EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), dated as
of April 15, 1999, is between Network Systems International,
Inc., a Nevada corporation (the "Company"), and Xxxxxxxxxxx X.
Xxxxx ("Executive"). The Company and Executive are collectively
referred to in this Agreement as the "Parties."
The Company desires to retain the services of Executive, and
Executive desires to be employed by the Company, in accordance
with this Agreement.
In consideration of the mutual covenants set forth herein
and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. Employment. Executive shall be employed by the
Company, and the Company shall employ Executive, on the terms and
conditions set forth in this Agreement.
(a) Duties. During the Term (as defined herein),
Executive shall be employed as the President and Chief
Operating Officer of the Company. Executive shall have such
authority and shall perform such duties as are customary for
such positions and as may be specified by the Bylaws of the
Company including responsibility for the following
departments of the Company: accounting/finance, human
resources, legal, investor relations, and strategic
planning. Executive shall, subject to the direction and
instruction of the Chairman (the "Chairman") of the Board of
Directors (the "Board"), (a) perform all duties incident to
Executive's employment hereunder; (b) promote the interests
of the Company; and (c) perform such other duties
appropriate for Executive's position as the Chairman may
from time to time reasonably direct.
(b) Full-Time Executive. Executive shall devote his
full time (except for permitted vacation time and absence
for any illness or disability), attention, and efforts to
the performance of his duties under this Agreement.
Executive may, however, engage in civic, charitable,
investing, and professional or trade activities so long as
those activities do not interfere with the performance of
his duties under this Agreement.
2. Term. The term of Executive's employment under this
Agreement (the "Term") shall be as follows:
(a) Initial Term. The Term shall commence on the date
of this Agreement and shall expire at 11:59:59 p.m., Eastern
Time, April 15, 2002, as may be extended pursuant to Section
2(b), unless Executive's employment hereunder is earlier
terminated pursuant to Section 6.
(b) Extended Term. Upon the expiration of the Term
described in Section 2(a), or of any subsequent extension of
the Term described in this Section 2(b), the Term shall be
extended, without the need for any action by either Party,
for additional consecutive one-year terms, (i) unless the
Company notifies Executive, at least 180 days before the
expiration date, that the Company does not wish to extend
the Term, or (ii) Executive notifies the Company, at least
90 days before the expiration date, that Executive does not
wish to extend the Term. If such a notice of non-extension
is timely given, the Term will expire at the end of the
initial Term or renewal Term in effect at the time of that
notice.
3. Compensation.
(a) Base Salary. During the Term, the Company shall
pay Executive for his services an annual base salary of
$200,000.00, payable in substantially equal installments in
accordance with the Company's normal payroll procedures.
Executive's base salary will be reviewed annually by the
Chairman or the Compensation Committee of the Board and may
be increased at the discretion of the Chairman or the
Compensation Committee of the Board. Executive's annual
base salary in effect from time to time, exclusive of any
other compensation hereunder, is hereinafter called the
"Base Salary."
(b) Annual Bonus. In addition to the Base Salary
payable to Executive, Executive shall be entitled to
receive additional cash compensation, as of the end of each
fiscal year of the Company during the Term, as an incentive
bonus. The additional cash compensation will be dependent
upon Executive's achieving stated performance objectives for
the fiscal year. The Chairman or the Compensation Committee
of the Board, in consultation with Executive, will determine
the performance objectives and bonus opportunity in
accordance with the Company's annual budgeting and planning
process. The bonus shall be earned upon satisfaction of the
performance objectives and shall be payable promptly after
the end of the fiscal year, but in no event later than
December 31 of each calendar year for the prior fiscal year
of the Company.
(c) Participation in Executive-Benefit Plans.
Executive shall be entitled to participate in any and all
health and insurance, disability (including the Long-Term
Disability Plan for Senior Executives as may be amended from
time to time), and other welfare benefit plans; profit-
sharing plans; long-term incentive compensation plans; stock
award, stock option, or other stock-related compensation
plans; and other benefits, plans, or arrangements provided
or available generally to senior executives of the Company
in effect during the Term (collectively, "Benefit Plans").
Executive's participation in any or all of the Benefit Plans
will be subject to the terms and conditions of the Benefit
Plans as they may hereafter be amended or restated (or
discontinued) by the Company, including the satisfaction of
all applicable eligibility requirements and vesting
provisions of the Benefit Plans. Notwithstanding and in
addition to the foregoing, Executive shall be entitled to
the following benefits during the Term:
(i) The Company shall provide Executive an
automobile consistent with the automobiles provided to
other senior executives of the Company.
