Exhibit 2.i.3
DRAFT (7/30/97)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
April 2, 1997 (the "Effective Date") by and between AMERICAN CAPITAL STRATEGIES,
LTD., a Delaware corporation (the "Company"), and XXXXX XXXXXXXXX (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Employee as of April 2,
1997; and
WHEREAS, Employee desires to accept such employment, on the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions and Interpretations
1.1. Definitions
For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following terms shall
have the following respective meanings:
"Annual Bonus Plan" shall have the meaning specified in Section 3.2.
"Base Salary" shall have the meaning specified in Section 3.1.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Compensation Committee" shall mean the Compensation Committee of the
Board of Directors or such other entity as may be designated for a particular
function by the Board of Directors.
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"Confidential Information" shall have the meaning specified in
Section 5.1(a).
"Continuation Period" shall have the meaning specified in Section
4.4(b).
"Disability" shall mean a physical or mental condition of Employee
that, in the good faith judgment of not less than a majority of the entire
membership of the Board of Directors, prevents Employee from being able to
perform the services required under this Agreement and which results in the
Employee becoming eligible for long-term disability benefits (if such benefits
are provided by the Company). If any dispute arises as to whether a Disability
has occurred, or whether a Disability has ceased and the Employee is able to
resume duties, then such dispute shall be referred to a licensed physician
appointed by the president of the Medical Society or similar organization in
Washington, D.C., at the request of either party. The Employee shall submit to
such examinations and provide information as such physician may request and the
determination of such physician as to the Employee's physical or mental
condition shall be binding and conclusive on the parties. The Company shall pay
the cost of any such physician and examination.
"Dispute" shall have the meaning specified in Article VI.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Executive Officers" shall refer to the President, the Chairman of
the Board, all Executive Vice Presidents and all other officers designated as
Executive Officers by the Board of Directors.
"Expiration Date" shall have the meaning specified in Section 2.2.
"Good Reason" shall mean any of the following:
(1) without Employee's express written consent, a material
adverse alteration in the nature or status of Employee's position,
functions, duties or responsibilities with the Company;
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(2) a material breach by the Company of any material provision
of this Agreement which, if capable of being remedied, remains
unremedied for more than 15 days after written notice thereof is
given by Employee to the Company;
(3) without Employee's express written consent, the relocation
of the principal executive offices of the Company outside the greater
Washington, D.C. area or the Company's requiring Employee to be based
other than at such principal executive offices;
(4) any purported termination by the Company of Employee's
employment not in accordance with the provisions of this Agreement;
(5) the failure of the Company to obtain any assumption
agreement required by Section 7.5(a);
(6) the amendment, modification or repeal of any provision of
the Company's Certificate of Incorporation or by-laws, if such
amendment, modification or repeal would materially adversely affect
Employee's rights to indemnification by the Company;
(7) change of control of the Company following any IPO which
would result in the control of 25% or more of the Company's voting
shares by one Person or a group of Persons acting in concert other
than such entities as may own voting securities on the date hereof;
or
(8) the determination by the Employee that there exists a
significant difference between the Employee and the Board of
Directors regarding either the method of operating the Company or the
direction of the Company.
"IPO" shall mean an initial underwritten public offering of
securities of the Corporation pursuant to a Securities and Exchange Commission
registration statement other than Form S-8 or Form S-14.
"ISO Plan" shall have the meaning specified in Section 3.3.
"Misconduct" shall mean (1) the willful and continued failure by
Employee to perform substantially his duties described in Section 2.3 (other
than any such failure resulting from Employee's incapacity due to physical or
mental illness) after two (2) written notices of such failure have been given to
Employee by the Company's Board of Directors and Employee has had a reasonable
period (not to exceed 15 days from the second notice) to correct such failure;
or (2) the commission by Employee of acts that are dishonest and demonstrably
injurious to the Company (monetarily or otherwise) in any material respect. For
purposes of this definition, (i) no act or failure to act on Employee's part
shall be considered "Misconduct" if done or omitted to be done by Employee in
good faith and in the reasonable belief that such act or failure to act was in
the best interest of the Company or in furtherance of Employee's duties and
responsibilities described in Section 2.3 and (ii) no disagreements between the
Board of Directors and the Employee regarding the direction or the operations of
the Company shall be construed as "Misconduct" and, further, material breaches
or violations by Employee of any material provision of this Agreement or any
material violation by the Employee of the Company's employment policy manual
shall be defined as "Misconduct."
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"Notice of Discontinuance" shall have the meaning specified in
Section 2.2.
"Notice of Termination" shall mean a notice purporting to terminate
Employee's employment in accordance with Section 4.1 or 4.2. Such notice shall
specify the effective date of such termination, which date shall not be less
than 30 (one (1) day in the case of a termination by the Company for Misconduct)
or more than 60 days after the date such notice is given. If such termination is
by Employee for Good Reason or by the Company for Disability or Misconduct, such
notice shall set forth in reasonable detail the reason for such termination and
the facts and circumstances claimed to provide a basis therefor. Any notice
purporting to terminate Employee's employment which is not in compliance with
the requirements of this definition shall be ineffective.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust and an unincorporated organization.
"Target Bonus" shall have the meaning specified in Section 3.2.
"Term" shall have the meaning specified in Section 2.2.
"Termination Date" shall mean the termination date specified in a
Notice of Termination delivered in accordance with this Agreement.
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1.2. Interpretations
(a) In this Agreement, unless a clear contrary intention
appears, (i) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, (ii) reference to any Article or Section,
means such Article or Section hereof, (iii) the words "including" (and with
correlative meaning "include") means including, without limiting the generality
of any description preceding such term, and (iv) where any provision of this
Agreement refers to action to be taken by either party, or which such party is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such party.
