EMPLOYMENT AGREEMENT
Exhibit
99.1
EMPLOYMENT AGREEMENT
("Agreement") made as of this 3rd day of November, 2010 by and between Document
Capture Technologies, Inc., a Delaware corporation, having an office at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as
"Employer") and Xxxxx X. Xxxxx, an individual residing at 0000 Xxx Xxxxxxxx
Xxxxx, Xxxx Xxxxx, XX 00000 (hereinafter referred to as
"Employee");
W
I T N E S S E T H:
WHEREAS, Employer desires to
employ directly or through a co-employment agreement with a Professional
Employer Organization (PEO) licensed in the State of California, Employee as
President and Chief Operating Officer of Employer; and
WHEREAS, Employee is willing
to be employed as the President and Chief Operating Officer of Employer in the
manner provided for herein, and to perform the duties of the President and Chief
Operating Officer of Employer upon the terms and conditions herein set
forth;
NOW, THEREFORE, in
consideration of the promises and mutual covenants herein set forth it is agreed
as follows:
1. Employment
of President and Chief Operating Officer of Employer. Employer hereby
employs Employee as President and Chief Operating Officer of
Employer.
2. Term.
a. Subject
to Section 9 and Section 10 below, the term of this Agreement shall be for a
period of twenty four (24) months commencing on November 3, 2010 (the
Term). The Term of this Agreement shall be automatically extended for
additional one (1) year periods, unless either party notifies the other in
writing at least ninety (90) days prior to the expiration of the then existing
Term of its intention not to extend the Term. During the Term,
Employee shall devote substantially all of his business time and efforts to
Employer and its subsidiaries and affiliates, except that (i) Employee may serve
on the board of directors of Optical Cable Corporation and as a member or
chairman of any committees of such board of directors and (ii) until November
18, 2010 Employee shall be permitted to provide services to his previous
employer on a part-time basis for the sole purpose of effecting an orderly
transition of his responsibilities.
3. Duties. The Employee
shall perform those functions generally performed by persons of such title and
position, shall attend all meetings of the stockholders and the Board (if
invited to attend), shall perform any and all related duties and shall have any
and all powers as may be prescribed by resolution of the Board, and shall be
available to confer and consult with and advise the officers and directors of
Employer at such times that may be required by Employer. Employee
shall report directly to the Chief Executive Officer of Employer.
4. Compensation.
a. (i)
Employee shall be paid a base pay of $250,000 per year (“Base Compensation”)
during the Term of this Agreement. Employee shall be paid
periodically in accordance with the policies of the Employer during the term of
this Agreement, but not less than twice a month.
(ii)
Employee is eligible for an annual bonus, if any, equal to up to 100% of
Employee’s Base Compensation, which Employee shall earn in the event that
Employer attains certain performance milestones. The compensation
committee shall review such performance milestones on the anniversary date of
this Agreement and shall in its sole discretion authorize Employer to pay all of
such annual bonus earned promptly after its determination that the performance
milestones have been met. Employee shall also be entitled to additional annual
option grants at the discretion of the compensation committee of the board of
directors. The compensation committee of the board of directors may from time to
time approve additional bonus plans, grants or awards for Employee, in each case
as such committee deems appropriate in its sole discretion.
b. Employer
shall grant and issue Employee 1,400,000 options (“Options”) to purchase shares
of the Company’s common stock at an exercise price of $0.67 per share [the closing price of the company’s
common stock on the day prior to the agreement becoming effective] which
shall be exercisable for a period of ten (10) years, upon execution of this
Agreement. The Options shall be incentive stock options (“ISO’s) as
defined in Employer’s 2010 Stock Option Plan, subject to any required
shareholder approval (which Employer shall use its best efforts to obtain), and
shall vest and become exercisable as follows:
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(1)
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700,000
Options shall vest on the twelve month anniversary date of this Agreement;
and
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(2)
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700,000
Options shall vest on the twenty-four month anniversary date of this
Agreement;.
