EXHIBIT 10.2
AMENDED AND
RESTATED
ENGAGEMENT
AGREEMENT
AGREEMENT
effective as of the 1 st day of January, 2009 between Capital Gold
Corporation, a Delaware Corporation having an office at 76 Beaver
Street, 14 th Floor, New York, NY 10005 (hereinafter referred
to as the “Company”), and Christopher M. Chipman
(hereinafter referred to as “Chipman”).
This agreement
(the “Agreement”) amends and restates the Second
Amended Engagement Agreement by and between the Company and Chipman
originally effective on May 1, 2007.
IN
CONSIDERATION OF the premises and mutual covenants and conditions
herein contained, the Company and Chipman hereby agree as
follows:
1.
Engagement . The Company agrees to engage
Chipman, and Chipman agrees to serve the Company as the Chief
Financial Officer for the Company upon the terms and conditions
hereafter set forth. The duties of Chipman shall be
consistent with his position as Chief Financial Officer, and shall
be those duties customarily performed by an executive of his
experience. Chipman shall report to the President of the
Company. During the term of engagement, Chipman shall
not directly or indirectly pursue any other business activity
without the prior written consent of the President, with the
exception of activity that does not materially interfere with his
duties hereunder, given his time commitment set forth in Section 5,
and passive personal investments not in breach of any other term or
provision hereof. Chipman agrees to travel to whatever extent is
reasonably necessary in the conduct of the Company’s
business, at the Company’s expense and pursuant to the
Company’s standard policies and procedures.
2.
Term . This Agreement becomes effective as of
January 1, 2009 and shall expire on December 31, 2011 (the
Engagement Period”). Subject to the provisions of
Section 7 herein, the Engagement Period shall automatically renew
for successive one-year periods unless either party provides the
other party with written notice of its intent not to renew at least
thirty (30) days prior to the expiration of the then current
Engagement Period.
3.
Compensation And Other Benefits.
(a)
Base Fee . For his services to the Company during
the Engagement Period, the Company shall pay Chipman a fee at the
annual rate of not less than Two Hundred One Thousand, Two Hundred
and Fifty ($201,250) Dollars (the “Annual Fee”) payable
in equal monthly installments.
(b)
Bonus . Chipman shall be eligible for any annual
incentive bonus opportunity offered by the Company to executive
officers of the Company at Chipman’s level. In the
event of any conflict between this Agreement and any incentive
bonus plan adopted by the Company for its officers and employees,
this Agreement shall control. The amount of this bonus,
as well as the criteria necessary to earn a bonus, may be changed
at any time by the Company and shall be within the sole discretion
of the Company. All bonuses paid pursuant to this
Agreement will
be subject to
applicable withholdings and deductions, if applicable, and will be
paid no earlier than fifteen (15) days and no later than ninety
(90) days after the Company’s fiscal year end for which the
bonus is earned (but in no event later than the March 15 of the
calendar year after the calendar year in which the bonus is
earned). If Chipman’s engagement terminates,
voluntarily or by the Company for Cause, prior to the last day of
the fiscal year for which the bonus applies, Chipman acknowledges
that he is not entitled to any bonus not yet paid at the time of
the termination because any such unpaid bonus will not be earned,
vested, due, or owing. Chipman hereby expressly forfeits
and waives any such unpaid bonus. In the event
that Chipman’s engagement terminates without cause pursuant
to Section 7(b) or by Chipman for breach pursuant to Section 7(e)
prior to the last day of the fiscal year for which the bonus
applies, Chipman will be entitled to a bonus pro rated for the
period from the beginning of that fiscal year to the date of
termination and payable no later than 60 days following
Chipman’s termination.
(c) As
an independent contractor, Chipman will not participate in the
Company’s Group Medical program or 401K pension
program.
4.
Independent Contractor . Nothing herein shall be
construed to create an employer-employee relationship between the
Company and Chipman. Chipman is an independent contractor and not
an employee of the Company or any of its subsidiaries or
affiliates. The consideration set forth in Section 3 shall be the
sole consideration due Chipman for the services rendered hereunder.
It is understood that the Company will not withhold any amounts for
payment of taxes from the compensation of Chipman
hereunder.
5.