(ii) The Company shall reimburse Executive for all
regular monthly dues and charges of a Greensboro, North
Carolina area country club chosen by Executive.
However, Executive shall remain responsible for payment
of any initiation fee and all personal charges.
(iii) The Company shall reimburse Executive
for all costs and expenses incurred in connection with
Executive's relocation to the Greensboro, North
Carolina area, including, real estate commissions and
closing costs (both on the sale of Executive's existing
home and the purchase of new home), moving expenses for
household goods, expenses of temporary living pending
purchase of a new home, travel expenses to look for
housing. Executive shall receive an additional payment
from the Company in an amount such that after payment
by Executive of all taxes imposed upon Executive as a
result of the relocation payments and reimbursements in
this Section 3(c)(iii), Executive will retain a net
after-tax benefit that is equal to the amount of such
payments and reimbursements.
(iv) The Company shall provide Executive with a
term life insurance policy (with premiums thereon paid
by the Company) with a face amount of at least $500,000
payable to the beneficiaries designated by Executive.
(d) Vacation. Executive will be entitled to paid
vacation, in accordance with the Company's vacation
policies, practices, and procedures, of at least three weeks
each calendar year.
(e) Tax Withholding. The Company may deduct from any
compensation or other amount payable to Executive under
this Agreement social security (FICA) taxes and all federal,
state, municipal, or other such taxes or governmental
charges as may now be in effect or that may hereafter be
enacted or required.
4. Stock Options. In connection with the execution of
this Agreement, Company and Executive are entering into that
certain Stock Option Agreement, of even date herewith, between
the Company and Executive (the "Stock Option Agreement"),
pursuant to which the Company is granting Executive the right to
purchase up to 500,000 shares of the Company's common stock on
the terms provided therein. The parties acknowledge that such
option agreement is a material inducement to Executive entering
into this Agreement.
5. Reimbursement; Indemnification.
(a) Reimbursable Expenses. Executive shall be
entitled to reimbursement from the Company, in accordance
with the relevant policies, practices, and procedures of the
Company, for all reasonable business expenses incurred by
Executive in performing his duties under this Agreement.
(b) Indemnification. Executive shall have rights to
indemnification and advancement of expenses to the maximum
extent allowed by applicable law. The Company shall
maintain directors' and officers' liability coverage for
Executive to the same extent as provided generally to other
executive officers of the Company.
6. Cessation of Employment. The Company may terminate
Executive's employment at any time, either with or without Cause;
provided the Company complies with this Section 6 and the other
provisions of this Agreement. Executive may terminate his
employment at any time with Good Reason or upon 90 days notice
without Good Reason; provided Executive complies with this
Section 6 and the other provisions of this Agreement. The
Parties' respective rights and obligations upon a Termination
Date (as hereinafter defined) are as provided in this Section 6.
(a) Definitions. As used in this Agreement, the
following terms shall have the meanings indicated:
(i) "Disability" means a permanent and total
disability, which shall be deemed to exist (y) if
Executive is unable reasonably to perform his duties
under this Agreement because of any medically
determinable physical or mental incapacity that has
lasted or can reasonably be expected to last for at
least 180 consecutive days and (z) a qualified
independent physician selected by or acceptable to the
Chairman and Executive (or his legal representative)
confirms such disability. If Executive (or his legal
representative) and the Company cannot agree as to a
qualified independent physician, each shall appoint
such a physician, and those two physicians shall select
a third. The determination of Disability by such third
physician, made in writing to the Company and
Executive, shall be final and conclusive for all
purposes of this Agreement. All costs of the
physician(s) shall be borne by the Company. In this
circumstance, Executive shall, if there is any question
about his Disability, submit to a physical examination.
(ii) "Cause" means any of the following:
(A) The continued failure of Executive to
substantially or satisfactorily perform his
duties under this Agreement in accordance
with the Company's reasonable performance
standards for Executive, other than any such
failure resulting from death or a Disability.
(B) (i) The conviction of Executive for,
Executive's pleading nolo contendre to an
allegation of, fraud, embezzlement, theft or
another felony (excluding a traffic
violation), or (ii) the Executive's
commission of, fraud, embezzlement, theft, or
another felony (excluding a traffic
violation) in the performance of his duties
to the Company.
