Exhibit 10.16
EXHIBIT C
EMPLOYMENT AND
NON-COMPETITION AGREEMENT
BY AND BETWEEN
STEPHEN J. STEARMAN
AND
MIDNIGHT HOLDINGS GROUP, INC
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EXHIBIT C
INDEX TO DEFINED TERMS
TERM
SECTION REFERENCED
"Agreement" .............................................
Introduction
"Base Salary" ...........................................
Section 2.1
"Board" .................................................
Section 1.4
"Business" ..............................................
Section 3.2
"Company" ...............................................
Introduction
"Confidential Information" ..............................
Section 4
"Effective Date" ........................................
Introduction
"Employment Period" .....................................
Section 1.3
"Employee" ..............................................
Introduction
"Good Cause" ............................................
Section 1.4
"Good Reason" ...........................................
Section 1.5
"Initial Period" ........................................
Section 1.3
"Permitted Investments" .................................
Section 3.2
"Purchase Agreement" ....................................
Preliminary
Recitals
"Restricted Period" .....................................
Section 3.2
"Restrictive Covenants" .................................
Section 7
Termination Without Cause Pursuant to a Merger ..........
Section 2.4
"Territory" .............................................
Section 3.2
"Total Disability" ......................................
Section 1.4
i
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EXHIBIT C
EMPLOYMENT
AND NON-COMPETITION AGREEMENT
THIS
EMPLOYMENT AND NON-COMPETITION AGREEMENT (the "Agreement"), is
made
and entered into on March 30, 2007 (the "Effective Date"), by and
between
MIDNIGHT HOLDINGS GROUP, INC., a Delaware corporation, and its
subsidiaries and
affiliates whether in existence or to be formed (collectively, the
"Company"),
and STEPHEN J. STEARMAN (the "Employee").
PRELIMINARY RECITALS:
A. WHEREAS, on the Effective Date, All Night Auto of Oklahoma,
Inc., a Michigan
corporation wholly owned by the Midnight Holdings Group, Inc., and
Elite
Automotive Group, LLC, an Oklahoma limited liability company of
which the
Employee is the majority owner, entered into an Asset Purchase
Agreement (the
"Purchase Agreement"), and
B. WHEREAS, in conjunction with the transaction evidenced by the
Purchase
Agreement the Company wishes to employ the Employee as its Director
of Southwest
and West Coast Operations and the Employee wishes to become
employed with the
Company in that capacity.
NOW,
THEREFORE, in consideration of the premises and mutual covenants
of
the parties hereinafter set forth, and other good and valuable
consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto
hereby agree as follows:
1.
EMPLOYMENT.
1.1 ENGAGEMENT OF EMPLOYEE. The Company agrees to employ the
Employee and the Employee agrees to accept employment as the
Director of
Southwest and West Coast Operations of the Company, all in
accordance with the
terms and conditions of this Agreement.
1.2 DUTIES AND POWERS. During the Employment Period, the
Employee
will serve as the Company's Director of Southwest and West Coast
Operations,
reporting directly to the Director of Sales and Marketing and will
have such
responsibilities, duties and authorities, and will render the
services set forth
on Exhibit A to this Agreement and such other services of an
executive and
administrative character (consistent with the duties set forth on
Exhibit A) as
the Company's Director of Sales and Marketing shall from time to
time direct.
The Employee shall devote his best efforts, energies and
abilities
and his full business time, skill and attention (except for
permitted vacation
periods and reasonable periods of illness or other incapacity) to
the business
and affairs of the Company. The Employee acknowledges that his
duties and
responsibilities will require his full-time business efforts and
agrees that
during the Employment Period he will not engage in any other
business activity
or have any business pursuits or interests which materially
interfere or
conflict with the performance of the Employee's duties hereunder,
provided, that
nothing in this Section 1.2 shall be deemed to prohibit the
Employee from making
Permitted Investments. The Employee's principal business office
will be located
in the Oklahoma City metropolitan area. Unless otherwise agreed by
the Employee,
the Employee will not be required to spend more than fifty percent
(50%) of his
time outside the State of Oklahoma.
Employment Agreement - Stephen J. Stearman
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EXHIBIT C
1.3 EMPLOYMENT PERIOD. The Employee's employment under this
Agreement shall begin on the Effective Date and shall continue
through and until
the second anniversary of the Effective Date (the "Initial Period")
unless
extended as provided in this Section 1.3. This Agreement shall be
automatically
extended for additional consecutive one (1) year periods ("Renewal
Periods")
unless either party delivers to the other party written notice of
such party's
election not to renew this Agreement at least ninety (90) days
prior to the
expiration of the Initial Period or any Renewal Periods. The
Initial Period and
the Renewal Periods are hereinafter referred to collectively as the
"Employment
Period." Notwithstanding anything to the contrary contained herein,
the
Employment Period is subject to termination pursuant to Section 1.4
and Section
1.5 below.
