EMPLOYMENT AGREEMENT
This Agreement is made as of April 13, 1993 by and between POLARIS
ACQUISITION INC. (to be renamed STAR GATE TECHNOLOGIES, INC.), a Delaware
corporation (the "Company"), and Xxx X. Xxxxx (the "Executive").
W I T N E S S E T H :
WHEREAS the Company desires to employ Executive in accordance with the
terms and conditions stated in this Agreement; and
WHEREAS Executive desires to accept that employment pursuant to the
terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereto agree as follows:
I. EMPLOYMENT
1.1 EMPLOYMENT AS SENIOR EXECUTIVE. The Company hereby agrees to employ
Executive in a senior executive capacity, initially in the same office that he
occupied with Star Gate Technologies, Inc., an Ohio corporation, immediately
prior to its merger into the Company, commencing the date hereof and continuing
until the earlier of (i) September 30, 1996 or (ii) the date his employment
terminates pursuant to Article III hereof. In addition, Executive shall serve
as a Vice President of Digi International Inc., a Delaware corporation and the
parent corporation of the Company ("Digi"), during the period this Agreement is
in effect. Executive accepts such employment pursuant to the terms of this
Agreement. Executive shall perform such duties and responsibilities as may be
determined from time to time by the Board of Directors of the Company and Digi,
which shall be consistent with his position as an officer of the Company.
1.2 EXCLUSIVE SERVICES. Executive agrees to devote his full time,
attention and energy to performing his duties and responsibilities to the
Company and Digi under this Agreement during the term of this Agreement.
II. COMPENSATION, BENEFITS AND PERQUISITES
2.1 BASE SALARY. During the period this Agreement is in effect, the
Company shall pay Executive a base salary at the annual rate set forth on
Schedule I hereto. The base salary shall be payable semi-monthly. Beginning
October 1, 1993, the Board of Directors of Digi will review the base salary
annually, and may in its sole discretion increase it to reflect performance,
appropriate industry guideline data and other factors. However, the Board is
not obligated to provide for any increases.
1
2.2 BONUSES. Executive shall be eligible to receive a bonus for each
fiscal year during which this Agreement is in effect as follows:
(a) The target bonus shall be equal to a percentage of base
salary paid for each fiscal year (or six month period, in the case of
the fiscal year ending September 30, 1993) during the period of this
Agreement as set forth on Schedule I hereto. Executive shall be
entitled to that bonus amount if the objectives set by the Company's
Budget Plan for the fiscal year (or such six month period) are met.
(b) If some or all of the objectives of the Budget Plan are not
met for a fiscal year (or such six month period), the Board of
Directors of Digi will determine in its discretion what portion, if
any, of the target bonus amount will be paid to Executive for that
year (or such six month period). If the objectives are exceeded for a
fiscal year (or such six month period), the Board may in its
discretion award Executive a bonus that is larger than the target
bonus.
(c) The bonus for each fiscal year (or such six month period)
shall be paid to Executive on September 30 of each year or as soon
thereafter as the Company is able to determine whether the objectives
have been met for that year (or such six month period).
(d) The Board of Directors will consult with Executive before
determining the Budget Plan for each fiscal year. However, the Board
will have authority to establish the Budget Plan for each year in its
sole discretion. The Budget Plan for the six months ending September
30, 1993 is set forth on Schedule I hereto.
2.3 COMMISSIONS. For each fiscal year (or six month period, in the case
of the fiscal year ending September 30, 1993) during the term of this Agreement,
Executive shall receive a commission equal to 1% of the amount by which net
sales of the Company exceed the Budget for the fiscal year (or such six month
period), provided that said commission shall be payable only if the Company's
after-tax earnings for such year (or such six month period) equal or exceed the
Budget for such fiscal year (or such six month period). If the after-tax
earnings of the Company for the fiscal year (or such six month period) are less
than the Budget for such fiscal year (or such six month period), the Board of
Directors will determine in its sole discretion the amount of commission, if
any, to be paid for such year (or such six month period). Any commission
payable for a fiscal year (or such six month period) shall be paid on
September 30 of that year, or as soon thereafter as the amount can be
determined.
2.4 STOCK OPTIONS. On or about September 30 of each year the Compensation
Committee of the Board of Directors of Digi considers and awards stock options
under the Digi International Inc. Stock Option Plan to officers of Digi. These
awards are made in the discretion of the Compensation Committee and are
principally intended to recognize performance over the preceding fiscal year.
Executive would be first eligible for a stock option grant on or about September
30, 1993.
2
2.5 VACATIONS. Executive shall be entitled to vacation in accordance with
policies of Digi.
