1
EXHIBIT 10.31
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the September 14,1999, between ACE*COMM
Corporation (the "Company") and Xxxx X. Xxxxxxx (the "Executive").
WHEREAS, the Executive has been appointed President and Chief Operating
Officer of the Company and that, as a condition to his employment, the Executive
and the Company agreed to the following terms of employment, and that such terms
were approved by the Board of Directors of the Company, and
WHEREAS, the Board of Directors of the Company has determined that it is
in the best interests of the Company and its shareholders to retain the services
of the Executive and to assure his commitment to the Company and to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a corporate reorganization or Change of
Control (as defined below) of the Company, and
WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened corporate reorganization or Change of Control
and, therefore, it is in the best interests of the Company and its shareholders
to provide the Executive with compensation and benefits arrangements upon
termination which ensure that the compensation and benefits expectations of the
Executive will be satisfied and are competitive with those of other
corporations.
NOW, THEREFORE, in order to accomplish these objectives, and in
consideration of the promises and mutual agreements herein contained, the
Company and Executive hereby agree as follows:
1. EMPLOYMENT, DUTIES.
Subject to the provisions set forth elsewhere in this Agreement, the
Company hereby employs the Executive as its President and Chief Operating
Officer (or such other title as is appropriate from time to time as is
determined by the Chief Executive Officer), with such responsibilities and
authority as shall be assigned to him from time to time by the Chief Executive
Officer of the Company, provided that after a Change of Control, the Executive's
position, authority, duties and responsibilities shall be at least commensurate
with those held, exercised and assigned during the 120-day period immediately
preceding the Change of Control.
Initially, the Executive's duties shall include duties as directed by the
Chief Executive Officer from time to time, including those listed on Exhibit A.
The Executive's principal place of employment shall be at the Company's
main headquarters, in Gaithersburg, Maryland, subject to such travel as may be
required by his employment.
The Executive hereby agrees to remain in the employ of the Company
subject to the terms and conditions of this Agreement, for the Term of this
Agreement (defined below) and to perform his duties faithfully, loyally and to
report to, and follow the reasonable directions of, the Chief Executive Officer
to the extent not inconsistent with the Executive's position. During the Term,
and excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote his full business time and best efforts
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use his
best efforts to perform faithfully and efficiently such responsibilities. During
the Term it shall not be a violation of this Agreement for the
2
Executive to (A) serve on corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such activities do
not interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement.
The Executive represents and warrants that there are no agreements or
arrangements, whether written or oral, in effect which would prevent him from
rendering exclusive services to the Company during the term hereof, and that he
has not made and will not make any commitment, agreement or arrangement, or do
any act, in conflict with this Agreement and that entering into this Agreement
will not be in violation of any other agreement.
2. TERM.
The term of the Executive's employment shall commence on September 14,
1999 (the "Hire Date") and shall end on September 21, 2002, unless sooner
terminated, as provided herein, or renewed by mutual agreement of the parties
(the "Term").
3. COMPENSATION.
As compensation for all services to be rendered pursuant to this
Agreement, the Company shall pay the Executive, during the Term, the following:
"Base Salary" payable bi-weekly, less such amounts as shall be required to
be withheld by applicable laws and regulations. The "Base Salary" shall be
$195,000 per year, subject to consideration by the Compensation Committee
of the Board of Directors as of October 1 of each year for increases as
appropriate.
"Bonus" In addition to his Base Salary, the Executive shall be eligible to
receive with respect to each fiscal year (beginning with respect to the
2000 fiscal year) payable on October 1 of the following year unless
deferred pursuant to the terms of the plan, a bonus of (1) up to 75% of
Base Salary as in effect from time to time, payable in cash and (2) an
option for up to 50,000 shares of Common Stock, which number of shares may
be increased annually by the Company so as to constitute 0.57% of the
number of shares of Common Stock of the Company outstanding at the time of
such award, excluding, for the purpose of determining the number of shares
outstanding, those shares of Common Stock issued by the Company between the
Hire Date and such date in connection with employee benefit plans
(including stock option and stock purchase plans) or which are issued in
connection with a transaction approved by the Board of Directors and which
issuance the Board determines in its sole discretion to be non-dilutive of
earnings per share of the Company. Such Bonus shall be payable, based on
the Company's financial performance and personal objectives as determined
in advance by the Chief Executive Officer and the Board of Directors in
accordance with the terms of the Company's executive compensation plan as
from time to time in effect. Such annual bonus award options to be issued
pursuant to terms determined by the Board of Directors, subject to an
exercise price equal to the then fair market value of the Common Stock.
