EXHIBIT 10.16
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT, dated as of the 15th day of
October, 2001 (the "AGREEMENT"), is by and between USA DIGITAL ACQUISITION,
INC., a Florida corporation (the "COMPANY"), and XXXXXX X. XXXXXX, an individual
(the "EXECUTIVE").
WHEREAS, the Company is an operating subsidiary of USA
Digital, Inc., a Nevada corporation ("USA DIGITAL"), which was formed to acquire
AVIX Telecom Solutions, Inc., a Florida corporation ("AVIX"), pursuant to that
certain Agreement and Plan of Reorganization dated as of September 19, 2001, by
and among USA Digital, the Company, AVIX and the Executive (the "MERGER
AGREEMENT")
WHEREAS, the Company and USA Digital develop and provide
integrated convergent communications services for their customers;
WHEREAS, the Executive has extensive managerial and technical
experience in this business;
WHEREAS, the Company wishes to employ the Executive for the
period provided in this Agreement and the Executive is willing to serve in the
employ of the Company for such period upon the terms and conditions hereinafter
set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT
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The Company hereby agrees to employ the Executive upon the
terms and conditions herein contained, and the Executive hereby agrees to accept
such employment for the term described below. The Executive agrees to serve as
the Company's President, and to perform the duties and functions customarily
performed by the President of a corporation during the term of this Agreement.
In such capacity, the Executive shall report only to the Company's Board of
Directors, and shall have such powers and responsibilities consistent with his
position as the Board of Directors may assign to him. The Executive shall also
be nominated to serve on USA Digital's and the Company's Boards of Directors and
shall be nominated for reelection upon expiration of his term as a member of
each such company's Board of Directors for so long as he is employed by the
Company. Throughout the term of this Agreement, the Executive shall devote his
best efforts and substantially all of his business time and services to the
business and affairs of the Company. The Executive may serve as a member of the
boards of directors of such business, community and charitable organizations as
he may disclose to and are approved by the Board of Directors of the Company
(which approval shall not be unreasonably withheld); provided, however, that
such service shall not materially interfere with the performance of his duties
under this Agreement. The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder; provided, however that such activities are not prohibited
under any code of conduct or investment or securities trading policy established
by the Company and generally applicable to all similarly situated executives.
2. TERM OF AGREEMENT
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The initial term of employment under this Agreement shall be
for a period of three (3) years beginning on the date hereof (the "EFFECTIVE
DATE"). After the expiration of such initial employment period, the term of the
Executive's employment hereunder shall automatically be extended without further
action by the parties for successive one (1) year renewal terms, provided that
if either party gives the other party at least ninety (90) days' advance written
notice of his or its intention to not renew this Agreement for an additional
term, the Agreement shall terminate upon the expiration of the then current
term.
Notwithstanding the foregoing, the Company shall be entitled
to terminate this Agreement immediately, subject to a continuing obligation to
make any payments required under Section 5 below, if the Executive: (a) becomes
disabled as described in Section 5(b), (b) is terminated for Cause, as defined
in Section 5(c), or (c) voluntarily terminates his employment before the current
term of this Agreement expires, as described in Section 5(d).
3. SALARY
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The Executive shall receive a base salary during the term of
this Agreement at a rate of One Hundred Forty-Five Thousand Dollars ($145,000)
per annum, payable in equal installments on a semi-monthly basis. The Board of
Directors of the Company shall review this base salary at annual intervals, and
may adjust the Executive's annual base salary upward from time to time if the
Board deems such adjustment to be appropriate.
4. ADDITIONAL COMPENSATION AND BENEFITS
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The Executive shall receive the following additional
compensation and fringe benefits:
(a) NET PROFIT BASED COMPENSATION. The Company shall pay the
Executive additional compensation (the "NET PROFIT BASED COMPENSATION")
which shall be payable monthly in arrears (based upon the results of
the immediately preceding month) to the Executive in an amount equal to
ten percent (10%) of the Company's "Net Profit" (as such term is
defined in EXHIBIT B of the Merger Agreement, which shall be payable
for five (5) years after the Effective Date (as such term is defined in
the Merger Agreement). The payment of the Net Profit Based Compensation
shall take into account any losses incurred by the Company arising
after the Effective Date, with losses being carried forward to offset
future Net Profits of the Company.
