Exhibit
10.1
EMPLOYMENT
AGREEMENT
AGREEMENT dated as of September 22, 2006 by and
between Sparta Commercial Services, Inc., a Nevada corporation with
an address at P.O. Box 60, New York, New York 10156 (the “
Company ”) and Anthony W. Adler (“
Executive ”) with an address at 325 Prospect Avenue,
Mamaroneck, NY 10543.
WHEREAS, the Company and Executive wish to enter
into an agreement relating to the employment of Executive by the
Company;
NOW, THEREFORE, in consideration of the premises
and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1. Term of Employment. Subject to the provisions of Section 8 of this
Agreement and on the other terms and subject to the conditions set
forth herein, Executive shall be employed by the Company commencing
on the date hereof (the “Commencement Date”) and ending
on the last day of the third anniversary of the Commencement Date
(the “Employment Term”). Notwithstanding the preceding
sentence, the Employment Term shall be extended for an additional
one (1) year period upon the written agreement of the Company and
Executive. Additional extensions may be agreed upon by the Company
and Executive from time to time. “Employment Term”
shall include any extension that becomes applicable pursuant to the
preceding sentence.
2. Position.
(a) During the Employment Term, Executive shall
serve as the Company’s Executive Vice President. In such
position, Executive shall have the powers, duties and
responsibilities that are customary for such position in a
corporation of the size, type and nature of the Company and shall
perform such other duties as the Company’s Board of Directors
or Company’s Chief Executive Officer (“ CEO
”), as the case may be, shall determine in their reasonable
discretion, including those duties currently performed on behalf of
the Company’s affiliates. In addition, Executive shall act as
the Company’s interim Chief Financial Officer commencing
after the audit of the Company’s books and records for the
fiscal year ended April 30, 2006 shall have been delivered and
accepted by the Company and thereafter until his replacement shall
have been appointed. Executive shall report exclusively to the
Company’s CEO. Executive shall comply with all federal, state
and local laws applicable to his duties and also shall comply with
the rules and regulations of any self-regulatory organization (as
such term is defined in Rule 3(a)(26) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) having
jurisdiction over the Company.
(b) During the Employment Term, Executive will
devote his full business time to the performance of his duties
hereunder and will not engage in any other business, profession or
occupation for compensation or otherwise which would conflict with
the rendition of such services either directly or indirectly,
without the prior written consent of the CEO. Nothing contained
herein shall preclude Executive from (i) serving on corporate,
civic and charitable boards or committees and (ii) managing his
personal investments; provided that none of the activities
set forth in clauses (i) and (ii) interfere in any material respect
with the performance of Executive’s employment hereunder or
conflict in any material respect with the business of the Company;
and further provided that no such non-employment activities shall
be conducted at the Company’s offices or using the
Company’s facilities.
3. Base Salary. During the Employment Term, the Company shall
pay Executive a base salary (the “Base Salary”) at the
annual rate of $185,000 payable in regular installments in
accordance with the Company’s usual payment practices.
Executive shall be entitled to such annual increases in his Base
Salary, if any, as may be determined in the sole discretion of the
Company’s Board of Directors or of the Compensation Committee
thereof.
4. Additional Compensation. In addition to salary and other compensation
specified in this agreement, Executive may from time to time,
receive such additional compensation (“Additional
Compensation”) from the Company in such form or forms as may
be determined by the Company’s Board of Directors or the
Compensation Committee thereof from time to time in order to more
fully compensate Executive for the true value of his services to
the Company.
5. Equity Arrangements .
(a) Grant of Option . Executive shall be entitled to a grant of
non-qualified options (the “ Grant ”) to
purchase up to 4,000,000 shares of the Company’s Common
Stock, $.001 par value per share (the “Option Shares”),
at a price equal to 110% of the average closing price of the
Company’s Common Stock for the five (5) trading days
immediately preceding the Commencement Date, subject to stock
splits and to the terms of the Grant of Option set forth in Exhibit
A hereto. Subject to Section 8 of this Agreement, Executive’s
rights to such shares of stock shall vest as follows:
(i) 20 % of the Option Shares on the Commencement
Date;
(ii) 20 % the Option Shares on the first anniversary
of the Commencement Date;
(iii) 30 % the Option Shares on the second
anniversary of the Commencement Date; and
(iv)
30% the Option Shares on the third
anniversary of the Commencement Date.
(b) Company Repurchase Option
. Following the termination of
Executive’s employment hereunder, if Executive determines to
sell all or any portion of the Option Shares that he has purchased
(other than Option Shares included in a registration statement
filed under the Securities Act of 1933, as amended (the
“Securities Act”)), Executive shall first offer to sell
such Option Shares to the Company by providing written notice to
the Company setting forth the number of Option Shares to be sold.
If the Company elects to purchase all or part of such Option Shares
so offered the purchase price per share therefor shall equal 90% of
the average daily bid price per share of the Company’s Common
Stock during the 7-trading day period following receipt by the
Company of such notice. If the Company elects to purchase less than
all of the Option Shares so offered, the purchase price per share
shall be 100% of the average daily bid price per share of the
Company’s Common Stock during the 7-trading day period
following receipt by the Company of such notice. The Company shall
notify Executive in writing of its decision whether to purchase any
or all of the Option Shares so offered within three days of the end
of such 7-trading day period. If the Company elects to purchase
such Shares, the Company shall pay the full purchase price therefor
within thirty (30) days of the Company’s election to so
purchase. If the Company does not so elect or fails to notify
Executive of its election within the time specified herein,
Executive shall be permitted to sell such Option Shares in the open
market in accordance with the applicable rules and regulations of
the Securities and Exchange Commission.