(b) The Article and Section headings herein are for
convenience only and shall not affect the construction hereof.
ARTICLE II
Employment: Term, Positions and Duties, Etc.
2.1. Employment
The Company agrees to employ Employee and Employee agrees to accept
employment with the Company, in each case on the terms and conditions set forth
in this Agreement.
2.2. Term of Employment
(a) Unless sooner terminated pursuant to Article IV, the
term of Employee's employment under this Agreement (the "Term") shall commence
on the Effective Date and shall continue until the first anniversary of the IPO
(the "Expiration Date"); provided, however, that on the third anniversary of the
IPO and on each anniversary thereafter (each such anniversary being an
"Extension Anniversary"), the Expiration Date shall be automatically extended
one additional year unless, at least six months prior to an Extension
Anniversary, (i) either party shall give written notice to the other (a "Notice
of Discontinuance") that no such automatic extension shall occur on the next
succeeding Extension Anniversary and
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each Extension Anniversary thereafter, or (ii) either party shall give a Notice
of Termination to the other party pursuant to Section 4.1 or 4.2, as the case
may be. No Notice of Discontinuance given by the Company shall be effective
unless given pursuant to instructions set forth in a resolution duly adopted by
the affirmative vote of a least a majority of the entire membership of the Board
of Directors.
(b) Except for the reimbursement of expenses under Section
3.5, this Agreement shall not become effective until the Company has completed
an IPO, but it shall be considered to then have become effective retroactive to
April 2, 1997.
2.3. Positions and Duties
(a) While employed hereunder, Employee shall serve as an
Executive Officer of the Company and, following an IPO, as the Chairman of the
Board of Directors of the Company and all of its subsidiaries, and shall have
and may exercise all of the powers, functions, duties and responsibilities
normally attributable to such offices, including (without limitation) such
duties and responsibilities as are set forth with respect to such offices in the
Company's Certificate of Incorporation and By-laws (as from time to time in
effect). Employee shall have such additional duties and responsibilities
commensurate with such offices as from time to time may be reasonably assigned
to him by the Board of Directors. While employed hereunder, Employee shall (i)
report directly to the Board of Directors of the Company and (ii) observe and
comply with all lawful policies, directions and instructions of the Board of
Directors which are consistent with the foregoing provisions of this paragraph
(a).
(b) The Company agrees to use its reasonable best efforts to
cause Employee to be elected or appointed, or re-elected or re-appointed, as a
member of the Board of Directors and the Executive Committee of the Board of
Directors (if such a committee exists) nonvoting and a ex officio member all
other committees other than the Compensation Committee, at all times during the
Term.
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(c) While employed hereunder, Employee shall (i) devote
substantially all of his business time, attention, skill and efforts to the
faithful and efficient performance of his duties hereunder and (ii) not accept
employment with any Person other than with the Company. Notwithstanding the
foregoing, Employee may engage in the following activities: (i) serve on
corporate, civic, religious, educational or charitable boards or committees and
(ii) manage his personal investments including being a consultant, board member
or adviser, to such investments and activities.
(d) While employed hereunder, Employee shall conduct himself
in such a manner as not to knowingly prejudice, in any material respect, the
reputation of the Company in the fields of business in which it is engaged or
with the investment community or the public at large.
2.4. Place of Employment
Employee's place of employment hereunder shall be at the Company's
principal executive offices in the greater Washington, D.C. area or such other
area that is mutually agreeable to both parties.
ARTICLE III
Compensation and Benefits
3.1. Base Salary
(a) For services rendered by Employee under this Agreement,
the Company shall pay to Employee an annual base salary ("Base Salary") of
$150,000. The Board of Directors shall review the Base Salary at least annually
and, subject to paragraph (b) below, may adjust the amount of the Base Salary at
any time as the Board of Directors may deem appropriate in their sole
discretion.
(b) The amount of the Base Salary may not be decreased
without the prior written approval of the Employee except that if the Board of
Directors increases the Base Salary as provided in the last sentence of
paragraph (a) above, the Board of Directors may thereafter decrease the Base
Salary by an amount not to exceed the amount of such increase, but only if a
proportionally similar decrease is made to the base compensation of all other
Executive Officers of the Company; provided, however, that in no event may the
Base Salary be decreased below $150,000, without the prior written consent of
Employee.
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(c) The Base Salary shall be payable in accordance with the
Company's payroll practice for Executive Officers as earned.
3.2 Annual Bonus Plan
During the Term, the Company shall maintain and the Employee shall be
entitled to participate in an incentive bonus plan (the "Annual Bonus Plan")
which will be determined by the Board of Directors, which will provide for the
payment of cash bonuses to eligible executives of the Company at specified times
during the year and within 90 days of the end of each fiscal year based on the
Company's financial performance and other appropriate factors for that year or a
portion thereof. Under the Annual Bonus Plan, Employee shall be eligible to earn
a target bonus (the "Target Bonus") each year equal to 200% of Employee's Base
Salary for such year based on criteria established by the Compensation
Committee, and the performance of the Company against such criteria. The
establishment of such criteria and of the necessary performance targets for
partial or full earning of the Target Bonus shall be at the sole reasonable
discretion of the Compensation Committee; provided, however, that Employee shall
be entitled to a Target Bonus each year equal to at least five percent (5%) of
the maximum Target Bonus. During the calendar year 1997 and the year in which
the Expiration Date occurs, the Target Bonus which would be payable shall be
prorated and paid based on the number of days in such year actually occurring
during the Term.
