EXHIBIT 11.1
EMPLOYMENT AGREEMENT
(XXXXX X. XXXXXXX)
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of August 1,
1998 (the "Effective Date"), by and between APPLIED VOICE RECOGNITION, INC., a
Delaware corporation ("Employer"), and XXXXX X. XXXXXX, an individual residing
in Xxxxxx County, Texas ("Employee").
W I T N E S S E T H:
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WHEREAS, Employer and Employee desire to enter into an agreement regarding
Employee's employment with Employer pursuant to the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties covenant and agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby accepts
employment with Employer on the terms and conditions set forth in this
Agreement.
2. TERM OF EMPLOYMENT. The term of Employee's employment hereunder (the
"Term") shall commence as of August 1, 1998 (the "Commencement Date") and shall
continue (subject to termination by either Employer or Employee as hereinafter
provided) for an initial term (the "Initial Term") expiring on July 31, 2002
(the "Expiration Date"). The Expiration Date shall be automatically extended
unless terminated by Employer or Employee for successive one year periods
following the expiration of the Initial Term. If Employer desires to terminate
Employee's employment under this Agreement at the end of the Initial Term or at
the end of any succeeding one year term, Employer shall give written notice of
such desire to Employee at least one month prior to the expiration of the
Initial Term or any succeeding one year term. If Employee desires to terminate
Employee's employment under this Agreement at the end of the Initial Term or at
the end of any succeeding one year term, Employee shall give written notice of
such desire to Employer at least one month prior to the expiration of the
Initial Term or any succeeding one year term. At the expiration of the then
existing term, Employer shall have no further obligation to Employee other than
payment of earned and unpaid Base Salary (as hereafter defined) and bonuses
under Sections 3(a) and 3(b), respectively, and Employee shall have no further
obligation to Employer except as set forth in Sections 7, 8, 9 and 10.
3. COMPENSATION AND OTHER BENEFITS.
a. As compensation for all services rendered by Employee in performance of
Employee's duties or obligations under this Agreement, Employer shall pay
Employee
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a monthly base salary of TWELVE THOUSAND FIVE HUNDRED AND 00/100 DOLLARS
($12,500.00) (the "Base Salary"). Employee's Base Salary shall be payable in
equal semi-monthly installments or in the manner and on the timetable which
Employer's payroll is customarily handled or at such intervals as Employer and
Employee may hereafter agree to from time to time. Employer agrees to review
Employee's performance on a quarterly basis and to consider an increase in
Employee's Base Salary on an annual basis, beginning on the first anniversary of
the Commencement Date. Employee's salary may, but is not required to, be
increased from time to time, based upon Employee's performance and other
relevant factors, as Employer may deem appropriate, without affecting any other
provisions of this Agreement.
b. In addition to receiving the Base Salary provided for in
Section 3(a), for the portion of the calendar year beginning with the
Commencement Date and each calendar year thereafter during the Term hereof,
Employee shall be entitled to a bonus of up to $100,000 per year (or pro rata
for portions of a year) if, and only if, Employee has met the performance
criteria set by Employer for the applicable year. In connection therewith,
Employer agrees that by September 1, 1998 and by January 31 of each year
thereafter, it shall set the performance criteria for Employee's bonus to be
earned during the applicable year and shall communicate such criteria to
Employee in writing. If Employee successfully meets the performance criteria
established by Employer (in the discretion of Employer), Employer shall pay to
Employee the bonus within thirty (30) days of the end of the applicable year.
c. Employee shall be entitled to be reimbursed by Employer for all
reasonable and necessary expenses incurred by Employee in carrying out
Employee's duties under this Agreement in accordance with Employer's standard
policies regarding such reimbursements.
d. Beginning within thirty (30) days of the Commencement Date,
Employee shall be entitled during the Term, upon satisfaction of all eligibility
requirements, if any, to participate in all health, dental, disability, life
insurance and other benefit programs now or hereafter established by Employer
which cover substantially all other of Employer's employees and shall receive
such other benefits as may be approved from time to time by Employer.
e. Employee shall be entitled to receive two weeks of paid
vacation for each year during the Term following the first anniversary of the
Commencement Date and shall be entitled to receive paid holidays as enjoyed by
all other employees of Employer.