1.4 TERMINATION BY THE COMPANY. The Company has the right to
terminate Employee's employment under this Agreement, by notice to
Employee in
writing, (i) at any time for Good Cause (as hereinafter defined),
(ii) at any
time after the Initial Period without Good Cause for any or no
reason, (iii) at
any time due to the death or Total Disability (as hereinafter
defined) of the
Employee, and/or (iv) at any time Without Cause Pursuant To A
Merger. Any such
termination shall be effective upon the date of service of such
notice pursuant
to Section 13. As used herein, "Good Cause" means the occurrence of
any of the
following events:
(a) conviction of a felony;
(b)
willful and serious misconduct;
(c) the unapproved or inappropriate disclosure of any
confidential company information to persons either internal or
external of
the
Company;
(d) failure to satisfactorily perform the duties of the
Employee's
position as measured and established by the Company's Director
of Sales
and Marketing (consistent with Exhibit A), which failure is not
cured
within fifteen (15) Business Days of written notice from the
Company
to the
Employee; or
(e) a breach by the Employee of this Agreement or by the
Employee
or his affiliates of the Purchase Agreement or any other
agreement
referenced in, or related to, this Agreement or the Purchase
Agreement,
which breach is not cured within fifteen (15) Business Days
after
written notice is given by the Company or a successor in
interest.
The Employee shall be deemed to have a "Total Disability" for
purposes of this Agreement if he is unable to perform, by reason of
physical or
mental incapacity, his duties or obligations under this Agreement,
for a total
period of ninety (90) consecutive days or one hundred twenty (120)
cumulative
days in any three hundred sixty (360) day period and such
incapacity is
continuing on the date of notice of termination. The Company's
Board of
Directors (the "Board") shall determine, according to the facts
then available
and based upon the opinion provided to the Board by the Employee's
personal
physician, whether and when the Total Disability of the Employee
has occurred.
Such determination shall not be arbitrary or unreasonable.
Employment Agreement - Stephen J. Stearman
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EXHIBIT C
1.5 TERMINATION BY EMPLOYEE. The Employee has the right to
terminate
his employment under this Agreement upon ninety (90) days prior
written notice
to the Company. Although the Employee may terminate his employment
for any
reason, including any salary reduction (whether or not shared by
other similar
Company employees), or any requirement by the Company that the
Employee spend
any more than fifty percent (50%) of his time outside the State of
Oklahoma),
the Employee shall be deemed to have terminated his employment for
"Good Reason"
ONLY if the Company engages in any of the following actions (which
action
continues for more than fifteen (15) Business Days after written
notice is given
by the Employee to the Company that the Employee considers the
action to
constitute Good Reason to terminate employment under this
Employment Agreement).
The following actions by the Company (and ONLY the following
actions) shall be
deemed to constitute Good Reason:
(a) materially reduces or decreases the Employee's salary from
the level
and effect on the date hereof without equally adjusting other
employee
salaries (for example, a salary decrease adjustment for all
employees
at an equal level to the Employee in the Company of any equal
percentage
of their base salary will not be a Good Reason);
(b) fails to include the Employee in any incentive
compensation plans, bonus plans or other plans and benefits
provided by
the Company to
other employees of equal level in the Company;
(c) materially reduces, decreases or diminishes the nature,
status or
duties and responsibilities of the Employee's position with the
Company in
effect on the date hereof and such reduction, decrease or
diminution
is not reasonably related to or the result of an adverse change
in the
Employee's performance of assigned duties and responsibilities;
and
(d) a breach by the Company or a successor in interest of the
Company of
this Agreement, the Purchase Agreement, or any other agreement
referenced
in, or related to, this Agreement or the Purchase Agreement,
which
breach is not cured within fifteen (15) Business Days after
written
notice is
given by the Employee.
2.
COMPENSATION AND BENEFITS.
2.1 BASE COMPENSATION. During the Employment Period, the
Company
will pay the Employee an annual salary of ONE HUNDRED TEN THOUSAND
DOLLARS
($110,000)(the "Base Salary"), payable in equal installments and in
accordance
with the Company's regular payroll policy for salaried employees,
but in no
event shall these installments be paid to employee less frequently
than monthly
(as of the date hereof, the Company pays payroll twice a month on
the 15th day
and the last day of each month).. The Employee's Base Salary shall
be subject to
review annually by the Company's Board of Directors and may be
increased (but
not decreased). In any event the Employee's Base Salary will be
increased for
cost of living adjustments of two percent (2%) of the Employee's
Base Salary
during the second and each of the following years of
employment.