Services . Chipman agrees to serve the Company
faithfully and to the best of his ability, and to devote
eighty-five percent (85%) of his business time, labor, skill,
attention and best ability to the performance of his duties
hereunder in a manner which will faithfully and diligently further
the business and interests of the Company. Chipman
agrees to spend a minimum of two days per month in the New York
offices of the Company. All services required to be
rendered by Chipman may be rendered for the benefit of any of the
Company’s affiliates or subsidiaries, but no liability shall
attach to such affiliate or subsidiary for the payment of any
compensation hereunder.
6.
Expenses . During the period of his engagement,
Chipman will be reimbursed for his reasonable and necessary
documented expenses incurred by him pursuant to his engagement
hereunder, as they are incurred.
7.
Termination.
(a)
Termination for Cause . The Company may discharge
Chipman for: (i) failure or refusal to perform the services
required hereunder; (ii) a material breach by Chipman of any of the
terms of this Agreement; or (iii) Chipman’s conviction of a
crime that either results in imprisonment or involves embezzlement,
dishonesty, or activities injurious to the Company or its
reputation. Whether Cause exists under this Agreement
shall be determined by the Company in its reasonable
discretion.
(b)
Without Cause . This Agreement may be terminated
by the Company without Cause at any time, such termination to be
effective thirty (30) days after Chipman’s receipt of written
notice from the Company.
(c)
Death or Disability . This Agreement shall
terminate upon the death or disability of Chipman. For
purposes of this subsection (c), “disability” shall
mean the inability of Chipman effectively to substantially provide
the services hereunder by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months.
(d)
Resignation . Chipman shall have the right to
terminate this Agreement upon not less than sixty (60) days prior
written notice of termination.
(e)
Material Breach. This Agreement may be
terminated by Chipman for a material breach by the Company of any
of the terms of this Agreement, upon thirty (30) days’
written notice specifying the breach, and failure of the Company to
either (i) cure or diligently commence to cure the breach within
the 30-day notice period, or (ii) dispute in good faith the
existence of the material breach.
(f)
Change of Control . The Agreement can be
terminated Upon a Change of Control as defined in the Agreement
Regarding Change In Control (“Change In Control
Agreement”) entered into by and between the Company and
Chipman effective as of January 1, 2009 and attached hereto as
Exhibit A.
(g)
Section 409A .
(i) Anything
in this Agreement to the contrary notwithstanding, if on the date
of termination of Chipman’s engagement with
Company,
(A) Chipman
would not have a separation from service within the meaning of
Section 409A(a)(2)(A)(i) (“Separation From Service”) of
the Internal Revenue Code of 1986, as amended (the
“Code”), and as a result of such termination of
engagement would receive any payment that, absent the application
of this Section 7(g)(i)(A), would be subject to additional tax
imposed pursuant to Section 409A(a) of the Code, then such payment
shall instead be payable on the date that is the earliest of (1)
Chipman’s Separation From Service, (2) the date Chipman
becomes disabled (within the meaning of Section 409A(a)(2)(C) of
the Code), (3) Chipman’s death, or (4) such other
date as will not result in such payment being subject to such
additional tax; and if
(B) Chipman
is a specified employee within the meaning of Section
409A(a)(2)(B)(i) of the Code and would receive any payment sooner
than six months after Chipman’s Separation From Service that,
absent the application of this Section 7(g)(i)(B), would be subject
to additional tax imposed pursuant to Section 409A(a) of the Code
as a result of such status as a specified employee, then such
payment shall instead be payable on the date that is the
earliest of
(1) six months after Chipman’s Separation From Service,
(2) Chipman’s death, or (3) such other date as will
not result in such payment being subject to such additional
tax.
(ii) It
is the intention of the parties that payments or benefits payable
under this Agreement not be subject to the additional tax imposed
pursuant to Section 409A of the Code. To the extent such
potential payments or benefits could become subject to such
Section, the parties shall cooperate to amend this Agreement with
the goal of giving Chipman the economic benefits described herein
in a manner that does not result in such tax being
imposed.
