Exhibit 10(h)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 29th day of October 1996, by and
between DIVERSIFAX, INC., a Delaware corporation, having its principal executive
offices at 00 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxx 00000 (hereinafter
referred to as the "Company"), and XX. XXXXX X. XXXXXXXX, with an address at 000
Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to as the
"Employee").
WITNESSETH:
WHEREAS, the Employee is presently the President and Chief Executive
Officer of the Company; and
WHEREAS, the parties hereto desire to set forth in this Agreement the terms
and conditions of the Employee's continued employment as the President and Chief
Executive Officer of the Company.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, the parties hereto agree as follows:
1. Employment; Position; Responsibilities.
1.1 The Company hereby employs and engages the Employee to serve as
the President and Chief Executive Officer of the Company and to perform the
duties customarily associated with such positions.
1.2 The Employee hereby accepts said employment with the Company on
the terms and conditions herein set forth and agrees to devote his full time,
energy and skill during regular business hours exclusively to such employment.
2. Term of Employment.
2.1 The term of employment hereunder shall commence as of December 1,
1996, shall continue for a period of one year (the "Term"), and shall be renewed
for additional successive one year periods (each an "Additional Term"), unless
either party terminates this Employment Agreement at the end of the Term or any
Additional Term by 30 days prior written notice, except that the Employee's
employment shall terminate sooner upon the occurrence of any of the following
acts:
(a) The death of the Employee;
(b) The incapacity of the Employee as defined below;
(c) An act or omission to act on the part of the Employee which
would constitute cause, as defined below, for the termination of employment, and
the giving of written notice to the Employee by the Company that the Company
elects to terminate the employment of the Employee; or
(d) The Employee voluntarily leaves the employ of the Company.
2.2 The term "incapacity" as that term is used in Section 2.1 (b)
above shall be deemed to refer to and include the absence of the Employee from
his employment by reason of mental or physical illness, disability or incapacity
for a continuous period of 120 days or for a period of six months in any one
year period, and the Company, at its option, elects to treat such illness,
disability or incapacity as permanent in nature.
2.3 The term "cause" as that term is used in Section 2.1(c) above
shall be defined as being for:
(a) A material default or breach of any of the representations,
warranties, obligations, covenants or agreements made by the Employee herein;
(b) The conviction of the Employee in a court of law of any
felony; or
(c) The misappropriation by the Employee of Company assets.
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3. Compensation: Related Matters.
3.1 The Employee shall be compensated for his services hereunder as
follows:
(a) Upon execution of this Employment Agreement, the Employee
shall receive, under the Company's 1996 Stock Option Plan, five year options to
purchase 750,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock"), which options shall vest as to 150,000 upon the date of
grant and as to 150,000 on each of the next four anniversary dates hereof. The
option exercise price per share shall be the fair market value of the Common
Stock on the date hereof. Said options shall be deemed "incentive" stock options
to the maximum extent permitted by the Internal Revenue Code of 1986, as
amended.
(b) A base salary at the rate of $125,000 per annum payable in
accordance with the Company's normal payroll procedures for executive employees;
provided, however, that on December 1 of each year during an Additional Term,
commencing December 1, 1997, the base salary shall be adjusted for a cost of
living increase based on the Consumer Price Index for New York City for the
twelve month period immediately preceding such December 1 date. The Employee
shall also be entitled to additional increases in base salary as may be
determined from time to time by the Board of Directors or any compensation
committee appointed by the Board of Directors.
(c) (i) A bonus equal to a percentage of the Pre-tax Profits of
the Company, for each one year period constituting the Term and each Additional
Term during which Employee is employed by the Company under this Agreement, as
follows:
Pre-Tax Profits Bonus
--------------- -----
$150,000-$500,000 6%
$500,001-$1,000,000 12%
$1,000,001-$6,000,000 15%
over $6,000,000 18%
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(ii) Such bonus shall be paid no later than four months after the
end of the applicable Term or Additional Term. At the option of the Employee,
and subject to compliance with relevant securities and other laws, the bonus
payable in Section 3.1(c)(i) above shall be paid in restricted shares of the
Common Stock, based upon the fair market value of the Common Stock on the last
day of the applicable Term or Additional Term.