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provided,
however, that Employee shall be entitled to receive pro rata vesting of the
Options through the date of termination in the event that termination of
employment is attributable to: (x) termination by Employee pursuant to Section
9(b)(i) or (y) termination by Employer for any reason other than Cause (as
defined in Section 9(a)(i)).
c. Employer
shall include Employee in its health insurance program, payment of premiums in
accordance with company policy.
d. Employee
shall have the right to participate in any other employee benefit plans
established by Employer and PEO maintained generally for other senior
executives, including but not limited to any matching 401(k) plan.
e. (i)
In the event of a "Change of Control" whereby:
(A) A
person (other than a person who is an officer or a Director of Employer on the
effective date hereof), including a "group" as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, after execution of this Agreement becomes,
or obtains the right to become, the beneficial owner of Employer securities
having 30% or more of the combined voting power of then outstanding securities
of the Employer that may be cast for the election of directors of the Employer;
provided, however, that with respect to Xxxxxxx Xxxxx and XXX Xxxxxxxxxxx the
aforementioned percentage shall be 50% (not 30%);
(B) At
any time, a majority of the Board-nominated slate of candidates for the Board is
not elected;
(C)
Employer consummates a merger in which it is not the surviving
entity;
(D)
Substantially all Employer's assets are sold; or
(E)
Employer's stockholders approve the dissolution or liquidation of Employer;
then
(ii) All stock options
and/or warrants ("Rights") granted by Employer to Employee under any plan or
otherwise prior to the effective date of the Change of Control, shall become
vested, accelerate and become immediately exercisable; any time within twelve
months after the effective date of the change of control, adjusted for any stock
splits and capital reorganizations having a similar effect, subsequent to the
effective date hereof. In the event Employee owns or is entitled to receive any
unregistered securities of Employer, then Employer shall use its best efforts to
effect the registration of all such securities as soon as practicable, but no
later than 120 days after the Change of Control; provided, however, that such
period may be extended or delayed by Employer for one period of up to 60 days
if, upon the advice of counsel at the time such registration is required to be
filed, or at the time Employer is required to exercise its best efforts to cause
such registration statement to become effective, such delay is advisable and in
the best interests of Employer because of the existence of non-public material
information, or to allow Employer to complete any pending audit of its financial
statements.
f. Employee
shall be entitled to four weeks of paid vacation per year, all of which shall
vest on the six month anniversary date hereof. For each year subsequent to the
first year of the Term, Employee shall be entitled to four weeks of paid
vacation, all of which shall vest immediately on such anniversary
date.
5. Expenses. Employee shall be
reimbursed for all of his actual out-of-pocket expenses incurred in the
performance of his duties hereunder, provided such expenses are reasonably
acceptable to Employer, which approval shall not be unreasonably withheld by
Employer, for business related travel and entertainment
expenses. Employee shall submit to Employer detailed receipts,
according to IRS guidelines, with respect thereto. Employer shall
also reimburse Employee for Employee’s monthly cell phone, PDA and wireless
services and blackberry expenses, all to be used for business purposes related
to Employer. Prior to Employee’s relocation to the San Jose, California
vicinity, reimbursable expenses shall also include the cost for travel between
Employee’s residence in Xxxx Xxxxx (Richmond), Virginia and San Jose,
California, as well as rental car and living expenses while in San Jose,
California for business purposes, in each case until March 31, 2011. Employer
shall also provide the relocation assistance as set forth in Annex A to this
Agreement.
6. Intentionally
left blank.
7. Secrecy. At no time shall
Employee disclose to anyone any confidential or secret information (not already
constituting information available to the public) concerning (a) internal
affairs or proprietary business operations of Employer or (b) any trade secrets,
new product developments, patents, programs or programming, especially unique
processes or methods.
8. Covenant
Not to Compete.