2.6 EMPLOYEE BENEFITS. Executive shall be entitled to the benefits and
perquisites which the Company generally provides to its other employees under
the applicable Company plans and policies, and to future benefits and
perquisites made generally available to employees of the Company. Executive's
participation in such benefit plans shall be on the same basis as applies to
other employees of the Company. Executive shall pay any contributions which are
generally required of employees to receive any such benefits.
2.7 EMPLOYMENT TAXES AND WITHHOLDING. Executive recognizes that the
compensation, benefits and other amounts provided by the Company under this
Agreement may be subject to federal, state or local income taxes. It is
expressly understood and agreed that all such taxes shall be the responsibility
of the Executive. To the extent that federal, state or local law requires
withholding of taxes on compensation, benefits or other amounts provided under
this Agreement, the Company shall withhold the necessary amounts from the
amounts payable to Executive under this Agreement.
2.8 LEGAL LIMITS ON BENEFITS. The parties recognize that the Internal
Revenue Code of 1986, as amended, and other laws and regulations place limits on
the benefits the Company can provide for its employees. The benefits for
Executive under this Agreement shall be reduced to the extent necessary to
comply with any such laws and regulations currently in effect or enacted in the
future, including any reductions that may be necessary to preserve the tax-
favored status of a benefit, to preserve the Company's tax deduction for the
costs of a benefit, or to avoid the imposition of excise taxes on the Company or
Executive.
2.9 COMPANY RESPONSIBILITY FOR INSURED BENEFITS. In this Article II, the
Company is agreeing to provide certain benefits which are provided in the form
of premiums of insurance coverage. The Company is not itself promising to pay
the benefit an insurance company is obligated to pay under the policy the
insurance company has issued. If an insurance company becomes insolvent and
cannot pay benefits it owes to Executive or his beneficiaries under the
insurance policy, neither Executive nor his personal representative or
beneficiary shall have any claim for benefits against the Company.
2.10 EXPENSES. During the term of his employment hereunder, Executive
shall be entitled to receive prompt reimbursement from the Company (in
accordance with the policies and procedures in effect for the Company's
employees) for all reasonable travel and other expenses incurred by him in
connection with his services hereunder.
III. TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 TERMINATION OF EMPLOYMENT. Executive's employment under this
Agreement may be terminated by the Company at any time for any reason; provided,
however, that if Executive's employment is terminated by the Company during the
term of this Agreement for a reason other than for cause, he shall be entitled
to continue to receive his base salary under Section 2.1 for the
3
remainder of the period through September 30, 1996. Executive's employment
under this Agreement may be terminated by Executive at any time for any reason.
The termination shall be effective as of the date specified by the party
initiating the termination in a written notice delivered to the other party,
which date shall not be earlier than the date such notice is delivered to the
other party. This Agreement shall terminate in its entirety immediately upon
the death of Executive. Except as expressly provided to the contrary in this
section or applicable law, Executive's rights to pay and benefits shall cease on
the date his employment under this Agreement terminates.
3.2 CAUSE. For purposes of this Article III, "cause" shall mean only the
following: (i) indictment or conviction of a felony; (ii) theft or embezzlement
of Company property or commission of similar acts involving moral turpitude;
(iii) failure of the Company to meet at least 70% of Budget for either net sales
or after-tax earnings in any fiscal year; or (iv) the willful failure by
Executive to substantially perform his material duties under this Agreement
(excluding nonperformance resulting from Executive's disability) which willful
failure is not cured within thirty (30) days after written notice from the
Chairman of the Board of Directors or the Chief Executive Officer of Digi
specifying the act of willful nonperformance or within such longer period (but
no longer than ninety (90) days in any event) as is reasonably required to cure
such willful nonperformance.
3.3 DISABILITY. If Executive has become disabled from performing his
duties under this Agreement and the disability has continued for a period of
more than sixty (60) days, the Board of Directors of Digi may, in its
discretion, determine that Executive will not return to work and terminate his
employment under this Agreement. Upon any such termination for disability,
Executive shall be entitled to such disability, medical, life insurance, and
other benefits as may be provided generally for disabled employees of the
Company during the period he remains disabled.
IV. NON-COMPETITION, CONFIDENTIALITY AND TRADE SECRETS
4.1 AGREEMENT NOT TO COMPETE. Executive agrees that, on or before the
date which is two years after the date Executive's employment under this
Agreement terminates under Section 3.1, he will not, unless he receives the
prior approval of the Board of Directors of Digi, directly or indirectly engage
in any of the following actions:
(a) Own an interest in (except as provided below), manage, operate,
join, control, lend money or render financial or other assistance to, or
participate in or be connected with, as an officer, employee, partner,
stockholder, consultant or otherwise, any entity whose products or services
compete directly or indirectly with those of the Company, Digi, or any of
their subsidiaries. However, nothing in this subsection (a) shall preclude
Executive from holding less than one percent of the outstanding capital
stock of any corporation required to file periodic reports with the
Securities and Exchange Commission under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the securities of which are
listed on any securities exchange, quoted on
4
the National Association of Securities Dealers Automated Quotation System or
traded in the over-the-counter market.