Following a Change of Control (as defined in Section 7.1 below), the Executive
shall be eligible, for each fiscal year ending during the balance of the Term,
an annual bonus (the "Annual Bonus") in cash and options at least equal to the
average of the bonuses paid to the Executive under the Company's annual bonus
plan for the preceding three full fiscal years prior to the Change of Control
(or such fewer number of years that he Executive was employed by the Company,
annualized in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the "Average Annual Bonus"). Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
3
4. OPTION GRANT.
In connection with his employment, the Executive was granted an option
(the "Option") exercisable for 200,000 shares of Common Stock (the "Option
Shares") exercisable at $4.188 per share, the terms and conditions of which are
set forth in the Option Agreement effective as of September 20,1999, as amended
and restated in the Amended and Restated Omnibus Stock Plan Non-Qualified Stock
Option Grant Agreement dated of even date herewith and a copy of which is
attached hereto (as amended, the "Option Agreement"). To the extent that the
terms of the Option evidenced in the Option Agreement and in the Amended and
Restated Omnibus Stock Plan (the " Plan") are in any way inconsistent with the
terms of this Agreement, the terms of the Option as set forth in the Option
Agreement and Plan shall supersede any terms set forth herein with respect
thereto.
5. PERQUISITES.
During the Term the Executive shall be eligible to participate in benefit
plans generally available to all executive level employees and reimbursement for
business expenses in accordance with Company policy.
After a Change of Control, the Executive shall be eligible to participate
in benefit plans at least as favorable to the Executive as were available to the
Executive at the Company within the 120 days prior to the Change of Control.
6. TERMINATION AND COMPENSATION THEREFOR PRIOR TO A CHANGE OF CONTROL.
6.1 DEATH: If the Executive dies during the Term and prior to a Change of
Control, this Agreement shall terminate automatically as of the date of death of
the Executive. In the event of such termination, all compensation and other
benefits payable or provided hereunder shall cease as of the date of termination
(except to the extent that death benefits are then payable), and Base Salary,
unpaid Bonus from a prior year, and all accrued benefits (if any) then payable
to the Executive pursuant to the terms of any plans or arrangements referred to
in Sections 3 or 5, shall be paid to the Executive (or to his heirs, legatees
and/or personal representatives) through the date of termination. No Bonus shall
be payable with respect to the year in which the Executive dies. The Option will
remain exercisable for up to one year from the date of death in accordance with
the terms of the Option Agreement with respect to Option Shares that have vested
as of the date of death. Unvested Option Shares will be deemed cancelled upon
the date of death.
6.2 DISABILITY: If during the Term and prior to a Change of Control the
Executive becomes physically, mentally or emotionally disabled, whether totally
or partially, as determined by the Board of Directors of the Company in good
faith, such as to be unable to perform his services hereunder for a period of
one month or shorter periods aggregating one month, the Company may at any time
after the last day of the month of disability or on the last day of the shorter
periods aggregating one month of disability, terminate the Executive's
employment hereunder effective on the 30th day after the date of such written
notice. In the event of such termination, all compensation and other benefits
payable or provided hereunder shall cease as of the effective date of
termination (except to the extent that disability benefits are then payable),
and Base Salary, unpaid Bonus from a prior year and all accrued benefits (if
any) then payable to the Executive pursuant to the terms of any plans or
arrangements referred to in Sections 3 or 5, shall be paid to the Executive (or
to his guardian or personal representatives) through such date of termination.
No Bonus shall be payable with respect to the year in which the termination for
disability becomes effective. The Option will remain exercisable for up to 90
days from the effective date of termination in accordance with the terms of the
Option Agreement with respect to Option Shares that have vested as of the
effective date of termination. Unvested Option Shares will be deemed cancelled
upon the effective date of termination.
6.3 TERMINATION AT ELECTION OF THE COMPANY:
(a) FOR CAUSE: Notwithstanding any other provision of this Agreement, the
Company may terminate the Executive's employment hereunder at any time prior to
a Change of Control, effective upon
4
the date of notice of such termination, upon the occurrence of any of the
following, which shall be determined in the sole discretion of the Board of
Directors of the Company (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board): (i) the Executive's engaging in conduct that constitutes
gross neglect or willful misconduct in carrying out his duties under this
Agreement; (ii) the Executive's engaging in any acts or omissions involving
dishonesty or that demonstrate a lack of integrity; (iii) the Executive's making
knowing material misrepresentations to the Company that injure the business and
affairs of the Company, monetarily or otherwise; (iv) the Executive's committing
a material breach of any of his obligations under this Agreement which is not
cured within ten (10) days of receipt of written notice from the Board of
Directors. Such termination will be deemed for "Cause."