3.3 Long-term Incentive Compensation
Upon the closing of the IPO, the Company shall have established a
long-term incentive compensation plan, which provides key employees of the
Company with ownership interests in the Company, as substantially set forth in
Attachment A hereto (the "ISO Plan"). Under the ISO Plan, Employee shall be
granted options to purchase 5.5% of the stock outstanding as of the IPO adjusted
upward for the additional shares issued pursuant to the exercise of any
underwriter's over-allotment option within thirty (30) days of the IPO.
One-third of such options will vest and become exercisable on each of the first
three anniversaries of the effectiveness of the IPO; provided, however, that
Employee may accelerate the vesting of any such options by agreeing to exercise
such options immediately and that for a period through the date on which such
options would have vested, not to sell, assign or convey any stock so purchased
(other than by laws of descent or distribution) and to grant the Company a call
option to repurchase such stock at the option exercise price if the options
would have been forfeited prior to their original vesting date as a result of
the Employee's subsequent termination of employment with the Company. To the
extent permissible, such options shall be characterized as Incentive Stock
Options as defined in Section 422 of the Code. The employee shall participate in
all other long-term compensation incentive plans of the Company in accordance
with their terms, except that while other Executive Officers may receive
additional options under the ISO Plan and other long-term incentive stock
options, stock appreciation rights and other similar programs adopted subsequent
to the IPO, Employee has no expectation of or right to additional options or
participation in such plans.
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3.4. Vacation
While employed hereunder, Employee shall be entitled to vacation
benefits in accordance with the vacation policy adopted by the Company from time
to time for senior executives in general, but in no event shall Employee's
annual vacation be less than 20 business days or such greater number of vacation
days as the Board of Directors may approve from time to time in its sole
discretion. Employee shall not be entitled to accumulate and carryover unused
vacation time from year to year, except to the extent permitted in accordance
with the Company's vacation policy for senior executives in general, nor shall
Employee be entitled to compensation for unused vacation time except as provided
in Section 4.3(a).
3.5. Business Expenses
The Company shall, in accordance with the rules and policies that it
may establish from time to time for senior executives, reimburse Employee for
business expenses reasonably incurred in the performance of Employee's duties.
Requests for reimbursement for such expenses must be accompanied by appropriate
documentation. Examples of reimbursable expenses include parking, mileage
charges, air fares and hotel accommodations while traveling on Company business.
3.6. Other Benefits
Employee shall be entitled to receive all employee benefits, fringe
benefits and other perquisites that may be offered by the Company to its
Executive Officers as a group, including, without limitation, (i) participation
by Employee and, where applicable, Employee's dependents, in the various
employee benefit plans or programs (including, without limitation, pension
plans, profit sharing plans, stock plans, health plans, life insurance, parking
and disability insurance) generally provided to Executive Officers of the
Company, subject to meeting the eligibility requirements with respect to each of
such benefit plans or programs, (ii) club memberships, (iii) automobile
allowances, and (iv) financial planning allowances. However, nothing in this
Section 3.6 shall be deemed to prohibit the Company from making any changes in
any of the plans, programs or benefits described herein, provided such changes
apply to all similarly situated Executive Officers.
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3.7. Indemnification
The Company agrees to defend, indemnify and hold harmless the
Employee from and against any liability and expenses arising by reason of
Employee's acting as a director or officer of the Company or any Company
subsidiary or affiliate, or any portfolio company of the Company, in accordance
with and to the fullest extent permitted by law. The Company shall maintain
Directors and Officers liability insurance for the Employee in such amounts of
coverage as are reasonably available to the Company and to the extent such is
attainable at reasonable cost and are permitted by law.
ARTICLE IV
Termination of Employment
4.1. Termination by Employee
Employee may, at any time prior to the Expiration Date, terminate his
employment hereunder for any reason by delivering a Notice of Termination to the
Board of Directors.
4.2. Termination by the Company
The Company may, at any time prior to the Expiration Date, terminate
Employee's employment hereunder for any reason by delivering a Notice of
Termination to Employee; provided, however, that in no event shall the Company
be entitled to terminate Employee's employment prior to the Expiration Date
unless the Board of Directors shall duly adopt, by the affirmative vote of at
least a majority of the entire membership of the Board of Directors, a
resolution authorizing such termination. Should the board adopt such a
resolution, the Employee may resign in lieu of being terminated, but such
resignation shall otherwise be treated as a termination by the Company for
purposes of this Article IV.
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4.3. Payment of Accrued Base Salary, Vacation Pay, etc.
(a) Promptly upon the termination of Employee's employment
for any reason (including death), the Company shall pay to Employee (or his
estate) a lump sum amount for (i) any unpaid Base Salary earned hereunder prior
to the Termination Date, (ii) all unused vacation time accrued by Employee as of
the Termination Date in accordance with Section 3.4, (iii) all unpaid benefits
earned or vested, as the case may be, by Employee as of the Termination Date
under any and all incentive or deferred compensation plans or programs of the
Company and (iv) any amounts in respect of which Employee has requested, and is
entitled to, reimbursement in accordance with Section 3.5.
(b) A termination of Employee's employment in accordance
with this Agreement shall not alter or impair any of Employee's accrued rights
or benefits as of the Termination Date under any employee benefit plan or
program maintained by the Company, in each case except as provided therein or in
any written agreement entered into between the Company and Employee pursuant
thereto.