(b) Intentionally solicit, endeavor to entice away from the Company,
Digi, or any of their subsidiaries, or otherwise interfere with the
relationship of the Company, Digi, or any of their subsidiaries with, any
person who is employed by or otherwise engaged to perform services for the
Company, Digi, or any of their subsidiaries (including, but not limited to,
any independent sales representatives or organizations), or any persons or
entity who is, or was within the then most recent 12-month period, a
customer or client of the Company, Digi, or any of their subsidiaries,
whether for Executive's own account or for the account of any other
individual, partnership, firm, corporation or other business organization.
If the scope of the restrictions in this section are determined by a court of
competent jurisdiction to be too broad to permit enforcement of such
restrictions to their full extent, then such restrictions shall be construed or
rewritten (blue-lined) so as to be enforceable to the maximum extent permitted
by law, and Executive hereby consents, to the extent he may lawfully do so, to
the judicial modification of the scope of such restrictions in any proceeding
brought to enforce them.
4.2 NON-DISCLOSURE OF INFORMATION. During the period of his employment
hereunder, and at all times thereafter, Executive shall not, without the written
consent of Digi, disclose to any person, other than an employee of the Company,
Digi, or any of their subsidiaries or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by Executive of his
duties as an executive of the Company, except where such disclosure may be
required by law, any material confidential information obtained by him while in
the employ of the Company with respect to any of the Company's or Digi's
products, technology, know-how or the like, services, customers, methods or
future plans, all of which Executive acknowledges are valuable, special and
unique assets the disclosure of which Executive acknowledges may be materially
damaging to the Company.
4.3 REMEDIES. Executive acknowledges that the Company's remedy at law for
any breach or threatened breach by Executive of Section 4.1 or Section 4.2 will
be inadequate. Therefore, the Company shall be entitled to injunctive and other
equitable relief restraining Executive from violating those requirements, in
addition to any other remedies that may be available to the Company under this
Agreement or applicable law.
5
V. MISCELLANEOUS
5.1 AMENDMENT. This Agreement may be amended only in writing, signed by
both parties and consented to by Digi.
5.2 ENTIRE AMENDMENT. This Agreement contains the entire understanding of
the parties with regard to all matters contained herein. There are no other
agreements, conditions or representations, oral or written, expressed or
implied, with regard thereto. This Agreement supersedes all prior agreements
relating to the employment of Executive by the Company.
5.3 ASSIGNMENT. The Company may in its sole discretion assign this
Agreement to any entity which succeeds to some or all of the business of the
Company through merger, consolidation, a sale of some or all of the assets of
the Company, or any similar transaction. Executive acknowledges that the
services to be rendered by him are unique and personal. Accordingly, Executive
may not assign any of his rights or obligations under this Agreement.
5.4 SUCCESSORS. Subject to Section 5.3, the provisions of this Agreement
shall be binding upon the parties hereto, upon any successor to or assign of the
Company, and upon Executive's heirs and the personal representative of Executive
or Executive's estate.
5.5 NOTICES. Any notice required to be given under this Agreement shall
be in writing and shall be delivered either in person or by certified or
registered mail, return receipt requested. Any notice by mail shall be
addressed as follows:
If to the Company, to:
Star Gate Technologies, Inc.
c/o Digi International Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Chief Financial Officer
with a copy to:
Digi International Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Chairman of the Board
6
If to Executive, to:
Xxx X. Xxxxx
Star Gate Technologies, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
or to such other addresses as either party may designate in writing to the other
party from time to time.
5.6 WAIVER OF BREACH. Any waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement. No waiver by the Company
shall be valid unless in writing and signed by the Chairman of the Board of
Directors or Chief Executive Officer of Digi.
5.7 SEVERABILITY. If any one or more of the provisions (or portions
thereof) of this Agreement shall for any reason be held by a final determination
of a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions (or portions of the provisions) of this Agreement, and the
invalid, illegal or unenforceable provisions shall be deemed replaced by a
provision that is valid, legal and enforceable and that comes closest to
expressing the intention of the parties hereto.
5.8 GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Minnesota, without giving effect to
conflict of law principles.
5.9 HEADINGS. The headings of articles and sections herein are included
solely for convenience and reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed by either of the parties
hereto in counterparts, each of which shall be deemed to be an original, but all
such counterparts shall constitute a single instrument.