In the event of termination of the Executive's employment for Cause, all
compensation and other benefits payable or provided hereunder shall cease as of
the date of termination and Base Salary, unpaid Bonus from a prior year and all
accrued benefits (if any) then payable to the Executive pursuant to the terms of
any plans or arrangements referred to in Sections 3 or 5, shall be paid to the
Executive through the date of termination. No Bonus shall be payable with
respect to the year in which the Executive is terminated for Cause. Upon
termination of the Executive for Cause, the Option shall terminate immediately
and no longer be exercisable.
(b) OTHER THAN FOR CAUSE: In addition to the Company's right to terminate
the Executive's employment pursuant to Section 6.3(a), prior to a Change of
Control the Company may, for any reason or for no reason, terminate the
Executive's employment upon written notice to the Executive effective upon the
date of the notice. In such event, all compensation and other benefits payable
or provided hereunder shall cease as of the date of termination and Base Salary,
unpaid Bonus from a prior year and all accrued benefits (if any) then payable to
the Executive pursuant to the terms of any plans or arrangements referred to in
Sections 3 or 5, shall be paid to the Executive through the date of termination.
No Bonus shall be payable with respect to the year in which the Executive is
terminated other than for Cause. As additional compensation for such
termination, the Company shall pay the Executive upon such termination a lump
sum equal to 1.5 times his Base Salary as is in effect as of immediately prior
to termination (the "Severance Payment").
6.4 TERMINATION BY THE EXECUTIVE: Notwithstanding any other provision of
this Agreement, prior to a Change of Control the Executive may terminate his
employment upon written notice of termination delivered to the Board of
Directors, effective upon the date of receipt of such notice by the Board. In
the event of such termination, all compensation and other benefits payable or
provided hereunder shall cease as of the date of termination and Base Salary and
all accrued benefits (if any) then payable to the Executive pursuant to the
terms of any plans or arrangements referred to in Sections 3 or 5, shall be paid
to the Executive through the date of termination. No Bonus shall be payable with
respect to the year in which such termination is effective. Upon termination by
the Executive, the Option shall terminate immediately and no longer be
exercisable.
7. Termination and Compensation Therefor following a Change of Control.
7.1 DEFINITION OF CHANGE OF CONTROL: For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 51% or more of either (i) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or
(ii) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any
5
acquisition of Common Stock directly from the Company, (ii) any
acquisition of Common Stock by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (A) and (B) of subsection (c) of this Section 7.1; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual becoming
a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
Consummation of a reorganization, merger or consolidation
involving the Company or any subsidiary of the Company or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, either (A)(i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be or (ii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or at the time of the action of the
Board, providing for such Business Combination and (B) no Person
(excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 35% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination.
7.2 DEATH: If the Executive dies during the Term after a Change of
Control, this Agreement shall terminate automatically as of the date of death of
the Executive. In the event of such termination, all compensation and other
benefits payable or provided hereunder shall cease as of the date of termination
(except to the extent that death benefits are then payable), and Base Salary,
any unpaid Bonus from a prior year, and all accrued benefits (if any) then
payable to the Executive pursuant to the terms of any plans or arrangements
referred to in Sections 3 or 5, shall be paid to the Executive (or to his heirs,
legatees and/or personal representatives) through the date of termination. No
Bonus shall be payable with respect to the year in which the Executive dies. The
Option will remain exercisable for up to one year from the date of death in
accordance with the terms of the Option Agreement with respect to Option Shares
that have vested as of the date of death. Unvested Option Shares will be deemed
cancelled upon the date of death.
With respect to the provision of plans or arrangements pursuant to
Sections 3 or 5, these shall include, without limitation, and the Executive's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the benefits that would have been provided by the Company to the estate
and
6
beneficiaries of the Executive under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to such
Executive and his beneficiaries at any time during the 120-day period
immediately preceding the Change of Control.