(C) Any willful and continued act or omission by
Executive that, in the good-faith judgment of
the Board, is demonstrably and materially
injurious to the Company's business or
reputation.
(D) A willful and continued breach of any of
Sections 8, 9, and 10.
No act or omission under any of subsections (A), (C)
and (D) of this Section 6(a)(ii) shall constitute
"Cause" (and will not be considered "willful and
continued") unless such act or omission continues after
the Board (x) provides Executive written notice
describing the particular act(s) or omission(s) which
the Board believes in good faith to constitute Cause,
(y) provides Executive an opportunity, as soon as
reasonably possible, but in no event greater than 30
days following that notice, to meet in person with the
Board to explain or defend the alleged act(s) or
omission(s) and, to the extent practicable, to cure
such act(s) or omission(s), and (z) following the
expiration of such notice and cure period, determines
that such act(s) or omission(s) have not been cured.
Executive shall further have the right to contest an
allegation of Cause by requesting arbitration of that
issue in accordance with Section 12.
(iii) "Good Reason" means any of the
following:
(A) Executive is not elected or appointed to, or
is removed from, the position of either
President or Chief Operating Officer of the
Company by the Board for any reason, other
than for Cause or by reason of Executive's
death or Disability;
(B) Executive is assigned duties and
responsibilities that are inconsistent, in
any material respect, with the scope of
duties and responsibilities associated with
Executive's position of President and Chief
Operating Officer of the Company;
(C) the Company fails to timely pay Executive any
amounts otherwise vested and due hereunder,
including any bonus, and such failure
continues for ten business days following
written notice of nonpayment to the Company;
provided Executive shall not be required to
give the Company more than one such notice in
any twelve consecutive month period;
(D) the taking of any action by the Company which
would adversely affect Executive's
participation in, or materially reduce
Executive's benefits under any Benefit Plans
(other than stock, stock option, or other
incentive compensation plans), unless reduced
in the same proportion for all other
executives of the Company; or
(E) the failure of the Company to provide
Executive with the number of paid vacation
days or the other perquisites to which
Executive is entitled under Sections 3(c)(i),
(ii) or (iv).
Nothing described above in this Section 6(a)(iii) shall
constitute "Good Reason" unless Executive (x) provides
the Board written notice of the occurrence of any
act(s) or omissions(s) described above that may
constitute Good Reason describing the particular act(s)
or omission(s) which Executive believes in good faith
to constitute Good Reason, (y) provides the Board an
opportunity, within 30 days following delivery of that
notice, for the Board to explain or defend the alleged
act(s) or omission(s) and to cure such act(s) or
omission(s), and (z) following the expiration of such
notice and cure period, determines that such act(s) or
omission(s) have not been cured. The Company shall
have the right to contest an allegation of Good Reason
by requesting arbitration of that issue in accordance
with Section 12.
(iv) "Change of Control" means a change of control
of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") whether or not the
Company in fact is required to comply with Regulation
14A. Notwithstanding the foregoing, a change of
control shall be deemed to have occurred if:
(A) Any "person" (as used in Section 13(d) of the
Exchange Act), other than Xxxxxx Xxxxx,
becomes the "beneficial owner" (as determined
pursuant to Rule 13d-3 under the Exchange
Act), directly or indirectly, of equity
securities of the Company representing 35% or
more of the combined voting power of the
Company's then outstanding equity securities.
(B) The Company shall reorganize or merge with or
consolidate into any other entity, other than
a reorganization, merger, or consolidation
which would result in the holders of the
voting securities of the Company outstanding
immediately prior thereto holding immediately
thereafter securities representing more than
60% of the combined voting power of the
voting securities of the Company or such
surviving entity outstanding immediately
after such reorganization, merger, or
consolidation.
(C) The shareholders of the Company approve a
plan of complete liquidation of the Company
or an agreement for the sale or disposition
of all or substantially all of the Company
assets.
(D) During any period of 24 consecutive months
(not including any period before the date of
this Agreement), at least a majority of the
Board ceases to consist of individuals who
have served continuously on the Board since
the beginning of such 24-month period unless
the election of directors during such period,
or nomination for election by the Company's
shareholders, was approved by a vote of at
least two-thirds of the directors then still
in office who shall at that time have served
continuously on the Board since the beginning
of such 24-month period.
