Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") made and entered into this 23rd day of March,
1999, by and between APPLIED CELLULAR TECHNOLOGY, INC., a Missouri corporation
("Company") and RICHARD J. SULLIVAN ("Employee").
BACKGROUND
Employee has been and presently is employed by Company as its chairman of
the board and chief executive officer. The parties have entered into a formal
employment agreement covering the terms and conditions of such employment.
Subsequently, the parties reached a tentative agreement regarding some, but not
all, of the terms and conditions of a revised employment agreement. The parties
have now reached an agreement on all of the terms and conditions of a revised
employment agreement and desire to set forth in this document such terms and
conditions.
TERMS AND CONDITIONS
1. Employment. Company hereby employs Employee, and Employee hereby accepts
such employment by Company, on the terms and conditions set forth below.
2. Capacity. Employee shall serve as Company's chairman of the board and
chief executive officer. Employee shall perform such services for company and
its subsidiaries and affiliates as Company's board of directors shall direct
from time to time. However, no such services shall be of a nature which are not
commensurate with, and/or are beneath the dignity of, Employee's title.
3. Term. Company's employment of Employee under this Agreement shall be for
an initial term of five years commencing on July 1, 1998 and ending on June 30,
2003. The term of Employee's employment under this Agreement shall automatically
be renewed for successive additional one year terms on each anniversary of the
commencement of Employee's employment under this Agreement, beginning with the
July 1, 1999 anniversary date, each of which terms shall be added at the end of
the then existing term (taking into account any prior extensions or failures to
extend), unless either party notifies the other at least 30 days prior to an
anniversary date of this Agreement. For example, unless either party notifies
the other to the contrary on or before June 1, 1999, the term of this Agreement
shall be extended from July 1, 2003 to June 30, 2004. For further example, and
assuming the term of this Agreement has been extended to June 30, 2004, if one
party notifies the other that it does not desire to extend the term of this
Agreement for an additional year and such notice is given on or before June 1,
2000, the term of this Agreement shall not be extended from July 1, 2004 to June
30, 2005. Notwithstanding the foregoing, the term of this Agreement may end
prior to the termination date determined under this paragraph 3 as provided in
paragraphs 9, 10, 11 and 12.
4. Service While Employed. Employee agrees to devote his best efforts, his
full diligence and at least 60% his business time to his duties hereunder and
shall not engage, either directly or indirectly, in any business or other
activity which is competitive with or adverse to the interests or the business
of Company.
5. Items Furnished and Relocation. Company shall furnish Employee with such
private office, secretarial assistance, and such other facilities, equipment and
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services suitable to his position and adequate to perform his duties hereunder.
Employee shall not be relocated by Company without his consent.
6. Compensation, Vacations and Reimbursement. As partial compensation for
his services to Company, Company agrees to pay Employee an annual salary in
regular monthly or other agreed upon installments of not less than $450,000 and
an annual bonus of not less than $140,000. In addition, Employee shall be
entitled to receive such bonuses (in addition to that required under the
preceding sentence), incentive compensation, and other compensation, if any, as
Company's board of directors, executive committee, compensation committee, or
other designated committee shall award Employee from time to time whether in
cash, Company stock, stock options, other stock based compensation, other form
of remuneration, or any combination of the foregoing. All such compensation
shall be subject to legally required income and employment tax withholding.
Employee shall be entitled to paid vacations and reimbursement for all
reasonable business expenses in accordance with Company's policies for executive
officers.
7. Other Benefits. In addition to his compensation described in paragraph 6
above, Employee shall be entitled to participate in such bonus, profit sharing,
deferred compensation and pension plans of Company for which he is eligible.
8. Welfare and Fringe Benefits. In addition to his compensation described
in paragraph 6 and the benefits described in paragraph 7 above, Employee shall
be entitled to participate in such welfare and fringe benefits plans and
programs of the Company for which he is eligible.
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9. Death and Disability. If Employee dies during the term of this
Agreement, his employment shall be deemed to have been terminated as of the last
day of the month in which his death occurs, and Company will pay to Employee's
personal representative all salary and other compensation due Employee through
the end of such month. If Employee becomes permanently disabled so that he
cannot perform his duties hereunder, as determined by a physician selected by or
acceptable to Company, his employment shall be deemed to have been terminated as
of the last day of the month in which such determination is made, and he will
receive his salary and other compensation through the end of such month. For
purposes of the foregoing computations, Employee shall be deemed to have earned
the same percentage of his minimum annual bonus for such employment year as the
number of days in the employment year through the date his employment is deemed
to terminate is of 365.
10. Retirement. From and after the time Employee attains age 65, he may
retire at any time by notifying Company at least 120 days prior to his
retirement date or be retired by Company upon at least two years notice.