(a)
Subject to, and limited by, Section 10(b), Employee will not, at any time,
during the term of this Agreement, and for one (1) year thereafter, either
directly or indirectly, engage in, with or for any enterprise, institution,
whether or not for profit, business, or company, competitive with the business
(as identified herein) of Employer as such business may be conducted on the date
thereof, as a creditor, guarantor, or financial backer, stockholder, director,
officer, consultant, advisor, employee, member, inventor, producer, director, or
otherwise of or through any corporation, partnership, association, sole
proprietorship or other entity; provided, that an investment by Employee, his
spouse or his children is permitted if such investment is not more than four
percent (4%) of the total debt or equity capital of any such competitive
enterprise or business and further provided that said competitive enterprise or
business is a publicly held entity whose stock is listed and traded on a
national stock exchange or through the NASDAQ Stock Market. As used
in this Agreement, the business of Employer shall be deemed to include the
manufacturing and marketing of imaging systems.
(b) For a
period of one year from the date of termination of this agreement Employee shall
not contact for the purpose of solicitation or solicit any of Employer’s, or its
subsidiaries, customers, employees or suppliers.
(c)
During the entire time of employment, any outside business opportunities must
receive the written approval of the compensation committee, established by the
board of directors, or any other committee of the board of directors serving
such function. Employee shall be permitted to serve on the board of directors of
Optical Cable Corporation and as a member or chairman of any committees of such
board of directors and no further approval shall be required for such
service.
9. Termination.
a. Termination by
Employer (i) Employer may terminate this Agreement upon
written notice for Cause. For purposes hereof, "Cause" shall mean (A)
Employee's misconduct as could reasonably be expected to have a material adverse
effect on the business and affairs of Employer, (B) the Employee's disregard of
lawful instructions of Employers Board of Directors consistent with Employee's
position relating to the business of Employer or neglect of duties or failure to
act, which, in each case, could reasonably be expected to have a material
adverse effect on the business and affairs of Employer,(C) engaging by the
Employee in conduct that constitutes activity in competition with Employer,
including any unapproved activities identified in section 8(c) of this
agreement; (D) the conviction of Employee for the commission of a felony; and/or
(E) the habitual abuse of alcohol or controlled
substances. Notwithstanding anything to the contrary in this Section
9(a)(i), Employer may not terminate Employee's employment under this Agreement
for Cause unless Employee shall have first received notice from the Board
advising Employee of the specific acts or omissions alleged to constitute Cause,
and such acts or omissions continue after Employee shall have had a reasonable
opportunity (at least 10 days from the date Employee receives the notice from
the Board) to correct the acts or omissions so complained of. In no
event shall alleged incompetence of Employee in the performance of Employee's
duties be deemed grounds for termination for Cause.
If
Employer terminates Employee for Cause, both parties agree as
follows:
(A)
Before such termination shall become effective, the matter shall be submitted to
a binding arbitration conducted at a location in San Jose, California to be
determined by an arbitrator selected by the initiating party and in accordance
with the then existing Rules of Practice and Procedure of the American
Arbitration Association.
(B) The
number of arbitrators shall be three; one selected by Employee, one selected by
Employer, and one selected by the two selected arbitrators. Each arbitrator
shall be impartial and independent and shall perform his or her duties with
diligence and in good faith.
(C) Any
party may be represented by counsel or other authorized representatives during
the arbitration hearings. No party shall communicate ex parte with a selected or
candidate arbitrator.
(D) The
arbitrators shall, by majority decision, determine the fairness and validity of
Employer’s reasons for terminating Employee for Cause and such determination
shall be final and binding upon the parties. If the termination is determined to
be invalid or unfair, Employer shall be deemed to have breached the Agreement
and Section 10 of the Agreement shall apply.
(E) Each
party shall bear its expenses, costs and attorney fees relating to the
arbitration.
(F) Until
such time as a final binding arbitration award is entered into, Employee shall
be placed on administrative leave and shall continue to receive his full
compensation (including salary, bonus, stock options and benefits) as if he
remained an Employee of the Company.
