EXHIBIT 99.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") entered into effective as of
July 16, 2003, by and between Xxxx X. Xxxxxxx (the "Executive"), and Gexa Corp.,
a Texas corporation having its principal place of business at 00 Xxxxxxxx Xxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (the "Company");
W I T N E S S E T H:
WHEREAS, The Company wishes to employ the Executive as Chairman and the
Chief Executive Officer and to perform services incident to such position for
the Company, and the Executive wishes to be so employed by the Company, all upon
the terms and conditions hereinafter set forth:
NOW THEREFORE, in consideration of the premises and mutual covenants and
obligations herein set forth and for other good and valuable consideration, the
receipt, sufficiency and adequacy of which is hereby acknowledged, accepted and
agreed to, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. EMPLOYMENT AND TERM. The Company hereby employs the Executive to serve
as Chairman and the Chief Executive Officer of the Company. The term of this
Agreement (the "Term of this Agreement") shall be effective as of the date first
above written and shall terminate thirty-six (36) months from the date hereof
(the "Termination Date"), unless earlier terminated by either party hereto in
accordance with the provisions of Section 5 hereof; provided, however, that
beginning on the third anniversary date of the date hereof and on each
anniversary date of the date hereof thereafter, the Term of this Agreement shall
be automatically extended one additional year unless either party gives written
notice to the other at least four months prior to such anniversary of the date
hereof that the Term of this Agreement shall cease to be so extended. During the
Term of this Agreement, the terms of employment shall be as set forth herein
unless modified by the Executive and the Company in accordance with the
provisions of Section 12 hereof. The Executive hereby agrees to accept such
employment and to perform the services specified herein, all upon the terms and
conditions hereinafter set forth.
2. POSITION AND RESPONSIBILITIES. The Executive shall serve as Chairman and
Chief Executive Officer of the Company and shall report to, and be subject to
the general direction of the Board of Directors of the Company. During the Term
of this Agreement, the Executive will also be nominated to be a member of the
Board of Directors of the Company with respect to each meeting, or consent in
lieu of meeting, of stockholders of the Company at which directors are to be
elected. The Executive shall have other obligations, duties, authority and power
to do all acts and things as are customarily done by a person holding the same
or equivalent position or performing duties similar to those to be performed by
executives in corporations of similar size to the Company and shall perform such
managerial duties and responsibilities for the Company which are not
inconsistent with his position as may reasonably be assigned to him by the Board
of Directors of the Company (or a committee thereof). Unless otherwise agreed to
by the Executive, the Executive shall be based at the Company's principal
executive offices located in the greater Houston, Texas metropolitan area.
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3. EXTENT OF SERVICE. The Executive shall devote his full business time and
attention to the business of the Company. During the Term of this Agreement,
Executive shall devote his best efforts and skills to the business and interests
of Company, do his utmost to further enhance and develop Company's best
interests and welfare, and endeavor to improve his ability and knowledge of
Company's business, in an effort to increase the value of his services for the
mutual benefit of the parties hereto. During the Term of this Agreement, it
shall not be a violation of this Agreement for Executive to (i) serve on any
corporate board or committee thereof with the approval of the Board (except for
boards or committees of a competing business unless approved by the Board), (ii)
serve on any civic or charitable boards or committees, (iii) deliver lectures,
fulfill teaching or speaking engagements, (iv) testify as a witness in
litigation involving a former employer or (v) manage personal investments;
provided, however, any such activities must not consume in the aggregate more
than 20 hours during any month, nor materially interfere with performance of
Executive's responsibilities under this Agreement.
4. COMPENSATION.
(a) In consideration of the services to be rendered by the Executive to the
Company, the Company will pay the Executive a salary ("Salary") of $208,200 per
year during the Term of this Agreement. Such Salary will be payable in
conformity with the Company's prevailing practice for executives' compensation
as such practice shall be established or modified from time to time. Salary
payments shall be subject to all applicable federal and state withholding,
payroll and other taxes. On each anniversary of this Agreement, the Salary shall
be increased by the Compensation Committee of the Company's Board of Directors
(the "Compensation Committee") by an amount up to 5% of the then Current Salary.
From time to time during the Term of this Agreement, the amount of the
Executive's Salary may be further increased by, and at the sole discretion of,
the Compensation Committee, which shall review the Executive's Salary no less
regularly than annually. In the event an employee of the Company receives a
greater base salary than the Executive, then the Salary shall be automatically
changed to 110% of the highest paid employee's salary.