(iii) "Pre-tax Profits" as used herein shall mean the pre-tax
profits of the Company as stated in its financial statements (prior to the
computation of Employee's bonus under Section 3.1(c)(i) hereof) for the
appropriate time period without taking into account any extraordinary gains or
losses of the Company.
3.2 The Company shall reimburse the Employee for all reasonable
expenses incurred by him in connection with the business of the Company,
provided the Employee shall submit proper supporting documentation for such
expenses.
3.3 The Employee shall be eligible, to the extent he qualifies, for
participation in any health or other group insurance plan of the Company and
shall also be entitled to participate in any employee benefit programs of the
Company for its key employees or for its employees generally.
3.4 The Employee shall be entitled to a four (4) week paid vacation
per year during the Term, to be taken at such times as are consistent with the
needs of the Company and the convenience of the Employee.
3.5 (a) In the event the Employee's employment by the Company is
terminated for "cause" pursuant to Section 2.1(c) hereof, or by virtue of
Section 2.1(d) hereof because the Employee voluntarily leaves the employ of the
Company, the Employee shall be entitled to (i) the compensation provided for by
Section 3.1(b) only up to and until the date of termination of his employment,
and (ii) a pro rata portion of the compensation provided for by Section
3.1(c)(i), based upon the portion of the Term or Additional Term in which the
Employee was actually employed by the Company under this
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Agreement; but shall not be entitled to any further compensation pursuant to
Sections 3.1(b) or 3.1(c) for the year in which the Employee's employment is
terminated or any subsequent year.
(b) In the event the Employee's employment by the Company is
terminated for reason other than cause or the Employee voluntarily leaving the
employ of the Company, the Employee (or his estate in the event such termination
is due to the death of the Employee or the Employee dies subsequent to such
termination) shall be entitled (i) to receive the compensation provided for in
Section 3.1(b) hereof for the balance of the Term or Additional Term, as the
case may be, the medical insurance-benefits provided for in Section 3.3 hereof
for the balance of the Term or Additional Term, as the case may be (but only to
the extent legally allowable); and (ii) a pro rata portion of the compensation
provided for by Section 3.1(c)(i), based upon the portion of the Term or
Additional Term in which the Employee was actually employed by the Company under
this Agreement.
4. Restrictive Covenants.
4.1 The Employee acknowledges the Company's vital interest in
retaining its employees. The Employee further acknowledges that if he were to
compete with the Company by organizing, directing, advising, assisting or
becoming an employee of any business entity, as defined below, competing with
the Company, he could do great harm to the Company and would materially diminish
or destroy the value to the Company of its customer relationships and servicing
and marketing arrangements.
Accordingly, during the Term and all Additional Terms and, so long as
Employee is continued to be paid the salary referred to in Section 3.1(b) above,
for a period of one (1) year immediately following the termination thereof (the
Term and all Additional Terms and the subsequent one (1) year period being
collectively referred to as the "Covenant Period"), unless otherwise consented
to by the Company in writing, the Employee shall not, within any region, city,
town or
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county in which the Company or any of its affiliates or subsidiaries conducts or
does any business, directly or indirectly, either for himself or as an officer,
director, stockholder, partner, associate, employee, consultant, agent,
independent contractor, or representative, become or be interested in or
associated with any other business or business entity, as defined below (except
an affiliate or subsidiary of the Company), which is engaged directly or
indirectly in any line of business which is competitive with any line of
business in which the Company or any of its affiliates or subsidiaries may be
engaged at the time of termination of the Employee's employment hereunder;
provided, that the Employee shall be permitted after the term of his employment
has terminated but during the Covenant Period to own less than a 3% interest as
a stockholder (and in no other capacity) in a company which is listed on any
national stock exchange and in direct competition with the Company.
As used in this Agreement, the term "business entity" shall include,
but not be limited to, any corporation, firm, partnership, association, trust,
group, joint venture, or individual proprietorship.
4.2 The Employee shall not, during the Covenant Period or thereafter,
directly or indirectly release or disclose to any person or business entity any
confidential information regarding the intellectual property, customers,
suppliers, marketing arrangements or methods of operation of the Company, or any
other confidential information of the Company, except that nothing contained in
this sentence shall be construed to prevent the Employee from using any general
technical knowhow and information that is in the public domain or of a nature
known generally throughout the industry.
4.3 The Employee shall, during the Term and all Additional Terms,
promptly reveal to the Company all matters coming to the Employee's attention
pertaining to the business or interests of the Company or any of its affiliates
or subsidiaries.