4. DUTIES.
a. Employee is employed to act as Chief Operating Officer of
the Employer and in such other office or position as shall be assigned to
Employee from time to time by Employer, and to perform such duties as are
commensurate with Employee's position with Employer.
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b. Employee agrees that during the period of employment, Employee
shall devote full-time efforts to Employee's duties as an employee of Employer
and Employee shall use Employee's best efforts to perform the duties of
Employee's position in an efficient and competent manner and shall use
Employee's best efforts to promote the interests of Employer and any affiliated
companies.
c. During the period of employment, Employee agrees not to (i)
solely or jointly with others undertake or join any planning for or organization
of any business activity competitive with the business activities of Employer,
and (ii) directly or indirectly, engage or participate in any other activities
in conflict with the best interests of Employer.
d. Employee agrees that during the period of employment Employee
shall refer to Employer all opportunities in the computer industry related to
voice recognition software designs and applications to which Employee might
become exposed in carrying out Employee's duties and responsibilities hereunder.
5. STOCK OPTION PLAN. As a further inducement to Employee to accept
employment upon the terms set forth herein and in consideration of Employee's
execution of this Agreement, Employee shall be granted options entitling
Employee to purchase 300,000 shares of Employer's common stock, par value $0.001
(the "Options"), pursuant to, and Employee shall be entitled to otherwise
participate in, that certain Applied Voice Recognition, Inc. 1997 Incentive
Plan, as amended from time to time. The granting instrument for the Options
will provide, in addition to other terms set forth therein, that (i) the
purchase price for the Options shall be the average bid and ask price for
Employer's shares of common stock on the NASDAQ OTCBB (or any national
securities exchange hereafter listing Employer's common stock) on the day prior
to the Commencement Date, and (ii) one fourth (1/4th) of the Options (being
options to purchase 75,000 shares) will vest on the first anniversary date of
the Commencement Date, and one thirty-sixth (1/36th) of the remaining Options
(being options to purchase 6,250 shares) will vest on the last day of each month
following the first anniversary date of the Commencement Date.
6. TERMINATION OF EMPLOYMENT. Employee's employment and this Agreement
shall terminate upon the earliest to occur of any of the following events (the
actual date of such termination being referred to herein as the "Termination
Date"):
a. The termination of the Agreement pursuant to Section 2.
b. Employee's employment pursuant hereto shall terminate in the
event of the death of Employee.
c. Employer may terminate Employee's employment under this
Agreement for cause without any prior notice (except as set forth in
subparagraph (3) below), upon the occurrence of any of the following events:
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(1) any embezzlement or wrongful diversion of funds of
Employer or any affiliate of Employer by Employee;
(2) gross malfeasance by Employee in the conduct of
Employee's duties;
(3) breach of this Agreement and the failure to cure such
breach following reasonable notice thereof;
(4) gross neglect by Employee in carrying out Employee's
duties; or
(5) the failure of Employee to be able to perform
Employee's duties hereunder for a period of not less than ninety (90)
days by reason of disability. For purposes of this Agreement, Employee
shall be deemed to have become disabled when the Board of Directors of
Employer, upon the advice of a qualified physician, shall have
determined that Employee has become physically or mentally incapable
(excluding infrequent and temporary absences due to ordinary illness)
of performing Employee's duties under this Agreement. Before making
any termination decision pursuant to this Section 6(c)(5), the Board
of Directors of Employer shall determine whether there is any
reasonable accommodation (within the meaning of the Americans with
Disabilities Act) which would enable Employee to perform the essential
functions of Employee's position under this Agreement despite the
existence of any such disability. If such a reasonable accommodation
is possible, Employer shall make that accommodation and shall not
terminate Employee's employment hereunder based on such disability.
d. If Employee's employment is terminated for any of the
reasons specified in Section 6, Employer shall no longer be obligated to make
the payments specified under Section 3 or to pay to Employee any other
compensation or benefits whatsoever, except as may otherwise be provided in
Section 6(e). Notwithstanding the foregoing, if for any reason Employee's
employment is terminated hereunder, any salary or bonus payable under Sections
3(a) or 3(b) which shall have been earned but not yet paid shall be paid by
Employer to Employee or Employee's estate, as the case may be.