(b) The Company hereby grants the Executive an option to purchase 150,000
shares of common stock of the Company at an exercise price per share of $2.00
("Option"). Such Option shall vest 33.4% on the date of grant and 33.3% on each
of the first and second anniversary date of grant. The term of the Option shall
be ten years from the date of grant subject to the provisions of paragraphs
5(f)(i) and 5(g) hereof. Grants of additional options will be considered by the
Compensation Committee on an annual basis based on a review of the Executive's
performance.
(c) The Executive will be considered for an annual cash and/or stock bonus
based on an evaluation of his performance by the Compensation Committee. Any
such bonus will be at the sole discretion of the Compensation Committee;
provided that the Executive will receive the bonus and other benefits pursuant
to the Bonus Policy attached hereto as Exhibit A.
(d) During the term of this Agreement, the Company shall pay or reimburse
the Executive for all reasonable out-of-pocket expenses for travel, meals, hotel
accommodations, entertainment and the like incurred by him in connection with
the business of the Company upon submission by him and approval of an
appropriate statement documenting such expenses as required by the Company's
policy and the Internal Revenue Code of 1986, as amended (the "Code").
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(e) The Executive shall be entitled to three (3) weeks of paid vacation
during each calendar year during the term of this Agreement. Vacation shall
accrue on the first day of each calendar year. The Company shall not pay the
Executive for any accrued but unused portion of vacation and any such unused
portion of vacation shall not be carried forward to the next year.
(f) During the term of this Agreement, the Executive shall be entitled to
participate in and to receive all rights and benefits under any life,
disability, medical and dental, health and accident and profit sharing or
deferred compensation plans and such other plan or plans as may be implemented
by the Company during the term of this Agreement. The Executive shall also be
entitled to participate in and to receive all rights and benefits under any plan
or program adopted by the Company for any other or group of other executive
employees of the Company, including without limitation, the rights and benefits
under the directors' and officers' liability insurance in place from time to
time under the Company's insurance program for the directors and officers of the
Company. The Company will also obtain, at its expense, key man life insurance on
the Executive in an amount of $3,000,000, and, to the extent the proceeds
therefrom are not pledged to a lender, permit the Executive to transfer such
policy to his estate.
(g) During the term of this agreement, the Executive shall be entitled to
receive an expense allowance of $1,000.00 per month, and one parking space shall
be provided at no cost to the Executive by the Company. The expense allowance
will be increased by $100 per month on each anniversary of this Agreement.
5. TERMINATION.
(a) Termination by Company; Discharge for Cause. The Company shall be
entitled to terminate this Agreement and the Executive's employment with the
Company at any time and for whatever reason; or at any time for "Cause" (as
defined below) by written notice to the Executive. Termination of the
Executive's employment by the Company shall constitute a termination for "Cause"
if such termination is for one or more of the following reasons: (i) the willful
failure or refusal of the Executive to render services to the Company in
accordance with his obligations under this Agreement, including, without
limitation, the willful failure or refusal of the Executive to comply with the
work rules, policies, procedures, and directives as established by the Board of
Directors and consistent with this Agreement; such failure or refusal to be
uncured and continuing for a period of not less than fifteen (15) days after
notice outlining the situation is given by the Company to the Executive; (ii)
the commission by the Executive of an act of fraud or embezzlement; (iii) the
commission by the Executive of any other action with the intent to injure the
Company or any act that could have been reasonably foreseen to materially injure
the Company that in fact materially injures the Company; (iv) the Executive
having been indicted for a felony or a crime involving moral turpitude; (v) the
Executive having misappropriated the property of the Company; (vi) the Executive
having engaged in personal misconduct which materially injures the Company; or
(vii) the Executive having willfully violated any law or regulation relating to
the business of the Company which results in material injury to the Company. In
the event of the Executive's termination by the Company for Cause hereunder, the
Executive shall be entitled to no severance or other termination benefits except
for any unpaid Salary accrued through the date of termination. A termination of
this Agreement by the Company without Cause pursuant to this Section 5(a) (which
shall include the decision by the Company to not renew the Term of this
Agreement for any additional one year periods as provided in Section 1 above)
shall entitle the Executive to the Severance Payment and other benefits
specified in Section 5(f) or (g), hereof, as the case may be.
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(b) Death. If the Executive dies during the term of this Agreement and
while in the employ of the Company, this Agreement shall automatically terminate
and the Company shall have no further obligation to the Executive or his estate
except that the Company shall pay to the Executive's estate that portion of his
Salary and benefits accrued through the date of death. All such payments to the
Executive's estate shall be made in the same manner and at the same time as the
Executive's Salary.