(v) "Successor" means any person who or which
acquired all or substantially all of the assets or
business or all or substantially all of the equity
securities of the Company, whether by purchase,
reorganization, merger, consolidation, or otherwise, in
a transaction or series of transactions constituting or
causing a Change of Control.
(vi) "Termination Date" means (A) the date the
Term expires without termination upon notice of a Party
pursuant to Section 2(b), (B) the date of Executive's
death, (C) the third business day after the date on
which the Company gives notice of termination of
Executive's employment because of Disability, or (D)
the date of termination specified in any other Notice
of Termination (as hereinafter defined) of Executive's
employment, or if not specified in the Notice of
Termination, the date that Notice of Termination is
given.
(vii) For purposes of the definition of
"Change of Control," a person has "control" over
another person if that first person has the power,
direct or indirect, to direct the management and
policies of that other person.
(viii) No act or omission shall be considered
"willful" if Executive believed in good faith that such
acts or omissions were in, or at least not opposed to,
the best interests of the Company.
(b) Expiration or Termination Generally. Upon the
occurrence of a Termination Date, the Company shall pay or
provide Executive the following:
(i) Any Base Salary earned by, but not yet paid
to, Executive through the Termination Date;
(ii) Any annual bonus (as described in Section
3(b)) that has been earned by, but not yet been paid
to, Executive through the Termination Date;
(iii) All benefits, or (at the Company's
option) the cash equivalent of all benefits, that have
been earned by or vested in, and are payable to,
Executive under, and subject to the terms (including
all eligibility requirements) of, the Benefit Plans in
which Executive participated through the Termination
Date;
(iv) All reimbursable expenses due, but not yet
paid, to Executive as of the Termination Date under
Section 5; and
(v) An amount equal to Executive's accrued and
unused vacation in accordance with Company policy.
Any amounts due under Section 6(b)(ii) shall be paid in the
same manner and on the same date(s) as would have occurred
if Executive's employment under this Agreement had not
ceased. The amounts or benefits due under Section 6(b)(iii)
shall be paid or provided in accordance with the terms of
the Benefit Plans under which such amounts or benefits are
due to Executive. The amounts due under Sections 6(b)(iv)
and 6(b)(v), if any, shall be paid in accordance with the
terms of the Company's policies, practices, and procedures
regarding reimbursable expenses and accrued and unused
vacation, respectively. Except as expressly provided in the
following subsections of this Section 6, upon paying or
providing Executive the preceding amounts or benefits, the
Company shall have no further obligation or liability under
this Agreement for Base Salary or any other cash
compensation or for any benefits under any of the Benefit
Plans. Upon the occurrence of a Termination Date, and
without any written resignation, Executive shall be deemed
to have resigned from any position as an officer or
director, or both, of any subsidiary, division, or affiliate
of the Company or any other entity in which the Company
holds an equity interest or which it sponsors that Executive
then holds.
(c) Termination Upon Disability. If a Termination
Date occurs due to notice by the Company because of
Disability, Executive (or his legal representative) shall be
entitled to receive from the Company any benefits under the
Long Term Disability Plan for Senior Executives, as may be
amended from time to time.
(d) Termination Without Cause or for Good Reason. If
Executive's employment is terminated either by the Company
without Cause or by Executive for Good Reason, then
Executive shall be entitled to receive the following from
the Company, as liquidated damages (the "Severance
Payment"):
(i) an amount equal to the greater of (y)
Executive's Base Salary, as in effect at the
Termination Date, paid for the remainder of the Term,
or (z) the Base Salary, as in effect on the Termination
Date (i.e., one year's salary);
(ii) the insurance required by Section 6(g); and
(iii) the amount incurred by Executive for all
legal fees and expenses as a result of such termination
incurred in successfully seeking to obtain or enforce
any right or benefit provided by this Agreement or the
Stock Option Agreement.
The portion of the Severance Payment described in clause (i)
above shall be paid in a lump-sum payment. The Severance
Payment shall be in addition to the amounts or benefits to
which Executive is entitled under Section 6(b) and any
rights Executive may have under the Benefit Plans. The
Company will promptly make the Severance Payment within ten
business days after the Termination Date.