e. Employer shall have the right to terminate Employee's
employment hereunder without prior notice and without cause; provided, however,
in such event, Employee shall continue to receive his Base Salary for six (6)
months following the date of such termination. If this Agreement is terminated
by Employer under this Section 6(e), any Options that would otherwise vest on or
before the next vesting period (be it annual or monthly) shall automatically
become fully vested immediately upon termination; however, any additional
unvested Options shall be cancelled upon termination. Notwithstanding the
foregoing, the prior provisions of this Section 6(e) shall be void and of no
force or effect in the event of (i) the sale of
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substantially all of the assets of Employer, (ii) the merger of Employer into
another entity, or (iii) the merger of another entity into Employer if, as a
result of any transaction described in clause (i), (ii) or (iii), the
shareholders of Employer do not control a majority of the shares of the
surviving entity. In the event of any such sale or merger, any of the Options
that have not yet vested shall immediately vest.
7. INVENTIONS AND CREATIONS BELONG TO EMPLOYER.
a. Any and all inventions, discoveries, improvements or creations
(collectively, "Creations") which Employee has conceived or made or may conceive
or make during the period of employment in any way, directly or indirectly,
connected with Employer's business shall be the sole and exclusive property of
Employer. Employee agrees that all copyrightable works created by Employee or
under Employer's direction in connection with Employer's business are "works
made for hire" and shall be the sole and complete property of Employer and that
any and all copyrights to such works shall belong to Employer. To the extent any
of the works described in the preceding sentence are not deemed to be "works
made for hire," Employee hereby assigns all proprietary rights, including
copyright, in these works to Employer without further compensation.
b. Employee further agrees to (i) disclose promptly to Employer all
such Creations which Employee has made or may make solely, jointly or commonly
with others during the period of employment to the extent connected with
Employer's business, (ii) assign all such Creations to Employer, and (iii)
execute and sign any and all applications, assignments or other instruments
which Employer may deem necessary in order to enable Employer, at Employer's
expense, to apply for, prosecute and obtain copyrights, patents or other
proprietary rights in the United States and foreign countries or in order to
transfer to Employer all right, title and interest in said Creations.
8. CONFIDENTIALITY; OWNERSHIP OF INFORMATION. Employer promises
that Employer will, during the Term, provide Employee with access to such
Confidential Information (as defined in Section 8(a)) owned by Employer and that
is used in the operation of Employer's business as reasonably necessary to allow
Employee to perform Employee's obligations hereunder. Employee acknowledges
that Employer has agreed to provide Employee with a definite term of employment
and with access to such Confidential Information of Employer during that term of
employment.
a. DEFINITION. For purposes of this Agreement, "Confidential
Information" means any and all information relating directly or indirectly to
Employer that is not generally ascertainable from public or published
information or trade sources and that represents proprietary information to
Employer, excluding, however, (i) Employees' business contacts, (ii) information
already known to Employee prior to Employee's employment with Employer, and
(iii) information required to be divulged in any legal or administrative
proceeding in which Employee is involved. Confidential Information shall
consist of, for example, and not intending to be inclusive, (A) software (source
and object codes), algorithms, computer processing
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systems, techniques, methodologies, formulae, processes, compilations of
information, drawings, proposals, job notes, reports, records and
specifications, and (B) information concerning any matters relating to the
business of Employer, any of its customers, prospective customers, customer
contacts, licenses, the prices it obtains or has obtained for the licensing of
its software products and services, or any other information concerning the
business of Employer and Employer's good will.
b. NO DISCLOSURE. During the Term and at all times thereafter,
Employee shall not disclose or use in any manner, directly or indirectly, and
shall use Employee's best efforts and shall take all reasonable precautions to
prevent the disclosure of, any such trade secrets or other Confidential
Information, except to the extent required in the performance of Employee's
duties or obligations to Employer hereunder or by express prior written consent
of a duly authorized officer or director of Employer (other than Employee).