7.3 DISABILITY: If during the Term and after a Change of Control the
Company determines in good faith that the Disability of the Executive has
occurred during the Term (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after the date of
such notice (the "Disability Hire Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" after a Change of Control shall mean the Executive's incapacity to
perform his services hereunder due to mental or physical illness which is
determined to be total and permanent by a physician selected by the Company or
its insurers and reasonably acceptable to the Executive or the Executive's legal
representative. In the event of such termination, all compensation and other
benefits payable or provided hereunder shall cease as of the effective date of
termination (except to the extent that disability benefits are then payable),
and Base Salary, unpaid bonus from prior years and all accrued benefits (if any)
then payable to the Executive pursuant to the terms of any plans or arrangements
referred to in Sections 3 or 5, shall be paid to the Executive (or to his
guardian or personal representatives) through the date of termination. No Bonus
shall be payable with respect to the year in which the Executive is determined
by the Board of Directors to have become disabled. The Option will remain
exercisable for up to 90 days from the effective date of termination in
accordance with the terms of the Option Agreement, with respect to Option Shares
that have vested as of the effective date of termination. Unvested Option Shares
will be deemed cancelled upon the effective date of termination
7.4 TERMINATION AT ELECTION OF THE COMPANY:
(a) FOR CAUSE: Notwithstanding any other provision of this Agreement, the
Company may terminate the Executive's employment hereunder at any time after a
Change of Control upon the occurrence of any of the following: (i) the willful
and continued failure of the Executive to perform substantially the Executive's
duties with the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the Board or
the Chief Executive Officer of the Company which identifies the manner in which
the Board or Chief Executive officer believes that the Executive has not
substantially performed the Executive's duties, or (ii) the willful engaging by
the Executive in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company. Following a Change of Control, only such
termination will be deemed for Cause.
The cessation of employment of the Executive shall not be deemed to be
for Cause following a Change of Control unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
In the event of such termination of the Executive's employment, all
compensation and other benefits payable or provided hereunder shall cease
as of the date of termination and Base Salary, any unpaid Bonus from a
prior year, and all accrued benefits (if any) then payable to the
Executive pursuant to the terms of any plans or arrangements referred to
in Sections 3 or 5, shall be paid to the Executive through the date of
termination. No Bonus shall be payable with respect to the year in which
the Executive is so terminated for Cause. Upon termination of the
Executive for Cause, the Option shall terminate immediately and no longer
be exercisable.
7
(b) OTHER THAN FOR CAUSE: In addition to the Company's right to terminate
the Executive's employment pursuant to Section 7.4(a), following a Change of
Control the Company may, for any reason or for no reason, terminate the
Executive's employment upon written notice to the Executive. In the event of
such termination, all compensation and other benefits payable or provided
hereunder shall cease as of the date of termination and Base Salary, unpaid
Bonus from a prior year and all accrued benefits (if any) then payable to the
Executive pursuant to the terms of any plans or arrangements referred to in
Sections 3 or 5, shall be paid to the Executive through the date of termination.
No Bonus shall be payable with respect to the year in which the Executive is
terminated other than for Cause. As additional compensation for such
termination, the Company shall pay the Executive upon such termination the
Severance Payment. In addition, if the effective date of termination is after
March 14, 2000 all unvested Option Shares shall be accelerated to become
exercisable as of the effective date of termination. The Option shall be
exercisable with respect to such accelerated shares and any other Option Shares
previously vested as of the effective date of termination and shall remain
exercisable for 90 days from the effective date of termination.
8.1 Termination by the Executive:
(a) FOR GOOD REASON: The Executive may terminate his employment for Good
Reason at any time following a Change of Control. For purposes of this
Agreement, "Good Reason" shall mean:
(i) a substantial diminishment in the position, authority, duties
and responsibility of the Executive, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Sections 3 and 5 of this Agreement, other than a failure
not occurring in bad faith and which is remedied by the Company promptly
after receipt of written notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at a
location that is more than 40 miles away from the Company's main
headquarters as of immediately prior to such move;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11.6 of this Agreement.
In the event of such termination, all compensation and other benefits
payable or provided hereunder shall cease as of the date of termination and Base
Salary and all accrued benefits (if any) then payable to the Executive pursuant
to the terms of any plans or arrangements referred to in Sections 3 or 5, shall
be paid to the Executive through the date of termination. No Bonus shall be
payable with respect to the year in which the Executive terminates for Good
Reason. As additional compensation for such termination, the Company shall pay
the Executive upon such termination the Severance Payment. In addition, if the
effective date of termination is after March 14, 2000 all unvested Option Shares
shall be accelerated to become exercisable as of the effective date of
termination. The Option shall be exercisable with respect to such accelerated
shares and any other Option Shares previously vested as of the effective date of
termination and shall remain exercisable for 90 days from the effective date of
termination.
