate protective
order or other remedy. If, in the absence of a protective order, the Executive
is compelled to disclose Confidential Information, the Executive may disclose
such Confidential Information but shall use its best efforts to ensure that such
information will be accorded confidential treatment.
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(c) Except in connection with any legal process, Executive agrees that
he shall not, and shall cause others not to, following the date hereof, in
public or in private, make any statements, whether in writing, orally or
otherwise, of a disparaging nature regarding the Company or its personnel or
business.
4. EQUITABLE REMEDY; EXPENSES OF COMPANY; SET-OFF.
(a) The Executive acknowledges and agrees that in the event the
Executive or his affiliates shall breach or threaten to breach any of the terms
of this Agreement, the Company shall be entitled, in addition to any other right
and remedy available to it, to an injunction restraining such breach or a
threatened breach and to have the provisions of this Agreement specifically
enforced by a court having jurisdiction, it being acknowledged and agreed by the
Executive that any such breach or threatened breach will cause immediate
irreparable damage to the Company and that money damages in an action at law
will not provide an adequate remedy. No bond or other security shall be required
in connection with the issuance of an injunction, and the Executive hereby
consents to the issuance of such injunction. Such right and remedy shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company at law or in equity. Executive and the Company agree that the provisions
of this Section 4 are necessary and reasonable to protect the Company in the
conduct of its business and that the covenants set forth in this Agreement are
reasonable and valid in temporal scope and in all respects. The invalidity or
unenforceability of any part of such covenant or any other provision hereof
shall not affect the remainder of such covenant or such other provision, which
shall be given full effect, without regard to the invalid portions, and the
invalidity or unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or enforceability of this
Agreement, or any provision hereof, in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be enforceable to
the fullest extent permitted by law.
(b) In the event the Company receives a final, non-appealable judgment
against Executive in connection with the enforcement of any of its rights under
this Agreement, including, without limitation, any breach of Executive of any of
his representations, warranties or agreements contained herein, Executive will,
on demand, reimburse the Company for all reasonable out-of-pocket costs and
expenses, including, without limitation, the reasonable fees and expenses of
legal counsel, incurred in connection with the enforcement of such rights.
(c) In the event of any material breach by Executive of any of his
obligations or representations, warranties and covenants made under this
Agreement, the Company shall have the right to set-off against payments
otherwise to be received by Executive hereunder the damages, losses and expenses
incurred or arising with respect to such material breach, provided, however,
that the Company shall give 10 days written notice to Executive of such breach
with opportunity to cure such breach within such 10 day period if such breach is
capable of being cured.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE EXECUTIVE.
(a) To the best knowledge of Executive, except as set forth on Schedule
5(a) annexed hereto, neither the Company nor any subsidiary of the Company is a
party to any action, suit, proceeding, claim or investigation, and no such
action, suit, proceeding or investigation is pending or threatened.
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(b) To the best knowledge of Executive, except as disclosed in Schedule
5(b), neither the Company nor any subsidiary is a party to any material
contract, agreement, or arrangement which can reasonably be expected to require
the payment of more than $25,000, and neither the Company nor any subsidiary is
in default with respect to any such material contract, agreement or arrangement,
which default could have a material adverse effect on the Company or any
subsidiary or could be reasonably expected to require payment by the Company of
more than $25,000.
(c) The Executive will cooperate fully with all reasonable requests of
the Chief Executive Officer of the Company to assist the Company with the
transition of his duties as an officer and employee of the Company.
(d) The Executive will either (i) obtain a waiver and consent from
XxXxxx prior to the Termination Date of the event of default contained in the
financing documents with such lender which require the Executive to be the
Chairman, Chief Executive Officer and/or President of the Company which consent
shall acknowledge and accept the Executive's new role as just Chairman of the
Board of the Company and the control of the Board of Directors by the Queens, or
(ii) in the absence of such waiver and consent and if XxXxxx calls the loan as a
result of the change in circumstances of Xxxxxxx Xxxxxx' employment and control,
all remaining payments due to Executive hereunder may be deferred and shall be
resumed, on a monthly basis going forward, only from the date of a successful
refinancing thereof. The Executive shall also remove his name from check signing
authority on any of the Company's or any subsidiary's accounts and replace such
authority with an officer designated by the Company.
6. INDEMNIFICATION.
The Executive shall be indemnified by the Company to the
extent permitted by the Company's Certificate of Incorporation and By-laws, as
amended to date, and the Delaware General Corporation Law, for all claims which
are indemnifiable thereunder arising up to and including the date when Executive
ceases to serve as Chairman.
7. PRESS RELEASE.
The parties hereby agree that no press release or similar
public announcement or communication will be made or caused to be made
concerning the execution or performance of this Agreement without the prior
approval of the other party, which approval will not be unreasonably withheld or
delayed.
8. STOCK OPTIONS.
Upon execution of this Agreement, currently unexercised
options granted to Executive to purchase 87,500 shares of the Company's common
stock, at an exercise price of $6.03 per share, shall become fully and
immediately exercisable. The parties hereto acknowledge that currently
unexercised options granted to the Executive to purchase 300,000 shares of the
Company's common stock, at an exercise price of $1.125 per share, will remain
exercisable by the Executive for a period of ninety (90) days following the date
on which the Executive ceases to be the Chairman of the Board of the Company.
The parties acknowledge that the foregoing provision shall not be enforceable
against the Company if it is determined to
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violate the provisions of the stock option plan(s) from which such options were
granted to Executive.
9. OFFICE SPACE; LEGAL EXPENSES. For a period of six (6) months after
the Termination Date, the Company will provide Executive with an office space
support allowance based on appropriate documentation of up to Five Hundred
($500.00) Dollars per month. In addition, the Company will provide Executive,
free of charge, his current computer and fax/printer, and the Company will allow
Executive to utilize Company office space and resources at its Boca Raton,
Florida location as designated by the Chief Executive Officer of the Company.
The Company shall also reimburse Executive for his reasonable out-of-pocket
legal fees and expenses incurred in connection with the negotiation and
execution of this Agreement up to a maximum of $5,000.
10. INVALID PROVISION.
If any restriction contained in this Agreement shall be deemed to be
invalid, illegal or unenforceable by reason of the extent, duration or
geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, or other
provisions hereof, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby.
11. MODIFICATION.
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
12. NOTICES.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party as the party shall have furnished in writing
in accordance with the provisions of this Section 13.
13. WAIVER.
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
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14. COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in accordance
with the laws of the State of New Jersey, without giving effect to conflicts of
laws.
15. JURISDICTION AND VENUE.
Each of the parties irrevocably and unconditionally: (a) agrees that
any suit, action or legal proceeding arising out of or relating to this
Agreement must only be brought in the courts of record of the State of New
Jersey in New Jersey or the District Court of the United States, New Jersey; (b)
consents to the jurisdiction of each such court in any suit, action or
proceeding; (c) waives any objection which he, she or it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
agrees that service of any court paper may be effected on such party by mail, as
provided in this Agreement, or in such other manner as may be provided under
applicable laws or court rules in the State of New Jersey.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
RESPONSE USA, INC.
By:
---------------------------------
Xxxxxxx Xxxxx, President
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Xxxxxxx X. Xxxxxx
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