(c) Disability. If during the term of this Agreement, the Executive shall
be prevented from performing his duties hereunder for a period of 90 days by
reason of disability, then the Company, on 30 days' prior notice to the
Executive, may terminate this Agreement. For purposes of this Agreement, the
Executive shall be deemed to have become disabled when the Board of Directors of
the Company, upon verification by a physician designated by the Company, shall
have determined that the Executive has become physically or mentally unable
(excluding infrequent and temporary absences due to ordinary illness) to perform
the essential functions of his duties under this Agreement with reasonable
accommodation. In the event of a termination pursuant to this paragraph (c), the
Company shall be relieved of all its obligations under this Agreement, except
that the Company shall pay to the Executive or his estate in the event of his
subsequent death, that portion of the Executive's Salary and benefits accrued
through the date of such termination. All such payments to the Executive or his
estate shall be made in the same manner and at the same time as his Salary would
have been paid to him had he not become disabled.
(d) Termination for Good Reason. The Executive shall be entitled to
terminate this Agreement and his employment with the Company at any time upon
thirty (30) days written notice to the Company for "Good Reason" (as defined
below). The Executive's termination of employment shall be for "Good Reason" if
such termination is a result of any of the following events:
(i) without Executive consent, the Executive is assigned any
responsibilities or duties materially inconsistent with his
position, duties, responsibilities and status with the Company as
in effect at the date of this Agreement or as may be assigned to
the Executive pursuant to Section 2 hereof; or his title or
offices as in effect at the date of this Agreement or as the
Executive may be appointed or elected to in accordance with
Section 2 are changed; or the Executive is required to report to
or be directed by any person other than the Board of Directors of
the Company;
(ii) without Executive's consent, there is a reduction in the Salary
(as such Salary shall have been increased from time to time)
payable to the Executive pursuant to Section 4(a) hereof unless
such reduction is similarly applicable to at least two other
officers of the Company;
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(iii) failure by the Company or any successor to the Company or its
assets to continue to provide to the Executive any material
benefit, bonus, profit sharing, incentive, remuneration or
compensation plan, stock ownership or purchase plan, stock option
plan, life insurance, disability plan, pension plan or retirement
plan on a basis consistent with practices in effect from time to
time for executive employees of the Company generally, but
excluding such action that is required by law;
(iv) without Executive's consent, the Company requires the executive
to relocate to any city or community other than one within a
fifty (50) mile radius of the greater Houston, Texas metropolitan
area, except for required travel on the Company's business to an
extent substantially consistent with the Executive's business
obligations under this Agreement; or
(v) there is any material breach by the Company of any provision of
this Agreement.
(vi) Upon the Executive's termination of this Agreement for Good
Reason, the Executive shall be entitled to the Severance Payment
and other benefits specified in Section 5(f) hereof.
(e) Voluntary Termination. Notwithstanding anything to the contrary herein,
the Executive shall be entitled to voluntarily terminate this Agreement and his
employment with the Company at his pleasure upon ninety (90) days written notice
to such effect. In such event, the Executive shall not be entitled to any
further compensation other than any unpaid Salary and benefits accrued through
the date of termination. At the Company's option, the Company may pay to the
Executive the salary and benefits that the Executive would have received during
such ninety (90) day period in lieu of requiring the Executive to remain in the
employment of the Company for such ninety (90) day period.
(f) Termination Benefits Upon Involuntary Termination or Termination for
Good Reason. In the event that (i) the Company terminates this Agreement and the
Executive's employment with the Company for any reason other than for Cause (as
defined in Section 5(a) hereof) or the death or disability (as defined in
Section 5(c) hereof) of the Executive, or (ii) the Executive terminates this
Agreement and his employment with the Company for Good Reason (as set forth in
Section 5(d) hereof), then the Company shall pay the Executive, within sixty
(60) days after the date of termination, an amount (the "Severance Payment")
equal to (x) two (2) times the Executive's highest annual Salary in existence at
any time during the last two (2) years of employment immediately preceding the
date of termination; provided that if the date of termination occurs after the
first anniversary of this Agreement, only one (1) times said highest annual
Salary will be payable, and (y) a prorata portion (based on the portion of the
calendar year that the Executive served hereunder prior to such termination) of
the annual bonus which would have been paid to the Executive for the full year
during which such termination occurred, minus applicable withholding and
authorized salary reductions (the "Severance Payment"). In addition, following
other such termination, the Executive shall be entitled to the following
benefits (collectively, the "Additional Benefits");
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(i) immediate vesting of any of the Executive's outstanding options
to purchase securities of the Company which were not vested by
their own terms on the date of termination and the extension of
the Executive's right to exercise all the Executive's options to
purchase securities of the Company for a period equal to the
lesser of (A) one (1) year following the date of termination or
(B) the remaining term of the applicable option;
(ii) continued coverage, at the Company's cost, under the Company's
group health plan for the applicable coverage period under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") but only if Executive elects such COBRA
continuation in accordance with the time limits and in the
applicable COBRA regulations; and
(iii) an amount, in cash, equal to any unreimbursed expenses incurred
by the Executive in the performance of his duties hereunder and
in compliance with Company policy through the date of
termination; and
(iv) Company shall cause Executive to be covered by any policy or
contract of insurance obtained by it to insure its directors and
officers against personal liability for acts or omissions in
connection with service as an officer or director of Company or
service in other capacities at the request of the company. The
coverage provided to Executive pursuant to this paragraph shall
be of a scope and on terms and conditions at least as favorable
as the most favorable coverage provided to any other officer or
director of Company (or any successor). In addition, the Company
agrees that any Indemnification Agreement entered into by and
between the Company and the Executive, as well as all other
rights to which Executive is entitled with regard to
indemnification and advancement of expenses, whether by virtue of
the Company's certificate of incorporation, bylaws or otherwise,
will remain in full force and effect, in accordance with its
terms.