(b) MEDICAL INSURANCE. The Company shall provide the Executive
with health insurance coverage no less favorable than that from time to
time made available to key employees of USA Digital.
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(c) VACATION; SICK AND PERSONAL DAYS. The Executive shall be
entitled to vacation in accordance with the following schedule: (i)
during the first six (6) months of employment - one (1) week, (ii)
during the second six (6) months of employment - one (1) week, and
(iii) during the next twelve (12) months of employment and during any
renewal term - two (2) weeks. The Executive shall also be entitled to a
reasonable amount of sick and personal days, ordinarily not to exceed
five (5) days per annum.
(d) BUSINESS EXPENSES. The Company shall reimburse the
Executive for all ordinary and necessary business expenses he incurs in
promoting the Company's business, including expenses for travel,
entertainment of business associates and similar items, as the Company
and Executive shall mutually agree are necessary and appropriate for
business purposes, upon presentation by the Executive from time to time
of an itemized account of such expenditures.
In addition to the benefits provided pursuant to the preceding
paragraphs of this Section 4, the Executive shall be eligible to participate:
(A) in such other executive compensation and retirement plans of USA Digital as
are applicable generally to USA Digital's key executive officers, and (B) in
such welfare benefit plans, programs, practices and policies of USA Digital as
are generally applicable to USA Digital's key executive officers.
5. PAYMENTS UPON DISABILITY, TERMINATION FOR CAUSE AND VOLUNTARY
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TERMINATION
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(a) DISABILITY. The Company shall be entitled to terminate
this Agreement if the Board determines that the Executive has been unable to
attend to his duties for at least forty-five (45) days in any one hundred twenty
(120) day period because of a medically diagnosable physical or mental
condition. Upon such termination, the Company shall pay to Executive a monthly
disability benefit equal to one-twenty-fourth (1/24th) of his current annual
base salary at the time he became permanently disabled. Payment of such
disability benefit shall commence on the last day of the month following the
date of the termination by reason of permanent disability and cease with the
earliest of: (i) the month in which the Executive returns to full-time active
employment, either with the Company or otherwise, (ii) the end of the initial
term of this Agreement, or the current renewal term, as the case may be, or
(iii) the twelfth (12th) month after the date of the termination. Any amounts
payable under this Section 5(a) shall be reduced by any amounts paid to the
Executive under any long-term disability plan or other disability program or
insurance policies maintained or provided by the Company. The payments to be
made to the Executive pursuant to this Section 5(a) shall be the exclusive
remedy of the Executive if the termination is as a result of Executive's
disability as described in Section 5(a).
(b) TERMINATION FOR CAUSE. If the Executive's employment is
terminated by the Company for Cause, the amount the Executive shall be entitled
to receive from the Company shall be limited to his base salary accrued through
the date of termination, and any nonforfeitable benefits already earned and
payable to the Executive under the terms of deferred compensation or incentive
plans maintained by the Company. For purposes of this Agreement, the term
"CAUSE" shall be limited to: (i) any action by the Executive involving willful
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disloyalty to the Company, such as embezzlement, fraud, misappropriation of
corporate assets or a breach of the covenants set forth in Sections 9 and 10
hereof; (ii) the Executive being convicted of a felony; (iii) the Executive
being convicted of any lesser crime or offense committed in connection with the
performance of his duties hereunder or involving moral turpitude; or (iv) the
intentional and willful failure by the Executive to substantially perform his
duties hereunder as directed by the Board (other than any such failure resulting
from the Executive's incapacity due to physical or mental disability); provided
that in the event of a termination for Cause under this Section 5(b)(iv), the
Executive shall have a period of ten (10) days in which to cure such breach
after receiving written notice from the Board of Directors of the Company
specifying in reasonable detail the nature of such breach.