(ii) This
agreement automatically shall terminate upon the death of Employee, except that
Employee's estate shall be entitled to receive any amounts that Employee would
have been entitled to receive under Section 9(a)(iii) below if his employment
had terminated pursuant to Section 9(a)(i) above.
(iii) In
the event that Employee’s employment is terminated pursuant to Section 9(a)(i)
above, Employee shall be entitled to receive: (a) payment of all earned/accrued
Base Compensation, (b) unreimbursed business expenses, (c) accrued/unused
vacation time, (d) a pro rata portion of Employee’s annual bonus for the
termination year, all of (a) – (d) shall be measured through the termination
date in accordance with Section 9(a)(i) above. Additionally, Employee
shall have ninety (90) days to exercise all vested options, which thereafter
shall immediately expire.
b. Termination by
Employee
(i)
Employee shall have the right to terminate his employment under this Agreement
upon 30 days' notice to Employer given within 90 days following the occurrence
of any of the following events (A) through (F) or within three years following
the occurrence of event (G):
(A) Employee
is not appointed or retained as President and Chief Operating Officer (or a
substantially similar position).
(B) Employer
acts to materially reduce Employee's duties and responsibilities
hereunder. Employee's duties and responsibilities shall not be deemed
materially reduced for purposes hereof solely by virtue of the fact that
Employer is (or substantially all of its assets are) sold to, or is combined
with, another entity, provided that Employee shall continue to have the same
duties and responsibilities with respect to Employer's business, and Employee
shall report directly to the board of directors of the entity (or individual)
that acquires Employer or its assets.
(C)
Employer acts to change the geographic location of the performance of Employee’s
duties from the San Xxxx area. For purposes of this Agreement, the San Xxxx area
shall be deemed to be the area within 60 miles of San Jose,
California.
(D) A
Material Reduction (as hereinafter defined) in Employee's rate of base
compensation, or Employee's other benefits. "Material Reduction"
shall mean a ten percent (10%) differential;
(E) A
failure by Employer to obtain the assumption of this Agreement by any
successor;
(F) A
material breach of this Agreement by Employer, which is not cured within thirty
(30) days of written notice of such breach by Employer;
(G) A
Change of Control.
(ii) Anything
herein to the contrary notwithstanding, Employee may terminate this Agreement
upon thirty (30) days written notice to Employer.
(iii) If
Employee shall terminate this Agreement under Section 9(b)(i), Employee shall be
entitled to receive: (a) twelve (12) months salary at Employee’s then current
yearly salary rate, (the “Severance Payment”), (b)
reimbursement by Employer of 100% of the C.O.B.R.A. premiums for twelve (12)
months after such termination, (c) payment of all unpaid earned Base
Compensation as of the date of termination, (d) payment of all unreimbursed
business expenses incurred through the date of termination, (e) payment for all
unused vacation time accrued through the date of termination, (f) payment of a
pro rata portion of Employee’s annual bonus as of the date of termination for
the termination year, and (g) the right to exercise all vested options within 90
days of the date of termination, all of which shall expire thereafter. Other
than the payments described in (a)-(g) of this section 9(b)(iii), Employer shall
have no further obligation to compensate Employee pursuant to Section 4
above.
(iv) If Employee shall
terminate this Agreement pursuant to Section 9(b)(ii), Employee shall only be
entitled to receive the compensation set forth in 9(b)(iii)(c), (d), (f) and (g)
above and Employer shall have no further obligation to compensate Employee
pursuant to Section 4 above.
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10.
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Consequences
of Breach by Employer;
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Employment
Termination
a. If
the Employer shall terminate Employee's employment under this Agreement in any
way that is a breach of this Agreement by Employer, the following shall
apply:
(i) Employee
shall be entitled to receive the compensation set forth in Section 9(b)(iii)
above and Employer shall have no further obligation to compensate Employee
pursuant to Section(s) 4 or 9 above.
b. In
the event of termination of Employee's employment pursuant to Section 9(b)(i) of
this Agreement, Sections 8(a) and 8(b) shall apply to Employee for twelve (12)
months after such termination.