(e) Termination for Cause or Without Good Reason. If
Executive's employment is terminated either by the Company
for Cause or by Executive without Good Reason, or a
Termination Date occurs due to Executive's death, then
Executive shall not be entitled to any payments other than
the amounts or benefits to which Executive is entitled under
Section 6(b).
(f) Change of Control. If a Successor does not assume
this Agreement, such event shall be considered a termination
without Cause by the Company. If Executive's employment is
terminated by notification to Executive from the Company or
a Successor under Section 2(b) that it does not wish to
extend the Term, and the Termination Date associated with
such notice occurs within 18 months following a Change of
Control, Executive shall be entitled to receive the
Severance Payment as liquidated damages on such Termination
Date.
(g) Insurance. Unless Executive is terminated for
Cause, the Company shall maintain or cause to be maintained
in full force and effect for a period of two years from the
Termination Date all health and dental insurance in which
Executive participated or was entitled to participate
immediately prior to the Termination Date, provided that
Executive's continued participation is possible under the
general terms and provisions of such plans and programs. If
Executive's participation in any such plan or program is
barred, the Company shall arrange to provide Executive with
benefits substantially similar to those which Executive is
entitled to receive under such plan or program. At the end
of such two year period, Executive will be entitled to take
advantage of any conversion privileges applicable to the
benefits available under any such plans or programs. The
Company shall pay any and all premiums associated with
maintaining such insurance coverage.
(i) No Mitigation. Executive will not be obligated to
seek or secure new employment or to become self-employed
after the Termination Date, and there will be no offset
against any Severance Payment or other severance benefit
under this Agreement on account of any remuneration or
benefits from any subsequent employment (including self-
employment) that Executive may obtain after the Termination
Date.
(j) Notice of Termination. Any purported termination
by the Company or by Executive shall be communicated by
written Notice of Termination to the other party. A "Notice
of Termination" shall mean a notice indicating the specific
termination provision in this Agreement relied upon and
setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
7. Excise Tax. Solely for purposes of this Section 7, the
term "Termination Payment" includes not only the Severance
Payment and other amounts described in Section 6 but also any
other payment or benefit received or to be received by the
Executive in the nature of compensation within the meaning of
section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") and the Treasury Regulations thereunder,
specifically including any benefit received by the Executive from
the accelerated vesting of any stock options. If any Termination
Payment becomes subject to the excise tax (the "Excise Tax")
imposed under section 4999 of the Code, the Company shall pay to
Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by Executive, after deduction of any
Excise Tax on any Termination Payment (and Excise Tax upon the
payment provided for by this Section 7), shall be equal to the
Termination Payments. For purposes of determining whether any of
the Termination Payments will be subject to the Excise Tax and
the amount of such Excise Tax,
(a) any other payment or benefit received or to be
received by Executive in connection with a Change of Control
of the Company and Executive's subsequent termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the
Company, any person whose actions resulted in the Change of
Control of the Company or any person affiliated with the
Company or such person) shall be treated as a "parachute
payment" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors and
reasonably acceptable to Executive such other payments or
benefits (in whole or in part) do not constitute parachute
payments, including by reason of section 280G(b)(4)(A) of
the Code, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services
actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the "base amount"
(as such term is defined in section 280G(b)(3) of the Code)
allocable to such reasonable compensation, or are otherwise
not subject to the Excise Tax,
(b) the amount of the Termination Payments which
shall be treated as subject to the Excise Tax shall be equal
to the lesser of (1) the total amount of the Termination
Payments and (2) the amount of excess parachute payments
within the meaning of section 280G(b)(1) of the Code (after
applying clause (a) above), and
(c) the value of any non-cash benefit, deferred
payment or other benefit shall be determined by the
Company's independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of Executive's residence on the
Termination Date, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and
local taxes. If the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
Executive's termination of employment, Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being
repaid by Executive to the extent that such repayment results in
a reduction in Excise Tax and/or a federal, state or local income
tax deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. If the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's
employment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or
additions payable by Executive with respect to such excess) at
the time that the amount of such excess is finally determined.
Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Termination Payments.
8. Confidential Information. The Company will provide
Executive, during the Term, access to various trade secrets,
confidential information, and proprietary information of the
Company (which, in this Section 8 as well as in Sections 9 and
10, shall include the Company's subsidiaries and affiliates)
which are valuable and unique to the Company ("Confidential
Information"). Confidential Information includes the Company's
compilations of and analyses and other records regarding its
customers and prospective customers and the terms (including
pricing) of products and services offered and sold by the Company
and other information concerning the Company's business, methods,
processes, research data, marketing, personnel and finances.