(iii) In
the event that a payment or benefit payable under this Agreement is
subject to the additional tax imposed by Section 409A of the Code,
and Chipman has not been uncooperative in any attempts of the
Company to amend this Agreement to avoid such additional tax,
Company shall (at Chipman’s option) pay directly, or
reimburse Chipman for such additional tax and any interest and
penalty related thereto (the “409A Amounts”) within 10
days of Chipman’s submission to Company of the taxing
authority’s determination of amounts due (which determination
must be submitted by Chipman to Company within 30 days of receipt
by Chipman), and in the case of Chipman’s payment, evidence
of such payment. At the same time as Company’s
payment or reimbursement, Company shall pay Chipman a gross-up
amount to cover income, excise, and other applicable taxes on the
409A Amounts and on the gross-up amount (before this further
gross-up). For purposes of calculating the gross-up
amounts for taxes, Chipman shall be deemed to be taxed at the
highest marginal rate under all applicable local, state, federal,
and foreign tax laws for which the payment is made.
8. Effect
of Termination .
(a) In
the event that this Agreement is terminated for "cause" pursuant to
subsection 7(a), the Company shall pay Chipman, at the
time of such termination, only the fees and any reasonable and
necessary business expenses incurred by him in connection with his
services (less any applicable withholdings and deductions), all due
and payable to him through the date of the termination of this
Agreement.
(b) In
the event that this Agreement is terminated without cause pursuant
to subsection 7(b), subject to Section 7(g)(i) of the
Agreement, the Company shall pay Chipman a cash termination payment
equal to the greater of Chipman’s Annual Fee in effect upon
the date of termination or the balance of Annual Fees remaining in
the then current term of the Agreement, payable in equal monthly
installments beginning in the month following Chipman’s
termination. Such termination payments shall cease immediately in
the event that Chipman violates any provision of Sections 9 and/or
10 herein. In addition, the Company shall pay
Chipman any reasonable and necessary business expenses incurred by
Chipman in connection with his duties, all to the date of
termination and payable in a lump sum, less any applicable holdings
and deductions, as soon as administratively practicable (but in no
event later than 60 days) following Chipman’s
termination.
(c) In
the event this Agreement is terminated at his election pursuant to
subsection 7(d) or due to Chipman’s death or disability
pursuant to subsection 7(c), the Company shall pay
›
to Chipman, the
same amount as provided for in subsection 8(a) above, in the same
manner as provided for therein.
(d)
In the event this Agreement is terminated for material breach by
Chipman pursuant to subsection 7(e), the Company shall
pay to Chipman termination payments in an amount equal to cash
termination payments calculated pursuant to Section
8(b). Subject to Section 7(g)(i) of the Agreement, such
termination payments shall be paid in equal monthly installments to
Chipman beginning in the month following Chipman’s
termination. Such termination payments shall be paid so
long as Chipman is not in breach of any term of this Agreement,
including, without limitation, Sections 9 and 10
hereof. In addition, the Company shall pay to Chipman
all accrued fees and any reasonable and necessary business expenses
incurred by Chipman in connection with his duties, all to the date
of termination and payable in a lump sum, less applicable holdings
and deductions, as soon as administratively practicable (but in no
event later than 60 days) following Chipman’s
termination.
(e) In
the event of a Termination Upon a Change of Control as defined in
the Change In Control Agreement, the Company’s obligation to
Chipman shall be as set forth in the Change In Control
Agreement.
9.
Confidentiality .
(a) The term “Confidential
Information” shall include, but not be limited to, the whole
or any portion or phase of (i) any confidential, or proprietary or
trade secret, technical, business, marketing or financial
information, whether pertaining to (1) the Company or its
Affiliates, (2) its or their suppliers, or (3) any third party
which the Company or its Affiliates is under an obligation to keep
confidential including, but not limited to, methods, know-how,
techniques, systems, processes, software programs, works of
authorship, supplier lists, projects, plans, and proposals, and
(ii) any software programs and programming prepared for the
Company’s benefit whether or not developed, in whole or in
part by Chipman. For purposes of this Agreement,
“Confidential Information” shall include, but shall not
be limited to, strategies, analysis, concepts, ideas, or plans;
operating techniques; demographic and trade area information;
prospective site locations know-how; improvements; discoveries,
developments; designs, techniques, procedures; methods; machinery,
devices; drawings; specifications; forecasts; new products;
research data, reports, or records; marketing or business
development plans, strategies, analysis, concepts or ideas;
contracts; general financial information about or proprietary to
the Company, including, but not limited to, unpublished financial
statements, budgets, projections, licenses, and costs; pricing;
personnel information; and any and all other trade secrets, trade
dress, or proprietary information, and all concepts or ideas in or
reasonably related to the Company’s business. All
such Confidential Information is extremely valuable and is intended
to be kept secret to the Company; is the sole and exclusive
property of the Company or its Affiliates; and, is subject to the
restrictive covenants set forth herein. The term Confidential
Information shall not include any information generally available
to the public or publicly disclosed by the Company (other than by
the act or omission of Chipman), information disclosed to Chipman
by a third party under no duty of confidentiality to the Company or
its Affiliates, or information required by law or court order to be
disclosed by Chipman.