(c) Volume Limitation on Sales of Option
Shares . If the Company
elects not to purchase all of the Option Shares pursuant to Section
5(b), Executive may sell any remaining Option Shares in the open
market provided that the number of Option Shares Executive may sell
in any one calendar month shall be the lesser of the average daily
trading volume for the month immediately preceding such sale or the
number of Option Shares Executive may sell pursuant to Rule 144 of
the Securities Act.
(d) Accelerated Vesting . If there shall be a change in control of the
Company and this Agreement is not assumed by the person or entity
acquiring control, all unvested Options shall be deemed vested on
the date immediately prior to the event resulting in such change in
control. For purposes of this Agreement, the phrase “change
in control” shall mean:
(i)
a transaction in which any Person
(as defined in Section 3(a)(9) of the Exchange Act) becomes the
Beneficial Owner (as defined in Rule 13d-3 of the Exchange Act)
(except that a Person shall be deemed to be the Beneficial Owner of
all shares that any such Person has the right to acquire pursuant
to any agreement or arrangement or upon exercise of conversion
rights, warrants or options or otherwise, without regard to the
sixty day period referred to in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
50% or more of the combined voting power of the Company’s
then-outstanding securities;
(ii)
during any period of two
consecutive years, individuals who at the beginning of such period
constitute the Board, and any new director whose election by the
Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the two-year period or whose election or nomination
for election was previously so approved but excluding for this
purpose any such new director whose initial assumption of office
occurs as a result of either an actual or threatened election
contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an
individual, corporation, or partnership, group, associate or other
entity or Person other than the Board, cease for any reason to
constitute at least a majority of the Board;
(iii)
the consummation of a merger or
consolidation of the Company with any other entity, other than a
merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving or resulting entity) more
than 50% of the combined voting power of the surviving or resulting
entity outstanding immediately after such merger or consolidation;
or
(iv) the Company disposes of all or substantially
all of the consolidated assets of the Company (other than such a
sale or disposition immediately after which such assets will be
owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company immediately prior to such sale or
disposition).
(e) Registration Rights . If at any time the Company proposes to file a
registration statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of
any holders of the Company’s Common Stock or for an
underwritten offering of the Company’s Common Stock (other
than (i) a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the Securities and Exchange
Commission) or (ii) a registration statement filed in connection
with an exchange offer or offering of securities solely to the
Company’s existing security holders), then the Company shall
give written notice of such proposed filing to Executive as soon as
practicable (but in no event less than 20 days before the
anticipated filing date), and such notice shall offer Executive the
opportunity to register such number of Option Shares as Executive
request (a “Piggy-Back Registration”).
In the case of a registration statement filed by
the Company for its own account or for the account of any holders
of its Common Stock and not involving an underwritten offering of
Common Stock, the number of Options Shares that Executive may
include in such registration statement shall be unlimited. In the
case of a registration statement involving an underwritten offering
of the Company’s Common Stock, the Company shall use
commercially reasonable efforts to cause the managing underwriter
or underwriters of a proposed underwritten offering to permit the
Option Shares requested by Executive to be included in a Piggy-Back
Registration on the same terms and conditions as any similar
securities of the Company or any other security holder included
therein and to permit the sale or other disposition of such Option
Shares in accordance with the intended method of distribution
thereof; provided, however, that the determination of the managing
underwriter or underwriters of such offering shall be conclusive as
to the number of Option Shares to be included in such registration
statement. Executive shall
have the right
to withdraw his request for inclusion of any Option Shares in any
registration statement by giving written notice to the Company of
its request to withdraw.
Executive’s right to participate in
Piggy-Back Registrations shall continue until Executive is
permitted to sell all of his Option Shares without restriction
under Rule 144 of the Securities Act.
6. Employee Benefits . During the Employment Term, Executive shall
be provided, in accordance with the terms of the Company’s
employee benefit plans as in effect from time to time, health
insurance and short term and long term disability insurance,
retirement benefits and fringe benefits (collectively
“Employee Benefits”) on the same basis as those
benefits are generally made available to other employees of the
Company. Executive shall be entitled to paid vacation of four (4)
weeks per annum during the first year Employment Term and five (5)
weeks during each additional year of the Employment Term. Such
vacation shall be taken at times consistent with the proper
performance by the Executive of his duties and responsibilities and
with the approval of the CEO. Vacation not taken in any calendar
year shall not carry forward to any future year. Executive may work
from home up to two (2) business days per month, subject to
approval by the CEO. If Executive works from home more than two (2)
business days per month, any such additional days shall be deducted
first from Executive’s accrued but unused vacation days and
then from allowable sick days, either in the calendar year in which
such additional days are taken or the next succeeding calendar
year, as applicable.
7. Business Expenses . During the Employment Term, reasonable
business expenses incurred by Executive in the performance of his
duties hereunder shall be reimbursed by the Company in accordance
with Company policies.
8. Termination. Notwithstanding any other provision
of this Agreement:
(a) By the Company for Cause or By Executive for
Executive’s Convenience .
(i) The Employment Term and Executive’s
employment hereunder may be terminated by the Company for Cause (as
defined below) or by Executive’s resignation for his
convenience.
(ii) For purposes of this Agreement, “
Cause ” shall mean (A) the Executive’s
continued failure to substantially perform the duties of his
position or breach of material terms of this Agreement, after
notice (specifying the details of such alleged failure) and a
reasonable opportunity to cure if such breach can be cured; (B) any
willful act or omission which is demonstrably and materially
injurious to the Company or any of its subsidiaries or affiliates;
(C) conviction or plea of nolo contendere to a felony or other
crime of moral turpitude other than involving acts of negligence;
or (D) willful failure to carry out the legitimate directives of
the Company�
