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EXHIBIT 10.16
DIDAX INC.
EMPLOYMENT AGREEMENT
(CHIEF EXECUTIVE OFFICER)
Agreement made as of this 10th day of June 1997, by and among Xx. Xxxxxx X.
Xxxxxx of Reston, Virginia ("Employee") and DIDAX INC. (the "Company"), but
effective as of the date of the closing of the Initial Public Offering of the
Company's securities.
PREAMBLE
The Board of Directors of the Company recognizes Employee's potential
contribution to the growth and success of the Company and desires to assure the
Company of Employee's employment in an executive capacity as Chief Executive
Officer and to compensate him therefor. Employee wants to be employed by the
Company and to commit himself to serve the Company on the terms herein
provided.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties, the parties agree as follows:
1. Definitions
"Benefits" shall mean all the fringe benefits approved by the Board
from time to time and established by the Company for the benefit of employees
generally and/or for key employees of the Company as a class, including, but
not limited to, regular holidays, vacations, absences resulting from illness or
accident, health insurance, disability and medical plans (including dental and
prescription drug), group life insurance, and pension, profit-sharing and stock
bonus plans or their equivalent.
"Board" shall mean the Board of Directors of the Company, together with
an executive committee thereof (if any), as same shall be constituted from time
to time.
"Cause" for termination shall mean (i) Employee's final conviction of a
felony involving a crime of moral turpitude, (ii) acts of Employee which, in
the judgment of the Board, constitute willful fraud on the part of Employee in
connection with his duties under this Agreement, including but not limited to
misappropriation or embezzlement in the performance of duties as an employee of
the Company, or willfully engaging in conduct materially injurious to the
Company and in violation of the covenants contained in this Agreement, or (iii)
gross misconduct, including but not limited to the willful failure of Employee
either to (a) continue to obey lawful written instruction of the Board after
thirty (30) days notice in writing of Employee's failure to do so and the
Board's intention to terminate Employee if such failure is not corrected, or
(b) correct any conduct of Employee which constitutes a material breach of this
Agreement after thirty (30) days notice in writing of Employee's failure to do
so and the Board's intention to terminate Employee if such failure is not
corrected.
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"Chairman" shall mean the individual designated by the Board from time
to time as its chairman.
"Change of Control" shall mean the occurrence of one or more of the
following three events:
(1) After the effective date of this Agreement, any person becomes a
beneficial owner (as such term is defined in Rule 13d3 promulgated under
the Securities Exchange Act of 1934) directly or indirectly of securities
representing 33% or more of the total number of votes that may be cast for
the election of directors of the Company;
(2) Within two years after a merger, consolidation, liquidation or sale
of assets involving the Company, or a contested election of a Company
director, or any combination of the foregoing, the individuals who were
directors of the Company immediately prior thereto shall cease to
constitute a majority of the Board; or
(3) Within two years after a tender offer or exchange offer for voting
securities of the Company, the individuals who were directors of the
Company immediately prior thereto shall cease to constitute a majority of
the Board.
"Chief Executive Officer" shall mean the individual having
responsibility to the Board for direction and management of the executive and
operational affairs of the Company and who reports and is accountable only to
the Board.
"Disability" shall mean a written determination by a physician mutually
agreeable to the Company and Employee (or, in the event of Employee's total
physical or mental disability, Employee's legal representative) that Employee
is physically or mentally unable to perform his duties of Chief Executive
Officer under this Agreement and that such disability can reasonably be
expected to continue for a period of six (6) consecutive months or for shorter
periods aggregating one hundred and eighty (180) days in any twelve-(12)-month
period.
"Employee" shall mean Xx. Xxxxxx X. Xxxxxx and, if the context
requires, his heirs, personal representatives, and permitted successors and
assigns.
"Person" shall mean any natural person, incorporated entity, limited or
general partnership, business trust, association, agency (governmental or
private), division, political sovereign, or subdivision or instrumentality,
including those groups identified as "persons" in xx.xx. 13(d)(3) and 14(d)(2)
of the Securities Exchange Act of 1934.
"Reorganization" shall mean any transaction, or any series of
transactions consummated in a 12-month period, pursuant to which any Person
acquires (by merger, acquisition, or otherwise) all or substantially all of the
assets of the Company or the then outstanding equity securities of the Company
and the Company is not the surviving entity, the Company being deemed surviving
if and only if the majority of the Board of Directors of the ultimate parent of
the surviving entity were directors of the Company prior to its organization.
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"Territory" shall mean any state of the United States, and any
equivalent section or area of any country, in which the Company has
revenue-producing customers or activities.
"Company" shall mean DIDAX INC., a Delaware corporation, together with
such subsidiaries of the Company as may from time to time exist.
2. Position, Responsibilities, and Term of Employment.
2.01 Position. Employee shall serve as Chief Executive Officer and in
such additional management position(s) as the Board shall designate. In this
capacity Employee shall, subject to the bylaws of the Company, and to the
direction of the Board, serve the Company by performing such duties and
carrying out such responsibilities as are normally related to the position of
Chief Executive Officer in accordance with the standards of the industry. As a
bona fide occupational qualification, the Employee will, upon request,
subscribe to the Statement of Faith as stated in Article XIII, Section 2 of the
bylaws of the Company. The Board shall either vote, or recommend to the
shareholders of the Company, as appropriate, that during the term of employment
pursuant to this Agreement: (i) Employee be nominated for election as a
director at each meeting of shareholders held for the election of directors;
(ii) Employee be elected to and continued on the Board of each subsidiary of
the Company, (iii) if the Board of the Company or any of its subsidiaries shall
appoint an executive committee (or similar committee authorized to exercise the
general powers of the Board), Employee be elected to and continued on such
committee; and (iv) neither the Company nor any of its subsidiaries shall
confer on any other officer or employee authority, responsibility, powers or
prerogatives superior or equal to the authority, responsibility, prerogatives
and powers vested in Employee hereunder.
2.02 Best Efforts Covenant. Employee will, to the best of his ability,
primarily devote his professional and business time and best efforts to the
performance of his duties for the Company and its subsidiaries and affiliates.
2.03 Protective Covenant. Employee agrees not to acquire, assume, or
participate in, directly or indirectly, any position, investment, or interest
in the Territory adverse or antagonistic to the Company, its business or
prospects, financial or otherwise, or take any action towards any of the
foregoing. The provisions of this Section shall not prevent Employee from
owning shares of any competitor of the Company so long as such shares (i) do
not constitute more than [1%] of the outstanding equity of such competitor, and
(ii) are regularly traded on a recognized exchange or listed for trading by
NASDAQ in the over-the-counter market.
2.04 Post-Employment Noncompetition Covenant. Except with the prior
written consent of the Board, Employee shall not engage in activities in the
Territory either on Employee's own behalf or that of any other business
organization, which are in direct competition with the Company, or solicit
customers, or clients, of the Company or any of its affiliates for a period of
six (6) months subsequent to Employee's voluntary withdrawal from employment
with the Company (except for a Change in Control Termination in which case this
Noncompetition Covenant does not apply), or the Company's termination of
Employee's employment for Cause. In accordance with the foregoing limits,
Employee will not willfully canvas, solicit nor accept any such business in
competition with the business of the Company from any customers of the Company
with whom Employee had contact during, or of which Employee had knowledge
solely as a result of, his performance of services for the Company pursuant to
this Agreement, and Employee will not directly or indirectly request, induce or
advise any customers of the Company with whom Employee had contact during the
term of this Agreement to withdraw, curtail or cancel their business with the
Company. Employee and the Company expressly declare that the territorial and
time limitations contained in this Section and the definition of "Territory"
are entirely reasonable at this time and are
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properly and necessarily required for the adequate protection of the business
and intellectual property of the Company. If such territorial or time
limitations, or any portions thereof, are deemed to be unreasonable by a
mediator, arbitrator or a court of competent jurisdiction, whether due to
passage of time, change of circumstances or otherwise, Employee and the Company
agree to a reduction of said territorial and/or time limitations to such areas
and/or periods of time as said court shall deem reasonable. The duration of the
covenant as noted herein will be extended if its enforcement is delayed by
mediation, arbitration or litigation.
For a period of one year subsequent to Employee's voluntary withdrawal
from employment with the Company (except for a Change in Control Termination in
which case this Noncompetition Covenant does not apply), or the Company's
termination of Employee's employment for Cause, Employee will not without the
express prior written approval of the Board (i) in one or a series of
transactions, recruit, solicit or otherwise induce or influence any proprietor,
partner, stockholder, lender, director, officer, employee, sales agent, joint
venturer, investor, lessor, agent, representative or any other person which has
a business relationship with the Company or had a business relationship with
the Company within the twelve-(12) month period preceding the date of the
incident in question, to discontinue, reduce, or modify such employment, agency
or business relationship with the Company, or (ii) employ or seek to employ or
cause any business organization in direct competition with the Company to
employ or seek to employ any person or agent who is then (or was at any time
within six months prior to the date the Employee or the competitive business
employs or seeks to employ such person) employed or retained by the Company.
Notwithstanding the foregoing, nothing herein shall prevent the Employee from
providing a letter of recommendation to an employee with respect to a future
employment opportunity. However, employee will not induce or attempt to induce
any employee of the Company to terminate his/her employment with the Company.
2.05 Confidential Information. Employee recognizes and acknowledges
that the Company's trade secrets and proprietary information and know-how, as
they may exist from time to time ("Confidential Information"), are valuable,
special and unique assets of the Company's business, access to and knowledge of
which are essential to the performance of Employee's duties hereunder. Employee
will not, during or after the term of his employment by the Company, in whole
or in part, disclose such secrets, information or know-how to any Person for
any reason or purpose whatsoever, nor shall Employee make use of any such
property for his own purposes or for the benefit of any Person (except the
Company) under any circumstances during or after the term of his employment,
provided that after the term of his employment these restrictions shall not
apply to such secrets, information and know-how which are then in the public
domain (provided that Employee was not directly responsible for such secrets,
information or processes entering the public domain without the Company's
consent). Employee shall have no obligation hereunder to keep confidential any
Confidential Information if and to the extent disclosure of any thereof is
specifically required by law; provided, however, that in the event disclosure
is required by applicable law, the Employee shall provide the Company with
prompt notice of such requirement, prior to making any disclosure, so that the
Company may seek an appropriate protective order. Employee agrees to hold as
the Company's property all memoranda, books, papers, letters, customer lists,
processes, computer software, records, financial information, policy and
procedure manuals, training and recruiting procedures and other data, and all
copies thereof and therefrom, in any way relating to the Company's business and
affairs, whether made by him or otherwise coming into his possession, and on
termination of his
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employment, or on demand of the Company at any time, to deliver the same to the
Company. Employee agrees that he will not use or disclose to other employees of
the Company, during the term of this Agreement, confidential information
belonging to his former employers.
Employee shall use his best efforts to prevent the removal of any
Confidential Information from the premises of the Company, except as required
in his normal course of employment by the Company. Employee shall use his best
efforts to cause all persons or entities to whom any Confidential Information
shall be disclosed by him hereunder to observe the terms and conditions set
forth herein as though each such person or entity was bound hereby.
2.06 Records, Files. All records, files, drawings, documents, equipment
and the like relating to the business of the Company which are created by
Employee only during the term of his employment under this Agreement shall be
and shall remain the sole property of the Company.
2.07 Hired to Invent. Employee agrees that every improvement,
invention, process, apparatus, method, design, and any other creation that
Employee may invent, discover, conceive, or originate by himself or in
conjunction with any other Person during the term of Employee's employment
under this Agreement, that relates to the business carried on by the Company
during the term of Employee's employment under this Agreement, shall be the
exclusive property of the Company. Employee agrees to disclose to the Company
every patent application, notice of copyright, or other action taken by
Employee or any affiliate or assignee to protect intellectual property during
the twelve -(12) months following Employee's termination of employment at the
Company, for whatever reason, so that the Company may determine whether to
assert a claim under this Section or any other provision of this Agreement.
3. Compensation.
3.01 Annual Compensation. The Company shall pay to Employee for the
services to be rendered hereunder a base salary at an annual rate of One
Hundred Thirty Thousand dollars ($130,000). It is understood that this
salary will be abated to Ninety Thousand dollars ($90,000) ("Minimum Annual
Compensation") per annum with the understanding that the Board will establish
by January 1, 1998, specific reasonable and measurable criteria for decreasing
or eliminating this abatement. There shall also be an annual review for merit
by the Board and an increase as deemed appropriate to reflect the value of
services by Employee. At no time during the term of this Agreement shall
Employee's annual base salary fall below the Minimum Annual Compensation.
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Employee's salary shall be payable in periodic installments in
accordance with the Company's usual practice for similarly situated employees
of the Company.
3.02 Incentive Compensation. In addition to the Annual Compensation,
Employee shall be entitled to receive payments under the Company's incentive
compensation and/or bonus program(s) (as in effect from time to time), if any,
in such amounts as are determined by the Board to be appropriate. Any
incentive compensation which is not deductible in the opinion of the Company's
counsel, under Section 162(m) of the Internal Revenue Code shall be deferred
and paid, without interest, in the first year or years when and to the extent
such payment may be deducted, Employee's right to such payment being absolute.
3.03 Participating in Benefits. Employee shall be entitled to all
Benefits for as long as such Benefits may remain in effect and/or any
substitute or additional Benefits made available in the future to similarly
situated employees of the Company, subject to and on a basis consistent with
the terms, conditions and overall administration of such Benefits adopted by
the Company. Benefits paid to Employee shall not be deemed to be in lieu of
other compensation to Employee hereunder as described in this Section 3.
3.04 Specific Benefits.
During the term of this Agreement (and thereafter to the extent this
Agreement shall require):
(a) Employee shall be entitled to four (4) weeks of paid vacation time
per year, to be taken at times mutually acceptable to the Company and Employee.
(b) The Company shall provide fully paid accident and health insurance
for Employee and his family.
(c) The Company shall obtain at its expense (subject to Employee's
insurability) an insurance policy on the life of Employee, adjusted at policy
anniversary date, subject to the last sentence of this Section 3.04(c), in the
minimum face amount of employee's
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current annual base salary. Employee shall have the exclusive right to
designate the beneficiaries of such policy and change such beneficiaries from
time to time. Such policy and the proceeds and cash value thereof shall be the
sole property of Employee and the Company shall not retain any benefit therein.
(d) Employee shall be entitled to sick leave benefits during the
employment period in accordance with the customary policies of the Company for
its executive officers, but in no event less than one (1) month per year. In
the event of Employee's Disability, disability insurance shall provide for the
payment of the Employee's annualized salary at the time of the disability for a
period of not less than one (1) year from the date of Disability.
(e) In addition to the vacation provided pursuant to Section 3.04(a)
hereof, Employee shall be entitled to not less than ten (10) paid holidays
(other than weekends) per year, generally on such days consistent with the
Company's policy manual.
(f) Employee shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by him (in accordance with the policies and
procedures established by the Company or the Board for the similarly situated
employees of the Company) in performing services hereunder.
(g) Employee shall be eligible to participate during the Employment
Period in Benefits not inconsistent or duplicative of those set forth in this
Section 3.04 as the Company shall establish or maintain for its employees or
executives generally.
(h) Employee shall be entitled to personal leave during the employment
period of one (1) day per week. After the $130,000 salary level has been
achieved, this entitlement, if exercised will be treated as unpaid time off.
4. Termination.
4.01 Termination by Company for Other Than Cause. If during the term of
this Agreement, the Company terminates the employment of Employee and such
termination is not for Cause, then, the Company shall pay to Employee an amount
equal to the Employees then current monthly compensation level multiplied by
the minimum of eighteen (18) or the number of months remaining in the term of
this Agreement (the "Severance Period") until such time as Employee shall
become reemployed in a position consistent with Employee's experience and
stature. If Employee obtains such a position but Employee's annual compensation
shall be less than the compensation upon termination, then the difference shall
be paid to Employee for the balance of the Severance Period. Such difference
shall be calculated as follows: The difference between Employee's ending
biweekly compensation annualized and the annualized compensation payable to
Employee in his new position during such period shall be payable in the same
manner as the Employee was paid prior to termination over the period of such
reemployment during such period. If the Employee's employment in a new position
shall terminate, then for the purposes of this Paragraph 4.01 Employee shall be
entitled to continuation of the ending monthly compensation until he shall
again become reemployed, in which case only
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the difference shall be payable as aforesaid, over the time of the Severance
Period. Should the Employee not be reemployed, all benefits included in Section
3.04(b) herein, will also be paid post termination, until the Employees' death.
This benefits coverage will cease upon the date the Employee is eligibile for
coverage by a succeeding employer.
4.02 Constructive Discharge. If the Company fails to reappoint Employee
to (or rejects Employee for) the position or positions listed in Section 2.01,
fails to comply with the provisions of Section 3, or engages in any other
material breach of the terms of this Agreement, Employee may at his option
terminate his employment and such termination shall be considered to be a
termination of Employee's employment by the Company for reasons other than
"Cause."
4.03 Termination by the Company for Cause. The Company shall have the
right to terminate the employment of Employee for Cause. Effective as of the
date that the employment of Employee terminates by reason of Cause, this
Agreement, except for Sections 2.04 through 2.08, shall terminate and no
further payments of the Compensation described in Section 3 (except for such
remaining payments of compensation under Section 3.01 relating to periods
during which Employee was employed by the Company, Benefits which are required
by applicable law to be continued, and reimbursement of prior expenses under
Section 3.04) shall be made.
4.04 Change in Control Termination. If at any time during the term of
this Agreement there is a termination due to Change of Control, the Company
shall pay to Employee an amount equal to the monthly portion of Employee's then
current monthly compensation as in effect on the date Employee's employment
terminated multiplied by twenty four (24). This amount shall be paid to
Employee in one lump sum as soon as practicable, but in no event later than
sixty (60) days, after the date of the termination due to Change in Control.
4.05 Termination on Account of Employee's Disability. If Employee
ceases to perform services for the Company because he is suffering from a
medically determinable disability and is therefore incapable of performing such
services, the Company shall continue to pay Employee an amount equal to the
Employee's then current compensation level as in effect on the date of
Employee's cessation of services by reason of disability less any amounts paid
to Employee as Workers Compensation, Social Security Disability benefits (or
any other disability benefits paid to Employee as federal, state, or local
disability benefits) and any amounts paid to Employee as disability payments
under any disability plan or program for a period ending on the earlier of: (a)
the date that Employee again becomes employed in a significant manner and on a
substantially full-time basis; (b) the date that Employee attains normal
retirement age, as such age is defined in a retirement plan maintained by the
Company; or (c) Employee begins to receive retirement benefits from a
retirement plan maintained by the Company.
4.06 Termination on Account of Employee's Death.
(a) In the event of Employee's death during the term of this
Agreement:
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(1) This Agreement shall terminate except as provided in this
Section; and
(2) The Company shall continue to retain benefits coverage on
behalf of the Employee's beneficiary or beneficiaries in the
manner indicted in Section 3.04(b) herein.
(b) Employee may designate one or more beneficiaries for the
purposes of this Section by making a written designation and delivering such
designation to the President or the Secretary of the Company. If Employee makes
more than one such written designation, the designation last received before
Employee's death shall control.
5. Stock Options.
5.01 Amount of Stock. In accordance with the provisions of the
Company's 1997 Incentive Stock Option Plan (the "Plan") and the specific
authorization of the Board, the Company hereby grants to Employee, subject to
all of the terms and conditions of the Plan and this Agreement, an option to
acquire shares of the Company's outstanding common stock ("Option Stock") in an
amount as indicated in Attachment "A" of this document.
5.02 Vesting. The Option to acquire the shares of common stock granted
in Section 5.01 vest per the schedule provided in Attachment "A" of this
document. Notwithstanding anything to the contrary contained in this Agreement,
all Options to acquire Option Stock shall irrevocably vest thirty (30) calendar
days prior to the scheduled consummation of a Change of Control.
5.03 Tax Changes. If any change(s) in the Federal income tax laws
materially affect the tax treatment of Employee with respect to the Option or
the Option Stock, the parties agree to negotiate in good faith to reach an
agreement which will take advantage of, or minimize the disadvantages of, such
changes.
5.04 Notwithstanding the type of termination described in Section 4
herein, Employee has the right to retain all granted options and warrants, even
those which are not vested, available for option exercise upon vesting, until
their natural expiration.
6. Miscellaneous.
6.01 Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of each of the parties
hereto and shall also bind and inure to the benefit of any successor or
successors of the Company in a reorganization, merger or consolidation and any
assignee of all or substantially all of the Company's business and properties,
but, except as to any such successor of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or Employee.
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6.02 Initial Term and Extensions. Except as otherwise provided, the
term of this Agreement shall be in effect until June 30, 1999 and commencing
with the effective date hereof. On June 30, 1999, and on each subsequent annual
anniversary of this date thereafter, the term of the Agreement shall be
automatically extended for an additional year unless either party notifies the
other in writing more than 90 days prior to the relevant anniversary date that
the Agreement is no longer to be extended. If, prior to June 30, 2009, Company
notifies Employee of its desire not to extend this agreement, this will be
considered termination by the Company other than by cause as described in
Section 4.01.
6.03 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Virginia.
6.04 Interpretation. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
6.05 Notice. Any notice required or permitted to be given hereunder
shall be effective when received and shall be sufficient if in writing and if
personally delivered or sent by prepaid cable, telex or registered air mail,
return receipt requested, to the party to receive such notice at its address
set forth at the end of this Agreement or at such other address as a party may
by notice specify to the other.
6.06 Amendment and Waiver. This Agreement may not be amended,
supplemented or waived except by a writing signed by the party against which
such amendment or waiver is to be enforced. The waiver by any party of a breach
of any provision of this Agreement shall not operate to, or be construed as a
waiver of, any other breach of that provision nor as a waiver of any breach of
another provision.
6.07 Binding Effect. Subject to the provisions of Section 4 hereof,
this Agreement shall be binding on the successors and assigns of the parties
hereto.
6.08 Survival of Rights and Obligations. All rights and obligations of
Employee or the Company arising during the term of this Agreement shall
continue to have full force and effect after the termination of this Agreement
unless otherwise provided herein.
6.09 Christian Conciliation. Employee and the Company desire to avoid
dissipating resources on wasteful litigation and therefore agree to resolve
disputes privately by good faith negotiation where at all possible. Any
dispute which cannot be resolved by negotiation shall be submitted to Christian
mediation, and if mediation fails, arbitration, under the rules of the
Institute for Christian Conciliation, or any comparable entity agreed upon in
writing both the Employee and the Company. Any arbitration award issued by the
mediator shall be final, binding, and enforceable in any court of competent
jurisdiction.
The Company
By
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Employee
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Spouse
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ATTACHMENT "A"
Xxxxxx Xxxxxx
Exercise Expiration
Shares Price Vesting Date
------------------------------------------------------------------------
116,000 $2.00 Fully Vested 06/29/05
145,312 $5.00 $.125 EPS For Quater OR $.50 EPS For Year 09/30/06
17,524 $4.00 Fully Vested 12/31/06
8,075 $5.00 Fully Vested 03/31/07
8,075 $5.00 Fully Vested 06/30/07