11. Default. In the event that either party fails to perform material
provision of this Agreement and such failure continues for 15 days after
notification from the nonbreaching party, the nonbreaching party may terminate
this Agreement by notice to the breaching party. Such termination shall be
without prejudice to any rights or remedies which the nonbreaching party may
have.
12. Change in Control. Notwithstanding any other provision of this
Agreement, should a "change of control" occur, Employee, at his sole option and
discretion, may terminate his employment under this Agreement at any time within
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one year after such change of control upon 15 days notice. In the event of such
termination, Company shall pay to Employee a severance payment ("Severance
Payment") equal to three times the base amount as defined in Section 280G(b)(3)
of the Internal Revenue Code of 1986, as amended ("Code") minus $1.00.
Notwithstanding the foregoing, (a) if the Severance Payment and any other
amounts payable by Company to Employee are parachute payments under Code Section
280b (collectively, "Parachute Payments") and, (b), if reducing the Severance
Payment would eliminate the tax provided for in Code Section 4999 ("Section 4999
Tax") which would otherwise be applicable to the Parachute Payments, and (c) if,
because of such elimination, the net amount of the Parachute Payments (total
payments minus Section 4999 Tax) would be greater than such net amount without
reduction, then the Severance Payment shall be reduced by the smallest amount
required to eliminate the imposition of the Section 4999 Tax. The foregoing
determination shall be made by Company's general counsel, and his determination
shall be binding upon Company and Employee. The amount determined under the
foregoing provisions of this paragraph 12 shall be payable no later than one
month after the effective date of the Employee's termination of employment. A
change in control means: the acquisition, without the approval of Company's
board of directors, by any person or entity, other than Company or a "related
entity," of more than 20% of the outstanding shares of Company's voting common
stock through a tender offer, exchange offer or otherwise; the liquidation or
dissolution of Company following a sale or other disposition of all or
substantially all of its assets; a merger of consolidation involving Company
which results in Company not being the surviving parent corporation; or any time
during any two-year period in which individuals who constituted the board of
directors of Company at the start of such period (or whose election was approved
by at least two-third of the then members of the board of directors of Company
who were members at the start of the two-year period) do not constitute at least
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50% of the board of directors for any reason. A related entity is the parent, a
subsidiary or any employee benefit plan (including a trust forming a part of
such a plan) maintained by Company, its parent or a subsidiary.
13. Nondisclosure; Return of Records. Employee will not, except as
authorized by Company, publish or disclose to others, or use for his own
benefit, or authorize anyone else to publish or disclose or use, or copy or make
notes of any secret, proprietary, or confidential information or knowledge of
data or trade secrets of or relating to the business activities of Company which
may come to Employee's knowledge during his employment with the Company. Upon
termination of Employee's employment for any reason, Employee will deliver to
Company, without retaining any copies, notes or excerpts, all records, notes,
data, memoranda, and all other documents or materials made or compiled by
Employee, or made available to him by Company during his employment, which are
in Employee's possession and/or control and which are the property of Company
and/or which relate to Employee's employment or the business activities of
Company.
14. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Company and any successors or assigns of Company, and Employee, his
heirs, personal representatives and assigns, except that Employee's obligations
to perform services and rights to receive payment therefore shall be
nonassignable and nontransferable.
15. Entire Agreement: Modification. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter and supersedes
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all prior or contemporaneous agreements not set forth in this agreement. This
Agreement may not be modified other than by an agreement in writing signed by
each of the parties.
16. Waiver. Any failure by either party to enforce any provision of this
Agreement shall not operate as a waiver of such provision or any other
provision. Any waiver by either party of any breach of any provision of this
Agreement shall not operate as a waiver of any other breach of such provision or
any other provision of this agreement.
17. Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not effect the other provisions of this
Agreement, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
18. Paragraph Headings. Paragraph headings throughout this Agreement are
solely for the convenience of the parties and shall not be construed as a part
of any section or as modifying the contents of any section.
19. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri.
20. Notices. All notices under this Agreement shall be personally
delivered, sent certified mail, postage prepaid, to Company at its corporate
office and to Employee at his principal residence, or sent by telecopy.
21. Supplemental Compensation. Upon the termination of Employee's
employment with Company for any reason, other than due to his breach of a
material provision of his employment as described in paragraph 11, Employee
shall be entitled to receive from Company 60 equal monthly payments, with the
first such payment due on the second first day of the month after termination of
employment, of $37,500 each. If Employee should die before all or any part of
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the above described monthly payments have been made, all payments or all
remaining payments shall be made to his designated beneficiary, if any,
otherwise to his estate. Notwithstanding the foregoing, the aggregate amount
payable under this paragraph 21 shall be reduced by the amount, if any, payable
under paragraph 12.