Executive shall not, either during the Term or at any time
thereafter, use any of the Confidential Information or disclose
any of the Confidential Information to any person who is not an
employee or agent of or engaged to render services to the
Company, except to perform his duties under this Agreement or
otherwise with the Company's prior written consent. Nothing in
this Section 8 shall preclude Executive from the use or
disclosure of information that (a) is or becomes publicly
available other than as a result of a disclosure by Executive,
(b) is in the possession of or known to Executive, prior to his
receipt from the Company, or (c) is or becomes available to
Executive on a non-confidential basis from a source (other than
Executive) which, to the best of Executive's knowledge after due
inquiry, is not prohibited from disclosing such information to
Executive by a legal, contractual or fiduciary obligation to the
Company. All Confidential Information and all other files,
records, documents, information, data, and similar items relating
to the business or affairs of the Company, whether prepared by
Executive or otherwise coming into his possession, and all other
items belonging to the Company, shall remain the exclusive
property of the Company and shall not be removed from the
Company's premises, except in the ordinary course of business as
part of Executive's performance of his duties under this
Agreement, and (in any event) shall be promptly returned or
delivered to the Company (without Executive's retaining any
copies) upon the occurrence of a Termination Date.
9. Non-Solicitation and Non-Competition. Executive shall
not, at any time during the Term and, subject to the provisions
of Section 9(c), within the 12 consecutive months following the
Termination Date, either directly or indirectly, on his own
behalf or in the service or on behalf of others:
(a) Intentionally solicit, recruit, or hire, or
intentionally attempt to solicit, recruit, or hire, any
employee of the Company, or in any other manner attempt to
induce any employee of the Company to leave the employ of
the Company. References in this Section 9(a) to "any
employee" shall include any person who was an employee of
the Company at any time within the six consecutive months
preceding the Termination Date.
(b) Anywhere in, into, or from the United States,
intentionally solicit, divert, or appropriate to or for, or
intentionally attempt to solicit, divert, or appropriate to
or for, any business that competes with the Company in the
development and marketing of enterprise-wide software
products for complex manufacturers emphasizing sales order
processing, enterprise resource planning, manufacturing
execution, and distribution management (a "Competing
Business"). For the purpose of this Section 9(b), Executive
acknowledges, represents, and agrees that (i) the Company
has provided and agreed to provide him, and he has received
and will receive from the Company, special experience and
knowledge, including the Confidential Information, (ii)
because the Confidential Information is valuable to the
Company, its protection constitutes a legitimate interest to
be protected by the Company by enforcement of the
restrictions in this Section 9(b), (iii) the enforcement of
the restrictions in this Section 9(b) would not be unduly
burdensome to Executive and, to induce the Company to enter
into this Agreement, Executive is willing and able to engage
in activities that are not subject to restriction pursuant
to this Section 9(b), (iv) this Section 9(b) is, and will be
construed as, ancillary to and independent of any other
provision of this Agreement, and (v) the restrictions in
this Section 9(b) regarding duration, geographic area, and
scope of activity are reasonable.
(c) The non-solicitation and non-competition
provisions of Sections 9(a) and 9(b) shall apply only if
either of the following conditions is satisfied:
(i) If Executive's employment is terminated either by
the Company without Cause or by Executive, whether
or not for Good Reason, and the Company elects to
pay Executive an amount equal to the Base Salary
(i.e., one year's salary), as in effect at the
Termination Date (the "Non-Compete Payments") for
the 12 consecutive months following the
Termination Date (the "Post-Termination Non-
Competition Period"). The Non-Compete Payments
shall be paid, at the Company's discretion, either
(x) at the dates on which Executive's Base Salary
would have been payable if Executive's employment
under this Agreement had not been terminated, (y)
in a lump-sum payment, or (z) in a combination of
clause (x) and clause (y) above. The Non-Compete
Payments shall be in addition to the amounts or
benefits to which Executive is entitled under
Section 6. The Company shall notify Executive in
writing within 15 days after the Termination Date
of its election to make the Non-Compete Payments
and extend the provisions of Sections 9(a) and
9(b) to the Post-Termination Non-Compete Period.