The parties agree that, because there can be no exact measure of the
damages which would occur to the Executive as a result of termination of
employment, such payments contemplated in this Section 5(f) shall be deemed to
constitute liquidated damages and not a penalty and the Company agrees that the
Executive shall not be required to mitigate his damages. The termination
compensation in this Section 5(f) shall be paid only if the Executive executes a
termination agreement releasing all legally waivable claims arising from the
Executive's employment.
(g) Termination and Benefits upon a Change in Control. In the event of a
Change in Control, as defined in this Section 5(g), then in lieu of the
Severance Payment contained in Section 5(f) hereof, if the Executive is
terminated without Cause or the Executive terminates his employment for Good
Reason within the twelve (12) month period immediately following a Change in
Control the Company shall pay to the Executive a lump sum amount equal to
one-half of the Executive's highest annual Salary paid during the last two (2)
years immediately preceding the date of termination, minus applicable
withholding and authorized salary reductions The Executive shall also be
entitled to receive the Additional Benefits. "Change of Control" means or shall
be deemed to have occurred if and when: (i) any "person" or "group" (as such
terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
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or indirectly, of more than 50% of the total voting power of the outstanding
voting stock of the Company; (ii) the Company is merged with or into or
consolidated with another Person and, immediately after giving effect to the
merger or consolidation, (a) less than 50% of the total voting power of the
outstanding voting stock of the surviving or resulting Person is then
"beneficially owned" (within the meaning of Rule 13d-3 under the Exchange Act)
in the aggregate by the stockholders of the Company immediately prior to such
merger or consolidation, and (b) any "person" or "group" (as defined in Section
13(d)(3) or 14(d)(2) of the Exchange Act) has become the direct or indirect
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of the voting stock of the surviving or
resulting Person; (iii) the Company sells, assigns, conveys, transfers, leases
or otherwise disposes of all or substantially all of the Company assets (either
in one transaction or a series of related transactions); or (iv) during any
consecutive two-year period individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination by the
Board of Directors for election by the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
(h) Survival. Notwithstanding the termination of this Agreement under this
Section 5, the provisions of Sections 7 and 8 of this Agreement, and all other
provisions hereof which by their terms are to be performed following the
termination hereof shall survive such termination and be continuing obligations.
6. CONSENT AND WAIVER BY THIRD PARTIES. The Executive hereby represents and
warrants that he has obtained all necessary waivers and/or consents from third
parties as to enable him to accept employment with the Company on the terms and
conditions set forth herein and to execute and perform this Agreement without
being in conflict with any other agreement, obligations or understanding with
any such third party.