4.4 Unless otherwise consented to by the Company in writing, the
Employee shall not, during the Covenant Period, hire or solicit for hiring, on
his own behalf or on behalf of any
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business entity, any key employee of the Company or any of its affiliates or
subsidiaries, who was employed by the Company or any of its affiliates or
subsidiaries during the Term or any Additional Term.
4.5 The Employee shall not, during the Term or any Additional Term, or
upon termination thereof, remove from the offices of the Company, any studies,
samples, reports, plans, contracts, publications, customer lists or other
similar items nor copies or facsimiles thereof, except as the same may relate to
the performance of the Employee's duties hereunder, or as otherwise authorized
by the Company.
4.6 During the Covenant Period, the Employee shall not solicit, cause
to be solicited, or assist in the solicitation of any person or business entity
which is a customer or account of the Company or any of its affiliates or
subsidiaries on the date of the Employee's termination, for the purpose of
providing services that are directly competitive with the Company or any of its
affiliates or subsidiaries.
5. Restrictive Covenants Severable.
The provisions of Section 4 of this Agreement contain a number of
separate and divisible covenants, all of which are included respectively in said
Section for the purpose of brevity only, and each of which shall be construed as
a separate covenant and shall be separately enforceable, and if any court of
competent jurisdiction shall determine that any part of said Section, or any
part of any sentence or paragraph thereof, or any such separate covenant therein
contained, is unduly restrictive or void, the remaining part or parts, or the
other separate covenants, shall be considered valid and enforceable,
notwithstanding the voidance of such part or separate covenant.
6. Remedies.
The Employee acknowledges that it will be impossible to measure in
money the damage to the Company of a breach of any of the provisions of Section
4; that any such breach will cause
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irreparable injury to the Company and that the Company, in addition to any other
rights and remedies existing at law or equity or by statute, shall be entitled
to an injunction or restraining order restraining the Employee from doing or
continuing to do any such acts and any other violations or threatened violations
of Section 4, and the Employee hereby consents to the issuance of any such
injunction or restraining order without bond or security.
7. Prior Bank Loan Guarantee.
The Company hereby acknowledges that up to November 1995 the Employee
guaranteed the Company's payments under a certain bank loan agreement, for which
guarantee no consideration has yet been provided by the Company to the Employee.
Accordingly, in consideration of such guarantee, the Company hereby grants to
the Employee, under the Company's 1996 Stock Option Plan, five year options to
purchase 100,000 shares of Common Stock, at an exercise price per share equal to
the fair market value of the Common Stock on the date hereof, which options
shall be fully vested as of the date hereof.
8. Notices.
All notices required or permitted to be given by any party hereunder
shall be in writing and delivered in person or mailed by registered or certified
mail, return receipt requested, to the other parties addressed as follows:
(a) If to the Employee to 000 Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxx
00000;
(b) If to the Company to 00 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx
Xxxx 00000; or to such other addresses as the parties may direct by notice given
pursuant hereto. Any notice mailed as provided above shall be deemed completed
on the date of receipt.
9. Entire Agreement.
The provisions hereof constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede, replace and
terminate all existing oral or written agreements
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concerning such subject matter. No modification, supplement or discharge hereof
shall be effective unless in writing and executed by or on behalf of the parties
hereto.
10. Waiver.
No waiver by any party of any condition, term or provision of this
Agreement shall be deemed to be a waiver of a preceding or succeeding breach of
the same or any other condition, term or provision hereof.
11. Assignability.
This Agreement, and its rights and obligations may not be assigned by
the Employee. This Agreement shall be binding upon the Company and its
successors and assigns.
12. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
13. Arbitration.
Any dispute or controversy arising among or between the parties hereto
regarding any of the terms of this Agreement or the breach hereof, the
determination of which is not otherwise provided for herein, on the written
demand of any of the parties hereto shall be submitted to and determined by
arbitration held in the City of New York in accordance with the rules then
obtaining of the American Arbitration Association. Any award or decision made by
the arbitrators shall be conclusive in the absence of fraud, and judgment upon
said award or decision may be entered in any court having jurisdiction thereof.
[signatures continued on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
DIVERSIFAX, INC.
By: /s/ Xxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxxxx
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Title: President XX. XXXXX X. XXXXXXXX
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