(b) Chipman shall not, without the
Company’s prior written approval, use, disclose, or reveal to
any person or entity any of the Company’s Confidential
Information, except as required in the ordinary course of
performing duties hereunder. Chipman shall not use or
attempt to use any Confidential Information in any manner which has
the possibility of injuring or causing loss, whether directly or
indirectly, to the Company or any of its Affiliates.
(c) In the event that Chipman’s
engagement with the Company is terminated for any reason
whatsoever, he shall return to the Company, promptly upon the
Company’s written request therefore, any documents,
photographs, tapes, discs, memory devices, and other property
containing Confidential Information which were received by him
during his engagement, without retaining copies thereof.
10.
Non-Competition; Non-Solicitation; Anti-Raiding;
Non-Disparagement . Without the prior written
approval of the Chief Executive Officer or the President of the
Company, Chipman shall not, directly or indirectly, during his
engagement and until the end of one hundred eighty (180) days after
termination of engagement (however such termination occurs,
including, without limitation, termination pursuant to Section
7(a), 7(b), 7(c), 7(d) or 7(e)):
(a) Engage in a “Competing
Business’’ in the “Territory”, as those
terms are defined below, whether as a sole proprietor, partner,
corporate officer, employee, director, shareholder, consultant,
agent, independent contractor, trustee, or in any other manner by
which Chipman holds any beneficial interest in a Competing
Business, derives any income from any interest in a Competing
Business, or provides any service or assistance to a Competing
Business. “Competing Business” shall mean any business
that mines or produces minerals which is competitive with the
business of the Company or any of its Affiliates (defined below),
as conducted or under development at any time during the term of
engagement. “Affiliates” shall mean any
entity controlled by or under common control with the Company or
any joint venture, partnership or other similar entity to which the
Company is a party. “Territory” shall mean
anywhere in the state of Sonora, Mexico. The provisions
of this Section 10 will not restrict Chipman from owning less
than five percent of the outstanding stock of a publicly-traded
corporation engaged in a Competing Business;
(b) Acquire, lease or otherwise
obtain or control any beneficial, direct or indirect interest in
mineral rights, or other rights or lands necessary to develop, any
mineral property in which the Company or any of its Affiliates at
the time of termination as a beneficial interest or is actively
seeking to acquire, or that is within a distance of five (5)
kilometers from any point on the outer perimeter of any such
property in which the Company or any of its affiliates has a
beneficial interest or that it is seeking to acquire;
(c) Conduct any exploration or
production activities or otherwise work on or in respect of any
mineral property within a distance of five (5) kilometers from any
point on the outer perimeter of any mineral property in which the
Company or any of its affiliates then has a beneficial interest or
is actively seeking to acquire;
(d) (i) Contact or solicit, or
direct or assist others to contact or solicit, for the purpose of
promoting any person’s or entity’s attempt to compete
with the Company or any of its Affiliates,
in any business
carried on by the Company or any of its Affiliates during the
period in which Chipman was a consultant of the Company, any
suppliers, independent contractors, vendors, or other business
associates of the Company or any of its Affiliates that were
existing or identified prospective suppliers, independent
contractors, vendors, or business associates during such period, or
(ii) otherwise interfere in any way in the relationships
between the Company or any of its Affiliates and their suppliers,
independent contractors, vendors, and business
associates;
(e) (i) Solicit, offer
engagement to, otherwise attempt to hire, or assist in the hiring
of any employee or officer of the Company or any of its Affiliates;
(ii) encourage, induce, assist or assist others in inducing
any such person to terminate his or her engagement with the Company
or any of its Affiliates; or (iii) in any way interfere with
the relationship between the Company or any of its Affiliates and
their employees; or
(f) Make any public statement or
perform or do any other act prejudicial or injurious to the
reputation or goodwill of the Company or any of its Affiliates or
otherwise interfere with the business of the Company or any of its
Affiliates.