22. Non-Competition. During the period that Employee is entitled to receive
payments under paragraph 21, Employee shall not engage, directly or indirectly,
either on his own behalf or on behalf of any other person, firm, corporation or
other entity, in any business competitive with the business of Company, in the
geographic area in which Company is conducting business at the time of
termination of Employee's employment, or own more than 5% of any such firm,
corporation or other entity. In addition, Employee must furnish Company with
such information as Company shall from time to time request in order to
determine that Employee is in compliance with the requirements of the preceding
provisions of this paragraph 22. The payments to be made under paragraph 21 are
conditioned upon Employee's complying with the provisions of this paragraph 22,
and, in the event that such provisions are not complied with, Company may
suspend such payments for any period of time in which Employee is not in
compliance with the preceding provisions of this paragraph 22.
23. Company. For purposes of paragraphs 4, 13, and 22 of this Agreement,
the Company shall mean Applied Cellular Technology, Inc. and all subsidiaries
and affiliates of it.
24. Salary in Stock or Cash. At least 10 days prior to each July 1 that
this Agreement is in effect, Employee shall elect the amount or percentage, if
any, of his salary for the 12 month period beginning on that date which he
desires to be payable in company common stock ("Stock"). To the extent Employee
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elects to have all or part of his salary paid in Stock, the per share value of
the Stock, which shall be used to determine the number of shares payable for the
employment year, shall be the average closing price for the last five business
days prior to the applicable July 1. Any election shall be irrevocable. If
Employee fails to make a timely election, his entire salary for the employment
year shall be paid in cash. Any shares of Stock payable to Employee shall be
subject to such transfer restrictions as are required by applicable securities
law and a legend to such effect shall be placed on the certificates. Employee
represents and warrants that any Stock which will be paid to him pursuant to
this paragraph 24 shall be acquired for investment purposes and not for resale
or distribution. Company shall include such Stock in any subsequent registration
to the extent practical. If any portion of Employee's salary is paid in Stock,
Employee shall tender to Company the amount required for income and employment
tax withholding on any such payment. If, and to the extent such amount is not so
tendered, Company may withhold the number of shares of Stock equal to the amount
such required withholding from the shares of Stock issued to Employee.
Notwithstanding the foregoing provisions of this paragraph 24, unless otherwise
elected by Employee on or before August 21, 1998, the election previously made
under the prior employment agreement for the employment year beginning June 1,
1998 shall apply to the employment year beginning on July 1, 1998. Any such
revised election shall apply only to salary payable after such revised election
is made.
25. Other Matters. For purposes of this paragraph 25, the following words
shall have the following respective meanings:
(a) Condominium. The condominium owned by Company known and numbered
as Unit #14, 6110 North Ocean Boulevard, Pelican Cove, Ocean Ridge, Florida
33480, or any condominium which the Company acquires to replace it.
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(b) Gross Up Payment. A payment that covers all federal and state
income taxes payable by Employee, if any, which would not have been
incurred by Employee if another payment or transfer and the Gross Up
Payment had not been made to Employee.
(c) Change of Control. As defined in paragraph 12 of this Agreement.
(d) Triggering Event. A Change of Control, termination of Employee's
employment for any reason other than due to his breach of a material
provision of the terms of his employment as described in paragraph 11 of
the Employment Agreement, or if he ceases to be Company's chairman of the
board or chief executive officer for any reason other than due to his
breach of a material provision of the terms of his employment as described
in paragraph 11 of the Employment Agreement. Within 10 days of the
occurrence of a Triggering Event, Company shall promptly transfer ownership
of the Condominium free and clear of all mortgages, deeds of trust, and
other encumbrances to Employee and, in addition, shall pay Employee an
amount of cash equal to the Gross Up Payment. In the event that the
Condominium is not owned by Company at such time, Company shall pay
Employee in cash an amount equal to the value of the Condominium free and
clear of all mortgages, deeds of trust and other encumbrances (as
determined by a reputable appraiser selected by Employee whose fee shall be
paid one half by each party) plus the Gross Up Payment. Within 10 days of
the occurrence of a Triggering Event, Company shall also pay to Employee
the sum of $12,105,000. If the Triggering Event is the Employee's death,
such amount shall be paid to his designated beneficiary, if any, otherwise
to his estate. Company may pay such amount in cash or in Company's common
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stock or in a combination of cash and common stock. Common Stock used in
payment shall be valued at the average closing price on the Nasdaq National
Market over the last 5 business days prior to the date of the Triggering
Event.
26. Effect of Amendment. This amended and restated agreement shall
supersede all agreements between the parties relating to Employee's employment
by Company.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of the
day and year first above written.
APPLIED CELLULAR TECHNOLOGY, INC.
By: /S/ Garrett A. Sullivan
--------------------------------------
Title: President
"Company"
/S/ Richard J. Sullivan
--------------------------------------
Richard J. Sullivan
"Employee"
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