Any termination by the Executive for Good Reason, shall be communicated
by notice of termination to the Company indicating the specific termination
provision in this Agreement relied upon, and, to the extent applicable,
reasonable detail as to the facts and circumstances claimed to provide a basis
for termination under the provision so indicated and specifying the termination
date (which date shall be not more than thirty days after the giving of such
notice).
8
(b) OTHER THAN FOR GOOD REASON. Nothwithstanding any other provision of
this Agreement, the Executive may terminate his employment effective as of the
date of his written notice of termination delivered to the Board of Directors.
In the event of such termination, all compensation and other benefits payable or
provided hereunder shall cease as of the date of termination and Base Salary,
unpaid Bonus from a prior year and all accrued benefits (if any) then payable to
the Executive pursuant to the terms of any plans or arrangements referred to in
Sections 3 or 5, shall be paid to the Executive through the date of termination.
No Bonus shall be payable with respect to the year in which the Executive
effects such termination. Upon such termination by the Executive, the Option
shall terminate immediately and shall no longer be exercisable.
9. CERTAIN COVENANTS OF THE EXECUTIVE.
9.1 At all times during the Term, and following termination of this
Agreement for any reason, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others
except in connection with the business and affairs of the Company, all
confidential matters relating to the business of the Company or matters relating
to this Agreement, learned by the Executive heretofore or hereafter, and shall
not disclose them to anyone outside of the Company, except (i) as required in
the course of performing his duties hereunder, (ii) with the Company's express
written consent, or (iii) to the extent that the confidential matter (a) is in
the public domain or is generally known in the industry through no unlawful act
of the Executive or (b) must be disclosed by the Executive pursuant to law.
9.2 All memoranda, notes, lists, records and other documents or papers
made or compiled by or on behalf of the Executive, or made available to the
Executive in connection with his employment are and shall be the property of the
Company and shall be delivered to the Company promptly upon termination of the
Executive's employment with the Company or at any other time upon request.
9.3 The Executive agrees that during the Term and for a period of one
year from the date of termination of this Agreement for reason other than
termination by the Company without Cause or termination by Executive for Good
Reason, he will not, either within or without the United States, directly or
indirectly, as a stockholder, partner, investor, director, officer, employee,
consultant, contractor, agent or in any other capacity, engage in any business
that is in competition with the Business of the Company. "Business" shall mean
the business of providing mediation software and hardware, telecommunications
data warehousing and analysis systems, billing systems or billing service bureau
for telecommunications and internet carriers, including Integrated Services
Providers (.e.g., CLECs, ILECs, RBOCS, ISPs, PTTs) or system accounting software
for enterprises and government telephony and data networks. Provided that the
foregoing shall not prohibit the Executive from owning beneficially less than 5%
of the outstanding stock of any class of stock of a corporation the securities
of which are regularly traded or quoted on a national securities exchange and
the foregoing shall not prohibit Executive from performing services as a
director, officer, employee, consultant, contractor, agent or in any other
capacity, if such services are performed for a company with multiple lines of
business and such services are not for the line of business that is in
competition with the Company's Business. Specifically, but without limiting the
generality of the foregoing, the Executive shall not directly or indirectly:
a) Contract with, represent, solicit business or engage in the Business
to develop, market or sell billing data collection or network management
systems or services;
b) Solicit business or in any other way interfere with or disrupt the
Company's business relationships with any persons in the Business;
9
c) Solicit, hire, contract with or enter into any business dealings
with, entice or aid or cooperate with others in soliciting or enticing
any current or future employees of the Company to leave the Company and
join any other company in the Business;
d) Divulge any confidential information regarding the Company to anyone
not connected with the Company;
"Indirect" competition shall include any competition undertaken through
an entity owned in whole or in part by the Executive or any of his agents or
affiliates.
For a period of one year from the date of termination of this Agreement,
as a result of termination of employment or expiration of the Term, the
Executive shall not directly or indirectly, (a) solicit or encourage any
employee of the Company to leave such employment, or (b) hire any such employee
who has left such employment within one year of the termination of such
employment without the prior written agreement of the Company.