c. OWNERSHIP OF INFORMATION. Such Confidential Information is
and shall remain the sole and exclusive property and proprietary information of
Employer or Employer's customers, as the case may be, and is disclosed in
confidence by Employer or permitted to be acquired from such customers in
reliance on Employee's agreement to maintain such Confidential Information in
confidence and not to use or disclose such Confidential Information to any other
person except in furtherance of Employer's business.
d. RETURN OF MATERIAL. Upon the expiration or earlier
termination of this Agreement for any reason, Employee shall immediately turn
over to Employer all documents, disks or other magnetic media, or other material
in Employee's possession or under Employee's control that (i) may contain or be
derived from Creations or Confidential Information, or (ii) are connected with
or derived from Employee's services to Employer. Employee shall not retain any
Confidential Information in any form (e.g., computer hard drive, microfilm,
etc.) upon the expiration or earlier termination of this Agreement.
9. NONCOMPETE; WORKING FOR COMPETITOR. In consideration of Employee's
employment by Employer, Employee will not, at any time during the Term or at any
time for twenty-four (24) months subsequent to any termination of Employee's
employment pursuant to the provisions of Section 6(c) or the voluntary
termination of employment by Employee pursuant to Section 2, directly or
indirectly, within the United States, Canada, Mexico, South America or Europe,
for Employee's own account or on behalf of any direct competitors of Employer,
engage in any business or transaction involving the design, installation,
integration, service or consulting with respect to voice recognition software
designs and applications (whether as an employee, employer, independent
contractor, consultant, agent, principal, partner, stockholder, corporate
officer, director or in any other individual or representative capacity),
without the prior written consent of Employer, which consent may be withheld by
Employer in Employer's sole and absolute discretion.
10. NON-SOLICITATION OF EMPLOYEES. During the Term and for a period of
twenty-four (24) months after the date of termination of employment, Employee
will not in any
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way, directly or indirectly (i) induce or attempt to induce any employee of
Employer to quit employment with Employer; (ii) otherwise interfere with or
disrupt Employer's relationship with its employees; (iii) solicit, entice or
hire away any employee of Employer; or (iv) hire or engage any employee of
Employer or any former employee of Employer whose employment with Employer
ceased less than one year before the date of such hiring or engagement. Employee
acknowledges that any attempt on the part of Employee to induce others to leave
Employer's employ, or any effort by Employee to interfere with Employer's
relationship with its other employees would be harmful and damaging to Employer.
11. EMPLOYEE'S ACKNOWLEDGEMENT. It is the express intention of
Employee and Employer to comply with sections 15.50 et seq. of the Texas
Business and Commerce Code in effect as of the date of execution hereof.
Employee stipulates that the provisions of this Agreement are not oppressive or
overly burdensome to Employee and will not prevent Employee from earning an
income following termination of this Agreement. Employee warrants and
represents that:
a. Employee is familiar with non-compete and non-solicitation
covenants;
b. Employee has discussed or acknowledges the opportunity to
discuss the provisions of the non-compete and non-solicitation covenants
contained herein with Employee's attorney and has concluded that such provisions
(including, without limitation, the right to equitable relief and the length of
time provided for herein) are fair, reasonable and just under the circumstances;
c. Employee is fully aware of the obligations, limitations and
liabilities included in the non-compete and non-solicitation covenants contained
in this Agreement;
d. The scope of activities covered hereby are substantially
similar to those activities to be performed by Employee under this Agreement;
e. The twenty-four (24) month non-compete and non-solicitation
period is a reasonable restriction, giving consideration to the following
factors: (1) Employee and Employer reasonably anticipate that this Agreement,
although terminable under certain provisions, will continue in effect for
sufficient duration to allow Employee to attain superior bargaining strength and
an ability for unfair competition with respect to the customers covered hereby;
(2) the duration of the twenty-four (24) month non-compete and non-solicitation
period is a reasonably necessary period to allow Employer to restore its
position of equivalent bargaining strength and fair competition with respect to
those customers covered hereby; and (3) historically, employees of all types
have remained with Employee for a duration of longer than the duration of the
twenty-four (24) month non-compete and non-solicitation period; and
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f. The limitations contained in this Agreement with respect to
geographic area, duration and scope of activity are reasonable; however, if any
court shall determine that the geographic area, duration or scope of activity of
any restriction contained in this Agreement is unenforceable, it is the
intention of the parties that such restrictive covenants set forth herein shall
not thereby be terminated, but shall be deemed amended to the extent required to
render such covenants valid and enforceable.