If the Company elects to make the Non-Compete
Payments and notifies Executive of such election
within such 15-day period, such election shall be
irrevocable and the Company shall be obligated to
make the Non-Compete Payments to Executive. If the
Company fails to notify Executive within such 15-
day period, the Company shall be deemed to have
rejected the option and the provisions of Sections
9(a) and 9(b) shall not apply (subject to Section
9(c)(ii) below). The Company will commence or
make the Non-Compete Payments within 20 days after
the Termination Date. At any time on or after the
Company begins to pay the portion of the Non-
Compete Payment in intervals under clause (x)
above, the Company may make a lump-sum payment of
all remaining amounts of the Non-Compete Payment.
(ii) Executive's employment is terminated by the
Company for Cause.
10. Developments.
(a) Disclosure of Developments. Executive shall
promptly disclose to the Company all inventions,
discoveries, improvements, processes, formulas, ideas, know-
how, methods, research, compositions, and other
developments, whether or not patentable or copyrightable,
that Executive, by himself or in conjunction with any other
person, conceives, makes, develops, or acquires during the
Term that (i) are or relate to the properties, assets, or
existing or contemplated business or research activities of
the Company, or (ii) arise out of or result from, directly
or indirectly, the use of the Company's time, labor,
materials, facilities, or other resources ("Developments").
(b) Assignment and Cooperation. Executive hereby
assigns, transfers, and conveys to the Company, and hereby
agrees to assign, transfer, and convey to the Company during
or after the Term, all of his right and title to and
interest in all Developments. Executive shall, from time to
time upon the request of the Company during or after the
Term, execute and deliver any and all instruments and
documents and take any and all other actions that, in the
reasonable judgment of the Company or its counsel, are or
may be necessary or desirable to document any such
assignment, transfer, and conveyance to the Company or to
enable the Company to file and process applications for, and
to acquire, maintain, and enforce, any and all patents,
trademarks, registrations, or copyrights with respect to any
of the Developments, or to obtain any extension, validation,
re-issue, continuance, or renewal of any such patent,
trademark, registration, or copyright. The Company will be
responsible for the preparation of any such instrument or
document and for the implementation of any such proceedings
and will reimburse Executive for all reasonable expenses
incurred by him in complying with this Section 10.
11. Reformation and Severability. The Parties intend all
provisions of Sections 8, 9, and 10 to be enforced to the fullest
extent permitted by law. Accordingly, should a court of
competent jurisdiction determine that the scope of any provision
of Section 8, Section 9, or Section 10 is too broad to be
enforced as written, the Parties intend that the court reform the
provision to such narrower scope as it determines to be
reasonable and enforceable. In addition, however, Executive
agrees that each of the agreements set forth in Sections 8, 9,
and 10 constitutes a separate agreement independently supported
by good and adequate consideration, shall be severable from the
other provisions of this Agreement, and (with this Section 11)
shall survive the occurrence of a Termination Date. If any
provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws, (i) such provision
shall be fully severable, (ii) this Agreement shall be construed
and enforced as if such illegal, invalid, or unenforceable
provision never constituted a part of this Agreement, and (iii)
the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be added as part of this Agreement a
provision as similar in its terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid,
and enforceable.
12. Dispute Resolution.
(a) Arbitration. The exclusive remedy or method of
resolving all disputes or questions arising out of or
relating to this Agreement or the expiration or termination
of Executive's employment hereunder shall be arbitration
held in Greensboro, North Carolina. Nevertheless, although
disputes or questions arising out of or relating to any of
Sections 8, 9, and 10 shall be subject to arbitration, the
Company may seek and obtain injunctive relief from any court
of proper jurisdiction to enforce or protect its rights
under Sections 8, 9, and 10 pending such arbitration. Any
arbitration may be requested or initiated by a Party by
written notice to the other Party specifying the subject of
the requested arbitration and appointing the notifying
Party's arbitrator ("Arbitration Notice").
(b) Arbitrators. Arbitration shall be before three
arbitrators, one to be appointed by the Company, a second to
be appointed by Executive, and a third to be appointed by
the two arbitrators chosen by the Company and Executive.
All such arbitrators shall be selected from a list of
potential arbitrators provided by the American Arbitration
Association. The third arbitrator shall act as chairman.
If either Party fails to appoint an arbitrator by written
notice to the other Party within ten days after the
Arbitration Notice is given or the two arbitrators appointed
by the Parties fail to appoint a third arbitrator within ten
days after the date of the appointment of the second
arbitrator, then the American Arbitration Association in
Greensboro, North Carolina, upon application of a Party
shall appoint an arbitrator to fill that position.