4.4. Additional Rights in Connection With Disability
In the event that the Company terminates an Employee by
delivering a Notice of Termination to Employee stating that such Termination is
by reason of a Disability, the Employee shall be entitled to the benefits and
payments set forth in this Section 4.4 in addition to such other applicable
rights as may be provided elsewhere in this Agreement:
(a) Base Salary and Target Bonus. The Company shall continue
to pay to Employee the Base Salary in effect as of the date on which the Notice
of Termination was delivered for two (2) years following the Termination Date
(but in no event less than 365 days) (such period being the "Continuation
Period") which amount shall be reduced by any amount payable to Employee under
any disability plan maintained by the Company for the benefit of Employee. In
addition, the Employee shall be entitled to continue to participate in the
Annual Bonus Plan for two (2) years following the Termination Date with the
second anniversary of the Termination Date being the Expiration Date for
purposes of Section 3.2.
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(b) Insurance Benefits, etc. The Company shall at all times
during the Continuation Period, without charge to Employee or Employee's
dependents, cause Employee and Employee's eligible dependents to be covered by
and to participate in, to the fullest extent allowable under the terms thereof,
all life, accidental death and dismemberment and health insurance plans and
programs that may be offered to the senior officers of the Company so that
Employee will receive, at all times during the Continuation Period, the same
benefits under such plans and programs as Employee would have been entitled to
receive had he remained an Executive Officer of the Company. In no event shall
Employee's continuation period for purposes of Part 6 of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("COBRA"), begin prior to the
end of Employee's coverage under the Company's group health plan as provided in
this paragraph (b).
(c) Options. All options of the Employee under the ISO Plan
(or similar plan) which have not vested as of Employee's Termination Date and
which would vest within one year of Employee's Termination Date shall vest and
shall become immediately exercisable. The Company shall issue to the Employee
within 30 days of the Termination Date an amount of new options as separate
securities in exchange for and in an amount equal to the Employee's vested ISO
Plan options. Such new options shall have the same exercise price and other
terms as the ISO Plan options including a requirement that these options be
registered under applicable securities laws if the ISO Plan options are
registered. All loans to the Employee in connection with the prior exercise of
any options under the ISO Plan (or similar plan) shall remain unaffected and
will remain on their original terms.
Should the Employee's Disability end during the pendency of the Term,
the Company may discontinue the payments contemplated by this Section 4.4 if it
offers to reemploy Employee under the terms of this Agreement, but no such offer
shall affect the terms of Section 4.4(c) above.
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4.5. Additional Rights in Connection With Terminations
by Employee for Good Reason or by the Company for
Other than Misconduct or Disability
In the event that Employee terminates his employment
pursuant to Section 4.1 for Good Reason or if the Company terminates Employee's
employment with the Company pursuant to Section 4.2 for other than Misconduct or
a Disability, the Employee shall be entitled to the payments and benefits set
forth in this Section 4.5 in addition to such other applicable rights as may be
provided elsewhere in this Agreement:
(a) Base Salary and Target Bonus. The Company shall continue
to pay to Employee the Base Salary in effect as of the date on which the Notice
of Termination for the Continuation Period. In addition, the Employee shall be
entitled to continue to participate in the Annual Bonus Plan for two (2) years
following the Termination Date with the second anniversary of the Termination
Date being the Expiration Date for purposes of Section 3.2. The amount payable
to Employee under this paragraph (a) is in lieu of, and not in addition to, any
severance payment due to or become due to Employee under any separate agreement
or contract between Employee and the Company or pursuant to any severance
payment plan, program or policy of the Company.
(b) Insurance Benefits, etc. The Company shall at all times
during the Continuation Period, without charge to Employee or Employee's
dependents, cause Employee and Employee's eligible dependents to be covered by
and to participate in, to the fullest extent allowable under the terms thereof,
all life, accidental death and dismemberment and health insurance plans and
programs that may be offered to the senior officers of the Company so that
Employee will receive, at all times during the Continuation Period, the same
benefits under such plans and programs as Employee would have been entitled to
receive had he remained an Executive Officer of the Company; provided, however,
in the event Employee becomes covered during the Continuation Period by another
employer's group plan or programs which provide benefits to Employee and his
dependents comparable to those being provided to Employee under this paragraph
(b) (provided with respect to any such group health plan, such plan does not
contain any exclusion or limitation with respect to any pre-existing
conditions), then the Company's similar plans and programs shall no longer be
liable for any benefits under this paragraph (b). In no event shall Employee's
COBRA continuation period begin prior to the end of Employee's coverage under
the Company's group health plan as provided in this paragraph (b).
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(c) Options. All options of the Employee under the ISO Plan
(or similar plan) which have not vested as of Employee's Termination Date shall
vest and shall become immediately exercisable. The Company shall issue to the
Employee within 30 days of the Termination Date an amount of new options as
separate securities in exchange for and in an amount equal to the Employee's
vested ISO Plan options. Such new options shall have the same exercise price and
other terms as the ISO Plan options including a requirement that these options
be registered under applicable securities laws if the ISO Plan options are
registered. All loans to the Employee in connection with the prior exercise of
any options under the ISO Plan (or similar plan) shall remain unaffected and
will remain on their original terms.
(d) Release. Notwithstanding anything in this Section 4.5 to
the contrary, as a condition to the receipt of any benefit under this Section
4.5, Employee must first execute and deliver to the Company a mutual release as
set out in exhibit 4.5(d) hereto (which the Company shall be obligated to
execute upon Employee's delivery thereof), releasing the Company, its officers,
Board of Directors, employees and agents from any and all claims and from any
and all causes of action of any kind or character that Employee may have arising
out of Employee's employment with the Company or the termination of such
employment, but excluding any claims and causes of action that Employee may have
arising under or based upon this Agreement.