11.
Acknowledgments . Chipman acknowledges that the
covenants contained in Sections 9 and 10, including those related
to duration, geographic scope, and the scope of prohibited conduct,
are reasonable and necessary to protect the legitimate interests of
the Company. Chipman acknowledges that the covenants
contained in Sections 9 and 10 are designed, intended, and
necessary to protect, and are reasonably related to the protection
of, the Company’s trade secrets, to which he will be exposed
and with which he will be entrusted. Specifically,
without limitation, Chipman is entrusted with trade secrets
regarding: the strategic planning initiatives; business
development plans; budgets; financial information; management
training; future business plans; and operational strategies and
procedures. Chipman understands that any breach of
Sections 9 or 10 will also constitute a misappropriation of
the Company’s proprietary rights, and may constitute a theft
of the Company’s trade secrets under applicable local, state,
and federal statutes, and will result in a claim for injunctive
relief, damages, and/or criminal sanctions and penalties against
Chipman by the Company, and possibly others.
12.
Forfeiture of Termination Payments . If
Chipman breaches Sections 9 or 10 of this Agreement during the term
that termination payments are made pursuant to Sections 8(b), 8(c)
or 8(d) of this Agreement, Chipman shall pay back to the Company
all termination payments received to date. Nothing
contained in this Section 12 shall be construed as prohibiting the
Company from pursuing any other remedies available to it in the
event of the breach of Sections 9 or 10, including the equitable
remedies set forth in Section 15.
13.
Forfeiture of Profits Related to Option Exercises
. If Chipman breaches Section 9 or 10 of this Agreement,
the Company shall have the right to repurchase any or all shares of
common stock of the Company purchased by Chipman upon the exercise
of options within the twelve (12)-month period immediately
preceding the breach at the exercise price of the option (the
“Repurchase Amount”), or if Chipman no longer holds
such shares of common stock purchased on exercise of options,
Chipman shall pay to the Company an amount (the
“Profit Amount”) equal to the gross profits that
Chipman received or to be received on the sale of such
shares
calculated as
the aggregate sale price of such shares of common stock less the
exercise price. The Company may exercise this right
within 90 days of its discovery of a breach, by a written notice
(“Forfeiture Notice”) to Executive and, as the case may
be: (i) if Executive has the shares, Executive shall immediately
deliver them to the Company and, thereafter, the Company shall pay
the Repurchase Amount to Executive within thirty (30) days by
certified or bank check or by wired funds; and (ii) If Executive no
longer has the shares, Executive shall pay the Profit Amount to the
Company within thirty (30) days of the date of the Forfeiture
Notice. If the Executive has transferred such shares in
a transaction which is not a sale (including, for example, a gift
to a family member or entity), the Profit Amount payable by
Executive to the Company shall be an amount equal to the difference
between the value of such shares on the date of the Forfeiture
Notice and the exercise price. Nothing contained in this Section 13
shall be construed as prohibiting the Company from pursuing any
other remedies available to it in the event of the breach of
Sections 9 or 10, including the equitable remedies set forth in
Section 15.
14.
Non-Exclusivity of Rights . Amounts that
are vested benefits or that Chipman is otherwise entitled to
receive under any plan, policy or program of, or contract or
agreement with the Company at or subsequent to termination of
engagement (however such termination occurs, including, without
limitation, termination pursuant to Section 7(a), 7(b), 7(c), 7(d)
or 7(e)) shall be payable in accordance with such plan, policy or
program of, or any contract or agreement except as explicitly
modified by this Agreement.
15.
Equitable Remedies . The services to be
rendered by Chipman and the Confidential Information entrusted to
Chipman as a result of his engagement by the Company are of a
unique and special character, and any breach of Sections 9 or 10
will cause the Company immediate and irreparable injury and damage,
for which monetary relief would be inadequate or difficult to
quantify. the Company will be entitled to, in addition
to all other remedies available to it, injunctive relief and
specific performance to prevent a breach and to secure the
enforcement of Sections 9 or 10. Chipman acknowledges
that injunctive relief may