7. CONFIDENTIAL INFORMATION. The Executive acknowledges that in the course
of his employment with the Company, he has received and will receive access to
confidential information of a special and unique value concerning the Company
and its business, including, without limitation, trade secrets, know-how, lists
of customers, employee records, books and records relating to operations, costs
or providing service and equipment, operating and maintenance costs, pricing
criteria and other confidential information and knowledge concerning the
business of the Company and its affiliates (hereinafter collectively referred to
as "information") which the Company desires to protect. The Executive
acknowledges that such information is confidential and the protection of such
confidential information against unauthorized use or disclosure is of critical
importance to the Company. The Executive agrees that he will not reveal such
information to any one outside the Company. The Executive further agrees that
during the term of this Agreement and thereafter he will not use or disclose
such information. Upon termination of his employment hereunder, the Executive
shall surrender to the Company all papers, documents, writings and other
property produced by him or coming into his possession by or through his
employment hereunder and relating to the information referred to in this Section
7, and the Executive agrees that all such materials will at all times remain the
property of the Company. The obligation of confidentiality, non-use and non-
disclosure of know-how set forth in this Section 7 shall not extend to know-how
(i) which was in the public domain prior to disclosure by the disclosing party,
(ii) which comes into the public domain other than through a breach of this
Agreement, (iii) which is disclosed to the Executive after the termination of
this Agreement by a third party having legitimate possession thereof and the
unrestricted right to make such disclosure, or (iv) which is necessarily
disclosed in the course of the Executive's performance of his duties to the
Company as contemplated in this Agreement. The agreements in this Section 7
shall survive the termination of this Agreement.
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8. NO SOLICITATION. To support the agreements contained in Section 7
hereof, from the date hereof and for a period twelve (12) months after the
Executive's employment with the Company is terminated for any reason, the
Executive shall not, either directly or indirectly, through any person, firm,
association or corporation with which the Executive is now or may hereafter
become associated, (i) solicit any then current employee of the Company or its
affiliates (except through ads or notices offering employment that are published
or otherwise made publicly available), or (ii) use in any competition,
solicitation or marketing effort any information as to which the Executive has a
duty of confidential treatment under paragraph 7 above.
9. NOTICES. All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be deemed to have been delivered on
the date personally delivered or on the date mailed, postage prepaid, by
certified mail, return receipt requested, or telegraphed and confirmed if
addressed to the respective parties as follows:
If to the Executive: Xxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
If to the Company: Gexa Corp.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Chairman, Compensation Committee
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
10. SPECIFIC PERFORMANCE. The Executive acknowledges that a remedy at law
for any breach or attempted breach of Section 7 or 8 of this Agreement will be
inadequate, agrees that the Company shall be entitled to specific performance
and injunctive and other equitable relief in case of any such a breach or
attempted breach, and further agrees to waive any requirement of the securing or
posting of any bond in connection with the obtaining of any such injunctive or
any other equitable relief.
11. WAIVERS AND MODIFICATIONS. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 11. No modifications or waiver by the Company shall be
effective without the consent of at least a majority of the Compensation
Committee of the Board of Directors then in office at the time of such
modification or waiver. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
sets forth all the terms of the understandings between the parties with
reference to the subject matter set forth herein and may not be waived, changed,
discharged or terminated orally or by any course of dealing between the parties,
but only by an instrument in writing signed by the party against whom any
waiver, change, discharge or termination is sought.
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12. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Texas.
13. SEVERABILITY. In case of one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
contained herein.
14. ARBITRATION. In the event that a dispute or controversy should arise
between the Executive and the Company as to the meaning or application of any
provision, term or condition of this Agreement, such dispute or controversy
shall be settled by binding arbitration in Houston, Texas and for said purpose
each of the parties hereto hereby expressly consents to such arbitration in such
place. Such arbitration shall be conducted in accordance with the existing rules
and regulations of the American Arbitration Association governing commercial
transactions. The expense of the arbitrator shall be borne by the Company.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date and year first above written.
COMPANY:
GEXA CORP.
By: /s/ Miles Xxxxxxx
-----------------------------
Miles Xxxxxxx, Vice President
EXECUTIVE:
/s/ Xxxx X. Xxxxxxx
-------------------------------
Xxxx X. Xxxxxxx
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EXHIBIT A
bonus & stock option policy
Employee shall be entitled to bonuses and stock options as determined by
the Compensation Committee. Notwithstanding the above, bonus shall again be
reviewed and evaluated after the Company reaches two hundred million in revenue
in any year. Until then, bonus shall be determined as follows:
Company achieves EBITDA budget as approved by Board $25,000.00
Company exceeds EBITDA budget as approved by Board by 7% $50,000.00
Company exceeds EBITDA budget as approved by Board by 10% $85,000.00
Company exceeds EBITDA budget as approved by Board by 15% $125,000.00
For 2003, the EBITDA budget as approved by the Board is $8,000,000, as adjusted
downward to reflect the expenses associated with the loan from The Catalyst
Fund, Ltd. In addition, the amount of any bonus paid hereunder shall not exceed
in any event 25% of the excess amount of EBITDA over the applicable EBITDA
budget approved by the Board.
Company may grant stock options to Employee and in no event shall any employee
or director receive a Bonus greater than Employee.
Employee's current 300,000 warrants shall be extended until the later to occur
of December 31, 2005 or the expiration of this Agreement.
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