4.6. Additional Rights in the Event of Death
In the event that the Employee's employment is terminated as a result
of his death, the Employee's estate and/or his beneficiaries shall be entitled
to the payments and benefits set forth in this Section 4.6 in addition to such
other applicable rights as may be set forth elsewhere in this Agreement:
(a) Target Bonus. The Employee's estate shall be entitled to
receive the Target Bonus that the deceased employee would have been entitled to
have received in the year in which the death occurred.
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(b) Insurance Benefits, etc. The Company shall pay the cost
for dependents of the Employee for insurance coverage that they are entitled to
obtain from the Company following the Employee's death pursuant to COBRA but not
less than 18 months.
(c) Options. All options of the Employee under the ISO Plan
(or similar plan) which have not vested as of Employee's death and which would
vest within one year thereof shall vest immediately upon the Employee's death
and shall remain exercisable by the Employee's estate for the shorter of 18
months following the Employee's death and their original term. All loans to the
Employee in connection with the prior exercise of any options under the ISO Plan
(or similar plan) shall be due the earlier of 18 months following the Employee's
death and their original term.
4.7. Additional Rights in the Event of Termination by
Resignation Other than for Good Reason
In the event that the Employee terminates his employment pursuant to
Section 4.1 without Good Reason, he shall be entitled to the rights set forth in
this Section 4.7 in addition to such other applicable rights as may be set forth
elsewhere in this Agreement:
(a) Options. Options of the Employee under the ISO Plan (or
similar plan) shall vest as of Employee's Termination Date and shall become
immediately exercisable so that the indicated percentage of the total options
which have been granted shall have vested based on the elapsed time between the
date of Initial Public Offering and the Termination Date.
Elapsed Time Total % Vested
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Less than six months 0%
At least six months and less 30%
than one year
At least one year and less 60%
than two years
At least two years and less 80%
than three years
At least three years 100%
The Company shall issue to the Employee within 30 days of the Termination Date
an amount of new options as separate securities in exchange for and in an amount
equal to the Employee's vested ISO Plan options. Such new options shall have the
same exercise price and other terms as the ISO Plan options including a
requirement that these options be registered under applicable securities laws if
the ISO Plan options are registered. All loans to the Employee in connection
with the prior exercise of any options under the ISO Plan (or similar plan)
shall remain unaffected and will remain on their original terms.
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4.8. Additional Rights in the Event of
Termination for Employee's Misconduct
In the event that the Company terminates Employee's employment with
the Company pursuant to Section 4.2 for Employee's Misconduct, Employee shall be
entitled to the rights set forth in this Section 4.8 in addition to such other
applicable rights as may be set forth elsewhere in this Agreement:
(a) Options. All options of the Employee under the ISO Plan
(or similar plan) which have not vested as of employee's Termination Date shall
lapse and shall not be exercisable. All previously vested options shall remain
exercisable for the shorter of 90 days following the Termination Date and their
original term. All loans to the Employee in connection with the prior exercise
of any options under the ISO Plan (or similar plan) shall be due the earlier of
90 days following the Employee's Termination Date and their original term.
4.9 Non-exclusivity of Rights
Nothing in this Agreement shall prevent or limit Employee's
continuing or future participation in any plan, program, policy or practice
provided by the Company for which Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as Employee may have under any
other contract or agreement with the Company. Amounts which are vested benefits
or which Employee is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company at or
subsequent to the Termination Date shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
4.10. Company to Pay Benefits During Pendency of Dispute
Either party may, within ten (10) days after its receipt of a Notice
of Termination given by the other party, provide notice to the other party that
a dispute exists concerning the termination, in which event such dispute shall
be resolved in accordance with Article VI. Notwithstanding the pendency of any
such dispute and notwithstanding any provision herein to the contrary, the
Company will (i) continue to pay Employee the Base Salary in effect when the
notice giving rise to the dispute was given and (ii) continue Employee as a
participant in all compensation and benefit plans in which Employee was
participating when the notice giving rise to the dispute until the dispute is
finally resolved or, with respect to a Notice of Employee, the date of
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termination specified in such notice, if earlier, but, in each case, not past
the Expiration Date. If (x)(i) the Company gives a Notice of Termination to
Employee and (ii) Employee disputes the termination as contemplated by this
Section 4.10, or (y)(i) the Employee gives a Notice of Termination for Good
Reason and (ii) the Company disputes such termination as contemplated by this
Section 4.10, and, in either case, (z) such dispute is finally resolved in favor
of the Company in accordance with Article VI, then Employee shall be required to
repay to the Company amounts paid to Employee under this Section 4.10 (including
the value of benefits received) but only if, and to the extent, Employee is not
otherwise entitled to receive such amounts under this Agreement.