(c) VOLUNTARY TERMINATION BY THE EXECUTIVE. If the Executive
resigns or otherwise voluntarily terminates his employment before the end of the
current term of this Agreement, the amount the Executive shall be entitled to
receive from the Company shall be limited to his base salary accrued through the
date of termination, and any nonforfeitable benefits already earned and payable
to the Executive under the terms of any deferred compensation or incentive plans
of the Company. For purposes of this Section, a resignation by the Executive
shall not be deemed to be voluntary if the Executive resigns during the period
of three (3) months after the date he is: (i) assigned to a position of lesser
rank (other than for Cause, or by reason of permanent disability), (ii) assigned
duties materially inconsistent with such position, or (iii) directed to report
to anyone other than the Company's Board of Directors or Chairman of the Board
of Directors.
6. EFFECT OF CHANGE IN CORPORATE CONTROL
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(a) ACCELERATION OF OPTIONS AND CONTINGENT STOCK AWARDS. In
the event of a Change in Corporate Control (as defined below), any stock options
or contingent shares of common stock of USA Digital granted or awarded to the
Executive under the terms of the Merger Agreement shall become immediately
vested in full and, in the case of stock options, exercisable in full.
(b) DEFINITION OF CHANGE IN CORPORATE CONTROL. For purposes of
this Agreement, a "Change in Corporate Control" shall be defined as set forth in
Article I of the Merger Agreement.
(c) LIMITATION ON PAYMENTS MADE AFTER CHANGE IN CORPORATE
CONTROL. Notwithstanding anything else in this Agreement, the amount of
severance compensation payable to the Executive as a result of a Change in
Corporate Control under this Section 6, or otherwise, shall be limited to the
maximum amount USA Digital would be entitled to deduct pursuant to Section 280G
of the Internal Revenue Code of 1986, as amended.
7. DEATH
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If the Executive dies during the term of this Agreement, the
Company shall pay to the Executive's estate a lump sum payment equal to the sum
of the Executive's base salary accrued through the date of death. In addition,
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the death benefits payable by reason of the Executive's death under any
retirement, deferred compensation or other employee benefit plan maintained by
the Company shall be paid to the beneficiary designated by the Executive in
accordance with the terms of the applicable plan or plans.
8. WITHHOLDING
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The Company shall, to the extent permitted by law, have the
right to withhold and deduct from any payment hereunder any federal, state or
local taxes of any kind required by law to be withheld with respect to any such
payment.
9. PROTECTION OF CONFIDENTIAL INFORMATION
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The Executive agrees that he will keep all confidential and
proprietary information of the Company or relating to its business (including,
but not limited to, information regarding the Company's customers, pricing
policies, methods of operation, proprietary computer programs and trade secrets)
confidential, and that he will not (except with the Company's prior written
consent), while in the employ of the Company or thereafter, disclose any such
confidential information to any person, firm, corporation, association or other
entity, other than in furtherance of his duties hereunder, and then only to
those with a "need to know." The Executive shall not make use of any such
confidential information for his own purposes or for the benefit of any person,
firm, corporation, association or other entity (except the Company) under any
circumstances during or after the term of his employment. The foregoing shall
not apply to any information which is already in the public domain, or is
generally disclosed by the Company or is otherwise in the public domain at the
time of disclosure.
The Executive recognizes that because his work for the Company
will bring him into contact with confidential and proprietary information of the
Company, the restrictions of this Section 9 are required for the reasonable
protection of the Company and its investments and for the Company's reliance on
and confidence in the Executive. For purposes of this Section 9, the term
"Company" means the Company, USA Digital, any of the Company's or USA Digital's
subsidiary corporations and their other affiliated entities. The parties
acknowledge and agree that USA Digital and the Company's and USA Digital's
subsidiary corporations and other affiliated entities are intended third party
beneficiaries of the restrictive covenants set forth in this Section.
10. NON-SOLICITATION
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The Executive agrees that he shall not, for a period of one
(1) year from the time his employment under this Agreement ceases (for whatever
reason), or, if later, during any period in which he is receiving monthly
severance payments under Section 5 of this Agreement:
(a) solicit any employee or full-time consultant of the
Company for the purposes of hiring or retaining such employee or
consultant, or
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(b) contact any present or prospective client of the Company
to solicit such a person to enter into any business transaction, other
than with the Company or with one of the Company's affiliates.
For this purpose, the Executive shall be considered to be receiving monthly
severance payments under Section 5 of this Agreement during any period for which
he would have received such severance payments had they not been offset by
compensation received from a successor employer. For purposes of this Section
10, the term "Company" means the Company, USA Digital, any of the Company's or
USA Digital's subsidiary corporations and their other affiliated entities. The
parties acknowledge and agree that USA Digital and the Company's and USA
Digital's subsidiary corporations and other affiliated entities are intended
third party beneficiaries of the restrictive covenants set forth in this
Section.
11. INJUNCTIVE RELIEF
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The Executive acknowledges and agrees that it would be
difficult to fully compensate the Company and/or USA Digital for damages
resulting from the breach or threatened breach of the covenants set forth in
Sections 9 and 10 of this Agreement and accordingly agrees that the Company and
USA Digital shall be entitled to temporary and injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions,
to enforce such provisions in any action or proceeding instituted in the Circuit
Court of Hillsborough County, Florida, or in any court in the State of Florida
having subject matter jurisdiction, and neither the Company nor USA Digital
shall be required to post a bond in order to receive such relief. This provision
with respect to injunctive relief shall not, however, diminish the Company's and
USA Digital's rights to claim and recover damages.
It is expressly understood and agreed that although the
parties consider the restrictions contained in this Agreement to be reasonable,
if a court determines that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction on the activities of
the Executive, no such provision of this Agreement shall be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such extent as such court may judicially determine or indicate to be reasonable.
12. SEPARABILITY
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If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
13. ASSIGNMENT
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This Agreement shall be binding upon and inure to the benefit
of the heirs and representatives of the Executive and the assigns and successors
of the Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive.
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14. ENTIRE AGREEMENT
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This Agreement represents the entire agreement of the parties
and shall supersede any and all previous contracts, arrangements or
understandings between the Company and the Executive. The Agreement may be
amended at any time by mutual written agreement of the parties hereto.
15. GOVERNING LAW
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This Agreement shall be construed, interpreted, and governed
in accordance with the laws of the State of Florida, other than the conflict of
laws provisions of such laws.
16. ASSIGNMENT OF RIGHTS IN INVENTIONS AND OTHER INTELLECTUAL
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PROPERTY
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Contemporaneously with the parties' execution and delivery of
this Agreement, the parties are also executing and delivering that certain
Assignment of Inventions and Other Intellectual Property, a copy of which is
attached hereto and made a part hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed, and the Executive has hereunto set his hand, as of the day and
year first above written.
Attest: USA DIGITAL ACQUISITION, INC.
By: /s/ Xxxx X. Xxxx
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Secretary Xxxx X. Xxxx, Its Chairman of the
Board of Directors
Witness: EXECUTIVE:
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
JOINDER BY USA DIGITAL, INC.:
USA Digital, Inc. ("USA DIGITAL") hereby joins in Section 1 of the
foregoing Employment Agreement for the purpose of binding USA Digital to
nominate Xxxxxx X. Xxxxxx to USA Digital's Board of Directors in the manner
provided in such Section.
Attest: USA DIGITAL, INC.
By: /s/ Xxxx X. Xxxx
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Secretary Xxxx X. Xxxx, Its President
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