9.4 If the Executive breaches, or threatens to breach, any of the
provisions of Section 9 (the "Restrictive Covenants"), the Company shall have,
in addition to its right immediately to terminate this Agreement for Cause, the
right and remedy (which right and remedy shall be independent of others and
severally enforceable, and which shall be in addition to, and not in lieu of,
any other rights and remedies available to the Company under law or in equity)
to seek an injunction or other equitable relief to prevent any such breach or
continuing breach, including having the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause irreparable injury
to the Company and that money damages will not provide adequate remedy to the
Company.
9.5 SEVERABILITY OF COVENANTS: The Executive acknowledges and agrees that
the Restrictive Covenants are reasonable and valid in all respects. If any court
determines that any of the Restrictive Covenants or any part thereof, is invalid
or unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect, without regard to the invalid
portions. The parties agree that such court shall be empowered to substitute, to
the extent enforceable, provisions similar hereto or other provisions so as to
provide to the Company, to the fullest extent possible under applicable law, the
benefits intended by this Agreement. The validity, legality or enforceability of
this Agreement shall not be affected by any such modification.
9.6 ENFORCEABILITY IN JURISDICTIONS: The parties intend to and hereby
confer jurisdiction to enforce the Restrictive Covenants upon the courts of
Maryland.
10. AGGREGATE PAYMENTS. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that the aggregate payments
or distributions by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement) (the "Payments") would be subject to the excise tax imposed by
Section 4999 of the Code (the "Excise Tax"), then the Payments shall be reduced
to the Reduced Amount. The "Reduced Amount" shall mean Payments in an amount
such that the receipt of such Payments would not give rise to any Excise Tax.
11. OTHER PROVISIONS.
11.1 NOTICES: Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally, sent by
nationally recognized overnight courier service or sent by certified, registered
or express mail, postage paid, and shall be deemed given when so delivered
personally, if sent by overnight courier, the next business day after the date
the notice is delivered to the courier service for delivery or, if mailed, four
days after the date of mailing, as follows:
10
(i) if to the Company, to:
ACE*COMM Corporation
000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Chairman of the Board
(ii) if to the Executive, to:
Xxxx X. Xxxxxxx
(address intentionally deleted)
Any party may notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
11.2 ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, written or oral, with respect thereto.
11.3 PERSONNEL POLICY MANUAL: All terms and conditions applicable to all
employees of the Company contained in the ACE*COMM Employee Handbook as the same
shall be in force from time to time, shall apply to the employment of the
Executive except to the extent that they conflict with the specific terms and
conditions of this Agreement, in which event the terms and conditions of this
Agreement shall prevail.
11.4 WAIVERS AND AMENDMENTS: This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the Executive and the
Chairman of the Board of the Company (each, in such capacity, a party) or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder, preclude any
other further exercise thereof or the exercise of any other right, power or
privilege hereunder.
11.5 GOVERNING LAW; NO OTHER AGREEMENTS: This Agreement has been
negotiated and is to be performed in the State of Maryland, and shall be
governed and construed in accordance with the laws of the State of Maryland
applicable to agreements made and to be performed entirely within such State.
This Agreement supersedes, as of its effective date, any other oral or written
agreement between the parties with respect to the subject matter hereof.
11.6 SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
defined in this Agreement and any successor to its
11
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
11.7 COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.8 TAXES: The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
11.9 INDEMNIFICATION: During the Term of Executive's employment and thereafter,
the Company shall indemnify the Executive in his capacity as an officer,
director or employee of the Company (and any affiliate thereof) to the maximum
extent permitted under applicable law and the Company's charter and bylaws.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Agreement on the date first above written.
ACE*COMM Corporation
By:
----------------------------------
Xxxxxx Xxxxxxx
Chairman of the Board
----------------------------------
Xxxx X. Xxxxxxx
12
Exhibit A
Exercise management responsibility and profit and loss accountability for
Company operations including: Organizing, Marketing, Sales, Engineering,
Production, Delivery and Customer Satisfaction.
Develop and execute a Current Fiscal Year Operations Plan for the Company
including Bookings and Revenue Forecast and Expense Budget, and establish
mechanisms for tracking plan performance.
Participate in development of the Corporate budget and development of the
overall Corporate Fiscal Year Operating Plan for approval by the Board of
Directors.
With other members of the Senior Management Team, participate in Strategic
Planning activities and in development and execution of a 3 to 5 Year Strategic
Plan for the Corporation.