ARTICLE V
Confidential Information and Non-Competition
5.1. Confidential Information
(a) Employee recognizes that the services to be performed by
him hereunder are special, unique, and extraordinary and that, by reason of his
employment with the Company, he may acquire Confidential Information concerning
the operation of the Company, the use or disclosure of which would cause the
Company substantial loss and damages which could not be readily calculated and
for which no remedy at law would be adequate. Accordingly, Employee agrees that
he will not (directly or indirectly) at any time, whether during or after his
employment hereunder, (i) knowingly use for an improper personal benefit any
Confidential Information that he may learn or has learned by reason of his
employment with the Company or (ii) disclose any such Confidential Information
to any Person except (A) in the performance of his obligations to the Company
hereunder, (B) as required by applicable law, (C) in connection with the
enforcement of his rights under this Agreement, (D) in connection with any
disagreement, dispute or litigation (pending or threatened) between Employee and
the Company or (E) with the prior written consent of the Board of Directors. As
used herein, "Confidential Information" includes information with respect to the
Company's products, facilities and methods, research and development, trade
secrets and other intellectual property, systems, patents and patent
applications, procedures, manuals, confidential reports, product price lists,
customer lists, financial information, business plans, prospects or
opportunities; provided, however, that such term, shall not include any
information that (x) is or becomes generally known or available other than as a
result of a disclosure by Employee or (y) is or becomes known or available to
Employee on a non-confidential basis from a source (other than the Company)
which, to Employee's knowledge, is not prohibited from disclosing such
information to Employee by a legal, contractual, fiduciary or other obligation
to the Company.
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(b) Employee confirms that all Confidential Information is
the exclusive property of the Company. All business records, papers and
documents kept or made by Employee while employed by the Company relating to the
business of the Company shall be and remain the property of the Company at all
times. Upon the request of the Company at any time, Employee shall promptly
deliver to the Company, and shall retain no copies of, any written materials,
records and documents made by Employee or coming into his possession while
employed by the Company concerning the business or affairs of the Company other
than personal materials, records and documents (including notes and
correspondence) of Employee not containing proprietary information relating to
such business or affairs. Notwithstanding the foregoing, Employee shall be
permitted to retain copies of, or have access to, all such materials, records
and documents relating to any disagreement, dispute or litigation (pending or
threatened) between Employee and the Company.
(c) The Company recognizes that the Employee maintains his
contacts and his domain name "XXXXXXXXXXXXXX.XXX" on the computer system and
that the list of contacts and his domain name will remain the exclusive
ownership of the Employee and that information shall not be deemed confidential
or subject to the terms of sections 5.1 or 5.2.
5.2. Non-Competition
(a) While employed hereunder and for the period of (i) one
(1) year thereafter or (ii) two (2) years after the Termination Date, if this
Agreement is terminated earlier and the Employee is entitled to receive
compensation and benefits under Section 4.5 (the "Restricted Period"), Employee
shall not, unless he receives the prior written consent of the Board of
Directors, own an interest in, manage, operate, join, control, lend money or
render financial or other assistance to or participate in or be connected with,
as an officer, employee, partner, stockholder, consultant or otherwise, any
Person which competes with the Company in investing or consulting with small and
medium sized businesses in the United States; provided, however, that the
foregoing restriction shall apply only to (i) those areas where the Company was
actually doing business on the Termination Date and (ii) those areas in respect
of which the Company actively and diligently conducted at any time during the
12-month period ended on the Termination Date an analysis to determine whether
or not it would commence doing business in such areas but, in the case of each
such area, only if the Company (A) retains on the Termination Date a reasonable
prospect of doing business in such areas and (B) gives Employee written notice
of the name and location of such county within 15 days after the Termination
Date and, provided finally, that the foregoing restriction shall not apply to
any areas where the Company ceases to actively conduct business. Without
limiting the generality of the foregoing, during the Restricted Period, Employee
shall not, unless he receives the prior written consent of the Board of
Directors, own an interest in, manage, operate, join, control, lend money or
render financial or other assistance to or participate in or be connected with,
as an officer, employee, partner, stockholder, consultant or otherwise, (A) any
Person (x) which competes with the Company in investing or consulting with small
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and medium sized businesses in the United States with regard to change of
control transactions in which the transaction utilizes employee stock ownership
plans, or (y) which provides or proposes to provide services to any Person which
is a client of the Company as of the Termination Date or to which the Company
has outstanding loans or in which the Company then has investments (including
warrants or options), or (B) any potential client of the Company with which the
Company has discussed a client, loan or investment relationship within 12 months
prior to, as applicable, the end of Employee's employment or the Termination
Date. Notwithstanding the foregoing, in the event (i) Employee is entitled to
receive compensation and benefits under Section 4.5, Employee may terminate this
Section 5.2(a) by renouncing and releasing the obligation of the Company to pay
any future compensation or benefits under Sections 4.5 (a) and (b), but such
termination shall not apply to any other provision of this Agreement including,
without limitation, Section 5.1; (ii) the Company terminates the Employee for
Misconduct, this Section 5.2(a) shall not apply; and (iii) the Employee
terminates his employment without Good Reason, this Section 5.2(a) shall apply
for one year from the Closing of the IPO. Nothing under this Section 5.2(a)
shall be deemed to limit the Employee from conducting activities permitted
pursuant to Section 2.3(c) hereof.
(b) In addition to the restrictions set forth in Section
5.2(a), for one year from the closing of the IPO, in the event that (i) the
Company terminates the Employee for Misconduct or (ii) the Employee terminates
his employment pursuant to Section 4.1 without Good Reason, Employee shall not,
unless he receives the prior written consent of the Board of Directors, own an
interest in, manage, operate, join, control, lend money or render financial or
other assistance to or participate in or be connected with, as an officer,
employee, partner, stockholder, consultant or otherwise, (A) any Person (x)
which competes with the Company in investing or consulting with small and medium
sized businesses in the United States with regard to change of control
transactions in which the transaction utilizes employee stock ownership plans,
or (y) which provides or proposes to provide services to any Person which is a
client of the Company as of the Termination Date or to which the Company has
outstanding loans or in which the Company then has investments (including
warrants or options), or (B) any potential client of the Company with which the
Company has discussed a client, loan or investment relationship within 12 months
prior to, as applicable, the end of Employee's employment or the Termination
Date. Nothing under this Section 5.2(b) shall be deemed to limit the Employee
from conducting activities permitted pursuant to Section 2.3(c) hereof.