2.2 BONUS COMPENSATION. In addition to his Base Salary, during
the
Employment Period, Employee will be paid bonuses ("Bonus
Compensation") when
specific operational criteria are met. These include: retail and
service center
sales and operations meeting or exceeding expectations; corporate
infrastructure
and vendor/supplier programs meeting or
Employment Agreement - Stephen J. Stearman
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EXHIBIT C
exceeding expectations; employee and team member performance
meeting and
exceeding expectations. Bonuses will be paid, at the option of the
Employee, in
the form of U.S. Dollars or cashless warrants or both U.S. Dollars
and cashless
warrants. The strike price of any issued warrants shall be based
upon the
average closing price of the Company's stock during the 6-month
period
immediately prior to the award. In no case shall the strike price
be below $0.08
per share. A copy of the form of the cashless warrant will be
attached as
Exhibit B to the Employment Agreement. During the Employment
Period, the
Employee's annual bonus structure shall be as follows:
(a). If all service centers and retail stores within the
Employee's
region meet or exceed operational expectations, the Executive
will
receive a cash award of $15,000 or cashless warrants that are
equivalent
to $15,000; and
(b). If all corporate infrastructure and vendor/supplier
programs
meet or exceed the prescribed expectations, the Employee will
receive an
additional cash award of $10,000 or cashless warrants that are
equivalent
to $10,000; and
(c). If all employee and team member programs for
performance and measurement meet or exceed expectations, the
Employee will
receive an
additional cash award of $5,000 or cashless warrants that are
equivalent
to $5,000.
For the fiscal year ending December 31, 2007, the expectations upon
which the
Executive's Bonus Compensation will be based are set forth on
Exhibit C to this
Agreement.
2.3 STOCK
GRANT. The Company hereby grants the Employee one million
(1,000,000) shares of the Company's restricted common stock (the
"Restricted
Stock"). The Employee will become fully vested with respect to the
Restricted
Stock on the second anniversary of the Effective Date of this
Employment
Agreement, provided that the Employee continuously serves as an
employee of the
Company during that period. Notwithstanding the foregoing, if the
Employee's
employment is terminated by the Company for other than "Good Cause"
or if the
Employee terminates his employment with the Company for Good
Reason, the
Restricted Stock shall immediately vest. Possession and enjoyment
of the
Restricted Stock shall be otherwise subject to the Restricted Stock
Award
Agreement attached as Exhibit D to this Agreement and shall also be
subject to a
Registration Rights Agreement attached as set Exhibit E to this
Agreement.
2.4 COMPENSATION AFTER TERMINATION.
(a) If the Employment Period is terminated (i) by the Company
for Good
Cause, (ii) by the Employee upon proper notice, or (iii) upon
expiration
of the Employment Period, then the Company shall have no
further
obligations hereunder or otherwise with respect to the
Employee's
employment
from and after the termination or expiration date (except
payment of
the Employee's Base Salary accrued through the date of
termination or expiration and any other accrued and unpaid
benefits, if
any), and
the Company shall continue to have all other rights available
hereunder
(including without limitation, all rights under Section 3 at
law
or in
equity).
Employment Agreement - Stephen J. Stearman
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EXHIBIT C
(b) If the Employment Period is terminated by the Company
without
Good Cause, or by the Employee for Good Reason, the Employee
shall
be
entitled to receive:
(i) the
Employee's Base Salary for the remainder of
the Employment Period (or if the termination
occurs during any Renewal Period, then for a
period of six (6) months after the effective date
of the termination) to be paid in the same manner
as if the Employee had remained employed with the
Company;
(ii) an amount equal
to the pro rata portion (based
upon a 365 day year) of the Bonus Compensation
which the Employee would have received, if any, to
be paid in a lump sum to the Employee within
thirty (30) days of the termination unless
otherwise requested by the Employee;
(iii) the Employee's healthcare benefits for the
remainder of the Employment Period (or, if the
termination occurs during any Renewal Period, then
for a period of six (6) months after the effective
date of the termination) to be maintained in the
same manner as if the Employee had remained
employed with the Company; and
(iv) the Restricted
Stock, which shall be immediately
vested.
(c) If the Employment Period is terminated by reason of the
Employee's
death or Total Disability, the Employee shall be entitled to
receive
the Employee's Base Salary accrued through the date of death or
Total Disability
and any other accrued and unpaid benefits.
(d) If the Employment Period is terminated by the Company by
reason of
a Termination Without Cause Pursuant to Merger (as hereinafter
defined),
the Employee shall be entitled to receive:
(i) the Emp