11. Remedies
Employer
recognizes that because of Employee's special talents, in the event of
termination by Employer hereunder (except under Section 9(a)(i) or (iii), or in
the event of termination by Employee under Section 9(b)(i) before the end of the
agreed term, the Employer acknowledges and agrees that the provisions of this
Agreement regarding further payments of base salary, bonuses and the
exercisability of Rights constitute fair and reasonable provisions for the
consequences of such termination, do not constitute a penalty, and such payments
and benefits shall not be limited or reduced by amounts' Employee might earn or
be able to earn from any other employment or ventures during the remainder of
the agreed term of this Agreement.
12. Excise
Tax. In the event that any payment or benefit received or to be
received by Employee in connection with a termination of his employment with
Employer would constitute a "parachute payment" within the meaning of Code
Section 280G or any similar or successor provision to 280G and/or would be
subject to any excise tax imposed by Code Section 4999 or any similar or
successor provision then Employer shall assume all liability for the payment of
any such tax and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such Employer
payment and reimbursements.
13. Attorneys'
Fees and Costs. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which he may be entitled.
14. Entire
Agreement; Survival. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and supersedes, effective as of the date hereof any prior agreement or
understanding between Employer and Employee with respect to Employee's
employment by Employer. The unenforceability of any provision of this Agreement
shall not effect the enforceability of any other provision. This
Agreement may not be amended except by an agreement in writing signed by the
Employee and the Employer, or any waiver, change, discharge or modification as
sought. Waiver of or failure to exercise any rights provided by this
Agreement and in any respect shall not be deemed a waiver of any further or
future rights.
b.
The provisions of Sections 4, 7, 8, 9(a)(ii), 9(a)(iii), 9(b)(iii), 10, 11, 12,
13, 14, 16, 17 and 18 shall survive the termination of this
Agreement.
15. Assignment. This Agreement
shall not be assigned to other parties.
16. Governing
Law. This Agreement
and all the amendments hereof, and waivers and consents with respect thereto
shall be governed by the laws of the State of California, without regard to the
conflicts of laws principles thereof.
17. Notices. All
notices, responses, demands or other communications under this Agreement shall
be in writing and shall be deemed to have been given when
a. delivered
by hand;
b. sent
be telex or telefax, (with receipt confirmed), provided that a copy is mailed by
registered or certified mail, return receipt requested; or
c. received
by the addressee as sent by express delivery service (receipt
requested)
in each
case to the appropriate addresses, telex numbers and telefax numbers indicated
below or to such other address as such party may designate for itself by notice
to the other parties; provided that any change of address furnished by Employee
to Employer for purposes of updating Employer’s payroll records shall be deemed
to constitute notice of address change under this Agreement unless otherwise
specifically requested in writing by Employee:
(i) if to
the Employer:
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Telefax:(000)-000-0000
Telephone:(000)-000-0000
(ii) if
to the Employee:
Xxxxx X.
Xxxxx
0000 Xxx
Xxxxxxxx Xxxxx
Xxxx
Xxxxx, XX 00000
18. Severability
of Agreement. Should any part of this Agreement for any reason
be declared invalid by a court of competent jurisdiction, such decision shall
not affect the validity of any remaining portion, which remaining provisions
shall remain in full force and effect as if this Agreement had been executed
with the invalid portion thereof eliminated, and it is hereby declared the
intention of the parties that they would have executed the remaining portions of
this Agreement without including any such part, parts or portions which may, for
any reason, be hereafter declared invalid.
[SIGNATURE
PAGE FOLLOWS]
IN WITNESS WHEREOF, the
undersigned have executed this agreement as of the day and year first above
written.