12. REMEDIES; INJUNCTION. In the event of a breach or threatened
breach by Employee of any of the provisions of this Agreement, Employee agrees
that Employer, in addition to and not in limitation of any other rights,
remedies or damages available to Employer at law or in equity, shall be entitled
to a permanent injunction without the necessity of proving actual monetary loss
in order to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employees and/or any and all
persons directly or indirectly acting for or with Employee. It is expressly
understood between the parties that this injunctive or other equitable relief
shall not be Employer's exclusive remedy for any breach of this Agreement, and
Employer shall be entitled to seek any other relief or remedy which it may have
by contract, statute, law or otherwise for any breach hereof.
13. ARBITRATION. The parties agree that all disputes or questions
arising in connection with this Agreement and/or the termination of Employee's
employment hereunder shall be settled by a single arbitrator pursuant to the
rules of the American Arbitration Association in the City of Houston, Texas, and
the award of the arbitrators shall be final, non-appealable, conclusive and
enforceable in a court of competent jurisdiction; provided, however,
notwithstanding the foregoing, in no event shall any dispute, claim or
disagreement arising under Sections 7, 8, 9 and 10 of this Agreement that
requires injunctive or other equitable relief be required to be submitted to
arbitration pursuant to this provision or otherwise.
14. NOTICES. Any notice, demand or request which may be permitted,
required or desired to be given in connection therewith shall be given in
writing and directed to Employer and Employee as follows:
If to Employer, at: Applied Voice Recognition, Inc.
0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chairman
Facsimile No.: (000) 000-0000
with a copy to: Xxxxx, Xxxxx & Xxxxxx
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
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or, if to Employee, at: Xx. Xxxxx X. Xxxxxxx
0000 Xxxx Xxx Xxxxx
Xxxxx Xxxx, Xxxxx 00000
Notices shall be deemed properly delivered and received when and if either: (i)
personally delivered; (ii) delivered by nationally-recognized overnight courier;
(iii) when deposited in the U.S. Mail, by registered or certified mail, return
receipt requested, postage prepaid; or (iv) sent via facsimile transmission with
confirmation mailed by regular U.S. mail. Any party may change its notice
address for purposes hereof to any address within the continental United States
by giving written notice of such change to the other parties hereto at least
fifteen days prior to the intended effective date of such change.
15. SEVERABILITY. If any provision of this Agreement is rendered or
declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by decree of a court of last resort, Employer and
Employee shall promptly meet and negotiate substitute provisions for those
rendered or declared illegal or unenforceable, but all the remaining provisions
of this Agreement shall remain in full force and effect.
16. ASSIGNMENT. This Agreement may not be assigned by any party
without the prior written consent of the other parties.
17. BINDING AGREEMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective legal
representatives, heirs, successors and permitted assigns.
18. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
19. ATTORNEYS FEES. In the event of any dispute between the parties
regarding this Agreement, the prevailing party shall be entitled to be
reimbursed for such prevailing party's attorneys fees and costs of court by the
non-prevailing party.
20. AGREEMENT READ, UNDERSTOOD AND FAIR. Employee has carefully read
and considered all provisions of this Agreement and agrees that all of the
restrictions set forth are fair and reasonable and are reasonably required for
the protection of the interests of Employer.
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, the parties have executed this Agreement on this
____ day of July, 1998, effective as of the Effective Date.
EMPLOYER:
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APPLIED VOICE RECOGNITION, INC., a
Delaware corporation
By:
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Xxxxxxx X. Xxxxxxxx, Chairman
EMPLOYEE:
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XXXXX X. XXXXXXX
Signature Page to
Employment Agreement
(Xxxxx X. Xxxxxxx)
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