From time to time, as assigned, take a supporting or leading role in relations
with other industry companies and Business Development including Corporate
Merger and Acquisition activities.
Support Financing efforts of the company including Capital Acquisition, Debt
Financing, and Collections and structuring or restructuring of customer
arrangements.
Support Investor Relations and Public Relations activities of the Company as
assigned.
From time to time, as assigned, act in the role of temporary CEO.
13
Exhibit B
ACE*COMM CORPORATION
AMENDED AND RESTATED OMNIBUS STOCK PLAN
NON-QUALIFIED STOCK OPTION GRANT AGREEMENT
This Amended and Restated Omnibus Stock Plan Non-Qualified Stock Option
Grant Agreement (the "Agreement") amends and restates the Non-Qualified Stock
Option Grant Agreement dated as of September 20, 1999 (the "Grant Date") entered
into, by and between ACE*COMM Corporation, a Maryland corporation (the
"Company"), and Xxxx Xxxxxxx ("Grantee").
ARTICLE 1
GRANT OF OPTION
SECTION 1.1 GRANT OF OPTION. Subject to the terms and conditions
prescribed in the Agreement and pursuant to the provisions of the Amended and
Restated Omnibus Stock Plan (the "Plan"), the Company hereby grants to Grantee
as of the Grant Date a Non-Qualified Stock Option (the "Option") to purchase all
or any part of 200,000 shares of voting common stock of the Company (the
"Stock") at an exercise price of $4.188 per share (the "Exercise Price").
SECTION 1.2 TERM OF OPTION. Unless the Option granted pursuant to Section
1.1 hereof terminates earlier pursuant to other provisions of the Agreement, the
Option shall expire at 5:00 p.m. Eastern Time on the day following the tenth
(10th) anniversary of its Grant Date.
ARTICLE 2
VESTING
SECTION 2.1 VESTING. Unless the Option has earlier terminated pursuant to
the provisions of the Agreement, Grantee shall become vested in the Option in
accordance with the schedule below, provided, however, that Grantee shall have
been in the continuous, full-time employ of the Corporation from the Grant Date
through the applicable date below:
Percentage of
Date Option Vested
---- -------------
September 20, 2000 66,667 shares
September 20, 2001 66,667 shares
September 20, 2002 66,666 shares
ARTICLE 3
EXERCISE OF OPTION
14
SECTION 3.1 EXERCISABILITY OF OPTION. The Option shall be exercisable
with respect to any vested shares. Except as otherwise provided herein, no
portion of the Option shall be exercisable by Grantee prior to the time such
portion of the Option has vested. Vested Option Shares that have become
exercisable shall remain exercisable throughout the term of this Option, except
as otherwise set forth in this Agreement, including Article 4.
SECTION 3.2 ACCELERATION OF EXERCISABILITY. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, the exercisability of
the Option granted to Grantee hereunder shall be accelerated so that the Vested
Option Shares shall become exercisable earlier in whole or in part upon the
terms and conditions set forth in the Employment Agreement dated as of September
14, 1999, between the Company and Xx. Xxxxxxx (the "Employment Agreement").
SECTION 3.3 MANNER OF EXERCISE. The exercisable portion of the Option
shares may be exercised, in whole or in part, by delivering written notice to
the Compensation Committee of the Board of Directors in accordance with Section
5.8 hereof in such form as the Committee may require from time to time;
provided, however, that the Option may not be exercised at any one time as to
fewer than one hundred (100) shares (or such number of shares as to which the
Option is then exercisable if such number of shares then exercisable is less
than one hundred (100)). Such notice shall specify the number of shares of Stock
subject to the Option as to which the Option is being exercised, and shall be
accompanied by full payment of the Exercise Price of the shares of Stock as to
which the Option is being exercised and any applicable withholding taxes which
may be due. Payment of the Exercise Price and any withholding tax obligations
shall be made in cash (or cash equivalents acceptable to the Committee in the
Committee's discretion). In the Committee's sole and absolute discretion, the
Committee may authorize payment of the Exercise Price and any withholding tax
obligations to be made, in whole or in part, by such other means as the
Committee may prescribe. The Option may be exercised only in multiples of whole
shares and no partial shares shall be issued.