(c) Employee has carefully read and considered the
provisions of this Section 5.2 and, having done so, agrees that the restrictions
set forth in this Section 5.2 (including the Restricted Period, scope of
activity to be restrained and the geographical scope) are fair and reasonable
and are reasonably required for the protection of the interests of the Company,
its officers, directors, employees, creditors and shareholders. Employee
understands that the restrictions contained in this Section 5.2 may limit his
ability to engage in a business similar to the Company's business, but
acknowledges that he will receive sufficiently high remuneration and other
benefits from the Company hereunder to justify such restrictions.
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(d) During the Restricted Period, Employee shall not,
whether for his own account or for the account of any other Person (excluding
the Company), intentionally (i) solicit, endeavor to entice or induce any
employee of the Company to terminate his employment with the Company or accept
employment with anyone else or (ii) interfere in a similar manner with the
business of the Company, except for those employees who the Company and Employee
agree are exempt from the applicability of this paragraph at the time of hiring.
(e) In the event that any provision of this Section 5.2
relating to the Restricted Period or the areas of restriction shall be declared
by a court of competent jurisdiction to exceed the maximum time period or areas
such court deems reasonable and enforceable, the Restricted Period or areas of
restriction deemed reasonable and enforceable by the court shall become and
thereafter be the maximum time period and/or areas.
5.3. Stock Ownership
Nothing in this Agreement shall prohibit Employee from acquiring or
holding any issue of stock or securities of any Person that has any securities
registered under Section 12 of the Exchange Act, listed on a national securities
exchange or quoted on the automated quotation system of the National Association
of Securities Dealers, Inc. so long as (i) Employee is not deemed to be an
"affiliate" of such Person as such term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act of 1933, as amended, and (ii) Employee and
members of his immediate family do not own or hold more than 3% of any voting
securities of any such Person.
5.4. Injunctive Relief
Employee acknowledges that a breach of any of the covenants contained
in this Article V may result in material irreparable injury to the Company for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach, any payments remaining under the terms of this Agreement shall cease and
the Company shall be entitled to obtain a temporary restraining order or a
preliminary or permanent injunction restraining Employee from engaging in
activities prohibited by this Article V or such other relief as may required to
specifically enforce any of the covenants contained in this Article V. Employee
agrees to and hereby does submit to in personam jurisdiction before each and
every such court for that purpose.
ARTICLE VI
Dispute Resolution
In the event a dispute shall arise between the parties as to whether
the provisions of this Agreement have been complied with (a "Dispute"), the
parties agree to resolve such Dispute in accordance with the following
procedure:
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(a) A meeting shall be held promptly between the Parties,
attended by (in the case of the Company) by one or more individuals with
decision-making authority regarding the Dispute, to attempt in good faith to
negotiate a resolution of the Dispute.
(b) If, within 10 days after such meeting, the parties have
not succeeded in negotiating a resolution of the Dispute, the parties agree to
submit the Dispute to mediation in accordance with the Commercial Mediation
Rules of the American Arbitration Association except that Disputes with regard
to the existence of a Disability shall be resolved in accordance with the
definition of the term "Disability" above.
(c) The parties will jointly appoint a mutually acceptable
mediator, seeking assistance in such regard from the American Arbitration
Association if they have been unable to agree upon such appointment within 10
days following the 10-day period referred to in clause (b) above.
(d) Upon appointment of the mediator, the parties agree to
participate in good faith in the mediation and negotiations relating thereto for
15 days.
(e) If the parties are not successful in resolving the
Dispute through mediation within such 15-day period, the parties agree that the
Dispute shall be settled by arbitration in accordance with the Expedited
Procedures of the Commercial Arbitration Rules of the American Arbitration
Association.
(f) The fees and expenses of the mediator/arbitrators shall
be borne solely by the non-prevailing party or, in the event there is no clear
prevailing party, as the mediator/arbitrators deem appropriate.
(g) The Company shall reimburse Employee, on a current
basis, for 50% of all reasonable legal fees and expenses, if any, incurred by
Employee in connection with any Dispute; provided, however, that in the event
the resolution of such Dispute in accordance with this Article VI includes a
finding denying, in all material respects, Employee's claims in such Dispute,
Employee shall be required to reimburse the Company, over a period not to exceed
12 months from the date of such resolution, for all sums advanced to Employee
with respect to such Dispute pursuant to this paragraph (g).
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(h) Except as provided above, each party shall pay its own
costs and expenses (including, without limitation, attorneys' fees) relating to
any mediation/arbitration proceeding conducted under this Article VI.
(i) All mediation/arbitration conferences and hearings
will be held in the greater Washington, D.C. area.
(j) In the event there is any disputed question of law
involved in any arbitration proceeding, such as the proper legal interpretation
of any provision of this Agreement, the arbitrators shall make separate and
distinct findings of all facts material to the disputed question of law to be
decided and, on the basis of the facts so found, express their conclusion of the
question of law. The facts so found shall be conclusive and binding on the
parties, but any legal conclusion reached by the arbitrators from such facts may
be submitted by either party to a court of law for final determination by
initiation of a civil action in the manner provided by law. Such action, to be
valid, must be commenced within 20 days after receipt of the arbitrators'
decision. If no such civil action is commenced within such 20-day period, the
legal conclusion reached by the arbitrators shall be conclusive and binding on
the parties. Any such civil action shall be submitted, heard and determined
solely on the basis of the facts found by the arbitrators. Neither of the
parties shall, or shall be entitled to, submit any additional or different facts
for consideration by the court. In the event any civil action is commenced under
this paragraph (b), the party who prevails or substantially prevails (as
determined by the court) in such civil action shall be entitled to recover from
the other party all costs, expenses and reasonable attorneys' fees incurred by
the prevailing party in connection with such action and on appeal.