(c) Award and Costs. The arbitration proceeding shall
be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. A
determination or award made or approved by at least two of
the arbitrators shall be the valid and binding action of the
arbitrators. The costs of arbitration shall be borne by the
Company and/or Executive as determined by the arbitrators.
The arbitration determination or award shall be final and
conclusive on the Parties, and judgment upon such award may
be entered and enforced in any court of competent
jurisdiction.
13. Miscellaneous.
(a) Notices. Any notice, consent, demand, request,
approval, or other communication to be given under this
Agreement by one Party to the other must be in writing and
must be either (i) personally delivered, (ii) mailed by
registered or certified mail, postage prepaid with return
receipt requested, (iii) delivered by overnight express
delivery service or same-day or overnight local courier
service, or (iv) delivered by facsimile transmission, in any
event to the address or number set forth below or to such
other address or number as may be designated by either or
both of the Parties from time to time in accordance with
this Section 13(a):
If to the Company: Network Systems International,
Inc.
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Fax No.: (000) 000-0000
If to Executive: Xx. Xxxxxxxxxxx X. Xxxxx
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Notices delivered personally or by overnight express
delivery service or by local courier service shall be deemed
given and received as of actual receipt. Notices mailed as
described above shall be deemed given and received three
business days after mailing or upon actual receipt,
whichever is earlier. Notices delivered by facsimile
transmission shall be deemed given and received upon receipt
by the sender of the transmission confirmation.
(b) Entire Agreement. This Agreement and the option
agreement referred to in Section 4 replace and supersede any
and all other agreements and understandings of any kind,
either oral or written, between the Parties with respect to
the subject matter of this Agreement and contain all of the
covenants and agreements between the Parties with respect to
the subject matter of this Agreement.
(c) Modification. No change or modification of this
Agreement will be valid or binding upon the Parties, nor
will any waiver of any term or condition be so binding,
unless the change or modification or waiver is in writing
and signed by both Parties.
(d) Governing Law and Venue. This Agreement and the
obligations and undertakings of the Parties under this
Agreement are performable in Greensboro, North Carolina.
This Agreement and all matters related hereto shall be
governed by, and construed in accordance with, the laws of
the State of North Carolina.
(e) Counterparts. This Agreement may be executed in
counterparts, each of which constitutes an original, but all
of which constitute one document.
(f) Estate. If Executive dies during his employment
hereunder, any amounts due him from the Company under this
Agreement as of the date of his death shall be paid to his
estate or heirs.
(g) Assignment. The Company shall not have the right
to assign this Agreement, except to a Successor. The
rights, duties, and benefits to Executive hereunder are
unique and personal to him, and no such right, duty, or
benefit may be assigned by him.
(h) Binding Effect; Survival. This Agreement is
binding upon the Parties, together with their respective
executors, administrators, successors, personal
representatives, heirs, and permitted assigns. The
respective rights and obligations of the Parties under this
Agreement shall survive the expiration or termination of the
Term to the extent necessary to give full effect to those
rights and obligations.
(i) Waiver of Breach. Any waiver by a Party of a
breach of any provision of this Agreement by the other Party
will not operate or be construed as a waiver of any other or
any subsequent breach.
(j) Certain Defined Terms. As used in this Agreement,
(i) "Section" means a Section of this Agreement unless
otherwise indicated, (ii) except as otherwise defined in
Section 6(a)(iv)(A), "person" means an individual or any
corporation, partnership, trust, unincorporated association,
or other legal entity, whether acting in an individual,
fiduciary, or other capacity, and any government, court, or
other governmental agency, (iii) "include" and "including"
shall not denote or signify any limitation, (iv) "herein,"
"hereof," "hereunder," and similar terms are references to
this Agreement as a whole and not to any particular
provision of this Agreement, and (v) "business day" means
any Monday through Friday other than any such weekday on
which the executive offices of the Company are closed.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first set forth above.
NETWORK SYSTEMS INTERNATIONAL, INC.
/s/ Xxxxxx X. Xxxxx
By: Xxxxxx X. Xxxxx, Chief
Executive Officer
/s/ Xxxxxxxxxxx X. Xxxxx
XXXXXXXXXXX X. XXXXX