The Committee, subject to such limitations as it may determine, may
authorize payment of the Exercise Price and any withholding tax obligations in
whole or in part, by delivery of a properly executed exercise notice, together
with irrevocable instructions: (i) to a brokerage firm approved by the Company
to deliver promptly to the Company the aggregate amount of sale or loan proceeds
to pay the exercise price and any withholding tax obligations that may arise in
connection with the exercise, and (ii) to the Company to deliver the
certificates for such purchased shares directly to such brokerage firm.
SECTION 3.4 ISSUANCE OF SHARES AND PAYMENT OF CASH UPON EXERCISE. Upon
exercise of the Option, in whole or in part, in accordance with the terms of the
Agreement and upon payment of the Exercise Price and any withholding tax
obligations for the shares of Stock as to which the Option is exercised, the
Company shall issue to Grantee or Grantee's permitted transferee, as the case
may be, the number of shares of Stock so paid for, in the form of fully paid and
nonassessable Stock.
ARTICLE 4
TERMINATION OF OPTION
Unless the Option has earlier terminated pursuant to the provisions of
the Agreement, the Option granted to Grantee shall terminate in its entirety
upon the events and on the terms and conditions set forth in the Employment
Agreement, but in any event not later than on the tenth anniversary of the Grant
Date.
ARTICLE 5
15
MISCELLANEOUS
SECTION 5.1 NON-GUARANTEE OF EMPLOYMENT OR OTHER RELATIONSHIP. Nothing in
the Plan or the Agreement shall be construed as a contract of employment or for
services between the Company (or an affiliate) and Grantee, or as a contractual
right of Grantee to continued employment or affiliation with the Company or an
affiliate, or as a limitation of the right of the Company or an affiliate to
terminate its relationship with Grantee at any time.
SECTION 5.2 NO RIGHTS OF STOCKHOLDER. Grantee shall not have any of the
rights of a stockholder with respect to the shares of Stock that may be issued
upon the exercise of the Option until such shares of Stock have been issued to
him upon the due exercise of the Option.
SECTION 5.3 WITHHOLDING OF TAXES. The Company or any affiliate shall have
the right to deduct from any compensation or any other payment of any kind
(including withholding the issuance of shares of Stock) due Grantee the amount
of any federal, state or local taxes required by law to be withheld as the
result of the exercise of the Option; provided, however, that the value of the
shares of Stock withheld may not exceed the statutory minimum withholding amount
required by law. In lieu of such deduction, the Committee may require Grantee to
make a cash payment to the Company or an affiliate equal to the amount required
to be withheld. If Grantee does not make such payment when requested, the
Company may refuse to issue any Stock certificate under the Plan until
arrangements satisfactory to the Committee for such payment have been made.
SECTION 5.4 NONTRANSFERABILITY OF OPTION. Except as expressly authorized
by the Committee in writing, the Option shall be nontransferable otherwise than
by will or the laws of descent and distribution, and during the lifetime of
Grantee, the Option may be exercised only by Grantee or, during the period
Grantee is under a legal disability, by Grantee's guardian or legal
representative.
SECTION 5.5 AGREEMENT SUBJECT TO CHARTER, BY-LAWS AND GOVERNING LAWS.
This Agreement is subject to the Charter and By-Laws of the Company, and any
applicable Federal or state laws, rules or regulations, including without
limitation, the laws, rules, and regulations of the State of Maryland, other
than the conflict of laws principles thereof.
SECTION 5.6 GENDER. As used herein the masculine shall include the
feminine as the circumstances may require.
SECTION 5.7 HEADINGS. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
SECTION 5.8 NOTICES. All notices and other communications made or given
pursuant to the Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Company, or addressed to the Committee,
care of the Company for the attention of its Secretary at its principal office
or, if the receiving party consents in advance, transmitted and received via
telecopy or via such other electronic transmission mechanism as may be available
to the parties.
SECTION 5.9 ENTIRE AGREEMENT; MODIFICATION. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto.
16
SECTION 5.10 CONFORMITY WITH PLAN. This Agreement is intended to conform
in all respects with, and is subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Unless stated otherwise herein,
capitalized terms in this Agreement shall have the same meaning as defined in
the Plan. Inconsistencies between this Agreement and the Plan shall be resolved
in accordance with the terms of the Plan. In the event of any ambiguity in the
Agreement or any matters as to which the Agreement is silent, the Plan shall
govern, as interpreted by the Committee in good faith.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first above written.
ATTEST: ACE*COMM CORPORATION
By:
------------------------------ ---------------------------------
WITNESS: GRANTEE
------------------------------ ---------------------------------
Xxxx Xxxxxxx