(k) Except as limited by paragraph (b) above, the parties
agree that judgment upon the award rendered by the arbitrators may be entered in
any court of competent jurisdiction. In the event legal proceedings are
commenced to enforce the rights awarded in an arbitration proceeding, the party
who prevails or substantially prevails in such legal proceeding shall be
entitled to recover from the other party all costs, expenses and reasonable
attorneys' fees incurred by the prevailing party in connection with such legal
proceeding and on appeal.
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(l) Except as provided above, (i) no legal action may be
brought by either party with respect to any Dispute and (ii) all Disputes shall
be determined only in accordance with the procedures set forth above.
ARTICLE VII
Miscellaneous
7.1. No Mitigation or Offset
The provisions of this Agreement are not intended to, nor shall they
be construed to, require that Employee mitigate the amount of any payment
provided for in this Agreement by seeking or accepting other employment, nor
shall the amount of any payment provided for in this Agreement be reduced by any
compensation earned by Employee as the result of employment by another employer
or otherwise. Without limitation of the foregoing, the Company's obligations to
make the payments to Employee required under this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set off,
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against Employee, except that the Company may deduct from any
amount required to be reimbursed to the Company by Employee under Section 4.7 or
Article VI(a) the amount of any payment which the Company is then required to
make to Employee hereunder.
7.2. Assignability
The obligations of Employee hereunder are personal and may not be
assigned or delegated by Employee or transferred in any manner whatsoever, nor
are such obligations subject to involuntary alienation, assignment or transfer.
The Company shall have the right to assign this Agreement and to delegate all
rights, duties and obligations hereunder as provided in Section 7.5.
7.3. Notices
All notices and all other communications provided for in the
Agreement shall be in writing and addressed (i) if to the Company, at its
principal office address or such other address as it may have designated by
written notice to Employee for purposes hereof, directed to the attention of the
Board of Directors with a copy to the Secretary of the Company and (ii) if to
Employee, at his residence address on the records of the Company or to such
other address as he may have designated to the Company in writing for purposes
hereof. Each such notice or other communication shall be deemed to have been
duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, except that any notice of change of address
shall be effective only upon receipt.
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7.4. Severability
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
7.5. Successors: Binding Agreement
(a) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance reasonable acceptable to Employee, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. As used herein, the
term "Company" shall include any successor to its business and/or assets as
aforesaid which executes and delivers the Agreement provided for in this Section
7.5 or which otherwise becomes bound by all terms and provisions of this
Agreement by operation of law.
(b) This Agreement and all rights of Employee hereunder
shall inure to the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If Employee should die while any amounts would be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Employee's devisee, legatee, or other designee or, if there be no such designee,
to Employee's estate.
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7.6. Tax Matters
(a) The Company shall withhold from all payments hereunder
all applicable taxes (federal, state or other) which it is required to withhold
therefrom unless Employee has otherwise paid (or made other arrangements
satisfactory) to the Company the amount of such taxes.
(b) Notwithstanding anything to the contrary in this
Agreement, in the event that any payment or distribution by Company or any
affiliate of Company to or for the benefit of Employee, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended, or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest or penalties, are hereinafter collectively referred to as the
"Excise Tax"), Company shall pay to Employee an additional payment (a "Gross-up
Payment") in an amount such that after payment by Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed on any Gross-up Payment, Employee retains an
amount of the Gross-up Payment equal to the Excise Tax imposed upon the
Payments. Company and Employee shall make an initial determination as to whether
a Gross-up Payment is required and the amount of any such Gross-up Payment.
Employee shall notify Company immediately in writing of any claim by the
Internal Revenue Service which, if successful, would require Company to make a
Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially
determined by Company and Employee) promptly and in any event within 15 days of
the receipt of such claim. Company shall notify Employee in writing at least
five days prior to the due date of any response required with respect to such
claim if it plans to contest the claim. If Company decides to contest such
claim, Employee shall cooperate fully with Company in such action; provided,
however, Company shall bear and pay directly or indirectly all costs and
expenses (including additional interest and penalties) incurred in connection
with such action and shall indemnify and hold Employee harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of Company's action. If, as a result of
Company's action with respect to a claim, Employee receives a refund of any
amount paid by Company with respect to such claim, Employee shall promptly pay
such refund to Company. If Company fails to timely notify Employee whether it
will contest such claim or Company determines not to contest such claim, then
Company shall immediately pay to Employee the portion of such claim, if any,
which it has not previously paid to Employee.
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7.7 Amendments and Waivers
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed
by Employee and such member of the Board of Directors as may be specifically
authorized by the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, or in compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
7.8. Entire Agreement, Termination of Other Agreements
This Agreement is an integration of the parties' agreement and no
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
7.9. Governing Law
THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD
TO ITS CONFLICT OF LAWS PROVISION.
7.10. Counterparts
This Agreement may be executed in or more counterparts, each of which
shall be deemed to be an original, but all of which together will constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first above written.
AMERICAN CAPITAL STRATEGIES, LTD.
By: ____________________________
Xxxxx Xxxxxx, President
EMPLOYEE:
__________________________________
Xxxxx Xxxxxxxxx
0000 Xxxxx Xxxx
XxXxxx, XX 00000