Employee
Signature:
/s/ Xxxxx X.
Xxxxx
Printed
Name: Xxxxx X. Xxxxx
Date:
November 3, 2010
By: /s/ Xxxxx X.
Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
Chief Executive Officer
Date:
November 3, 2010
[SIGNATURE
PAGE TO EMPLOYMENT AGREEMENT DATED NOVEMBER 3, 2010]
ANNEX
A
Relocation
Expense Assistance
Employer
will pay the following costs in connection with Employee’s relocation from Glen
Allen, Virginia to San Jose, California:
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1.
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Sale
of the Employee’s current primary
residence:
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Real
estate brokerage fees, up to 6% of the gross selling
price;
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Transfer
taxes and other costs imposed on the seller by federal, state or local
law;
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Normal
and reasonable closing costs, to
include:
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attorney
fees;
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settlement
fees and other expenses customarily paid by seller in accordance with
applicable law or local practice (for example, in some states the seller
may be required to pay title search and title insurance costs, deed
recordation fees, mortgage release recordation fees, home warranty cost
and so forth);
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mortgage
fees (where required of seller by law or local practice, but not to
include buy-downs and other voluntary arrangements designed to induce a
sale).
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Employee
has furnished Employer an appraisal of the value of Employee’s residence, which
appraisal was performed by a licensed Virginia residential real estate appraiser
less than 120 prior to the date of this Agreement (the “Appraisal” and the
appraised value contained therein being referred to as the “Appraised
Value”).
Within 90
days following the date of this Agreement Employee will list his home in Glen
Allen, Virginia for sale with a licensed residential real estate
broker. Employee will use reasonable best efforts to obtain the
highest selling price for the residence. To the extent that the
actual selling price attained upon closing is less than the Appraised Value,
Employer shall reimburse Employee for the entire amount of any shortfall up to a
maximum of 20% of the Appraised Value.
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2.
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Locating,
purchasing (or leasing) and moving to a new
home:
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Reasonable
expenses incurred in making up to two house hunting trips (Employee and
spouse), such expenses to include lodging, meals, automobile mileage, or
airfare;
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Normal
and reasonable closing costs (not to exceed $20,000), to
include:
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up
to 1% mortgage discount fee and 1% mortgage origination fee charged by a
bank or other commercial lender, as well as mortgage application,
processing and similar fees;
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attorney
fees;
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settlement
fees and other expenses customarily paid by buyer in accordance with
applicable law or local practice (for example, in some states the buyer
may be required to pay tax and title search costs, title insurance or
guarantee costs, deed and/or mortgage recordation fees, home warranty cost
and so forth); and
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fees
for survey and for home inspection (structural, radon, pest and so
forth).
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Normal
and reasonable costs of packing, storage, transportation and unpacking
Employee’s (and Employee’s family’s) belongings from the former residence
to the new residence. Eligible belongings include such items as
household furnishings and appliances, automobiles, clothing and other
household items. Employer may designate one or more firms to provide these
services to the Employee.
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Reasonable
costs for Employee and his or her family members to travel from their old
home to their new home. Covered expenses include meals and
lodging while en route, as well as actual transportation
costs.
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3.
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Temporary
housing: Prior to closing of the sale of Employee’s residence in Glen
Allen, Virginia, Employer will provide hotel accommodations, a furnished
corporate apartment or other temporary housing for Employee (and spouse)
in reasonable proximity to Employer’s corporate office in San Jose,
California. Such temporary housing shall not be provided for longer than
nine months without written approval of the Chief Executive Officer of
Employer.
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4.
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Incidentals: Employee
will receive a lump sum payment equal to $10,000 for such Employee to
cover all other incidental expenses (draperies, carpets and so forth)
incurred in connection with the Employee’s relocation to a new
residence.
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5.
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Tax
gross-up: Employer will pay such amounts as required to offset
any additional taxes owed by Employee because of the financial assistance
received from Employer in connection with the
relocation.
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