7
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.
POLARIS ACQUISITION INC.
By /s/ Xxxx X. Xxxxxxx
----------------------------
Its Chairman of the Board
EXECUTIVE
/s/ Xxx X. Xxxxx
------------------------------
Xxx X. Xxxxx
ACKNOWLEDGED AND AGREED TO:
DIGI INTERNATIONAL INC.
By /s/ Xxxx X. Xxxxxxx
----------------------------
Its Chairman of the Board
8
Schedule I to
EMPLOYMENT AGREEMENT
Annual Base Salary: $110,000
Target Bonus: 100% of Base Salary
Company Budget Plan for the six months ending September 30, 1993 (including pre-
merger results of operations from April 1, 1993):
Net sales of at least $7,732,450
After-tax earnings of at least $858,302
9
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, made as of the 8th day of
May, 1995, by and between STAR GATE TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), and Xxx X. Xxxxx (the "Executive").
WITNESSETH:
Whereas, the parties have entered into an Employment Agreement dated as of
April 13, 1993 (the "Employment Agreement"); and
Whereas the parties hereto wish to amend the Employment Agreement as set
forth below:
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AMENDMENT TO EMPLOYMENT AGREEMENT.
(A) Section 2.2 of the Employment Agreement is hereby amended in its
entirety to read as follows:
2.2 BONUS FOR FISCAL 1995. Executive shall be eligible to receive a
bonus for fiscal 1995 as follows:
(a) The target bonus shall be 100% of Executive's base salary for fiscal
1995. Executive shall be entitled to that bonus amount if the
objectives set by the budget plan for Digi International Inc. (the
"Budget Plan" or "Budget") for fiscal 1995 are met.
(b) If some or all of the objectives of the Budget Plan are not met for
fiscal 1995, the Board of Directors of Digi will determine in its
discretion what portion, if any, of the target bonus amount will
be paid to Executive for that year. If the objectives are exceeded
for fiscal 1995, the Board may in its discretion award Executive a
bonus that is larger than the target bonus.
(c) The bonus for fiscal 1995 shall be paid to Executive on September 30,
1995 or as soon thereafter as the Company is able to determine
whether the objectives have been met for that year.
(B) Section 2.3 of the Employment Agreement is hereby amended in its
entirety to read as follows:
2.3 BONUSES BEGINNING IN FISCAL 1996. Beginning in fiscal 1996, if
Digi International Inc. meets both net sales and after-tax earnings targets
set by the Budget Plan by at least 80% for any fiscal year during which
this Agreement is in effect, then Executive shall be eligible for the cash
bonuses described below for such year. If the Digi International Inc.
Budget Plan is less than 80% achieved for either net sales or after-tax
earnings, neither bonus described below will be paid.
(a) If the targets for Digi International Inc. are 100% achieved for both
net sales and after-tax earnings, Executive shall be entitled
to a bonus equal to 50% of Executive's base salary. If the Digi
International Inc. targets for both net sales and after-tax earnings
are achieved by at least 80%, but for either measure by less than
100%, Executive will be entitled to a percentage of the foregoing
bonus amount (i.e., 50% of Executive's base salary) equal to the
smaller of the percentages of net sales or after-tax earnings that
were achieved.
(b) Provided that that Digi International Inc. targets are at least 80%
achieved, Executive will also be entitled to an additional bonus
(the "PMU Bonus") based upon targets for net sales and operating
income for Digi International Inc.'s Multiuser Product Marketing Unit
(the "Multiuser PMU").
(c) If the Multiuser PMU targets for both net sales and operating income
are 100% achieved, Executive will be entitled to a PMU Bonus equal
to 50% of Executive's base salary. If the net sales and operating
income targets for the Multiuser PMU are both achieved by at least
80%, but for either measure by less than 100%, Executive will be
entitled to a prorated PMU Bonus as set forth below:
(i) Three-fourths of the amount of the PMU Bonus will be contingent
upon operating income. As a result, if the Multiuser PMU
target for operating income is achieved by at least 80%,
Executive will be entitled to a percentage of the amount which is
contingent upon operating income (i.e., three-fourths of 50% of
Executive's base salary) equal to the percentage (not exceeding
100%) by which the Multiuser PMU operating income was achieved.
(ii) One quarter of the amount of PMU Bonus will be similarly
contingent upon net sales. As a result, if the Multiuser
PMU target for net sales is achieved by at least 80%,
Executive will be entitled to a percentage of the amount which
is contingent upon net sales (i.e., one quarter of 50% of
Executive's base salary) equal to the percentage (not exceeding
100%) by which the Multiuser PMU target for net sales was
achieved.
(d) If some or all of the objectives of the Budget Plan are exceeded
for a fiscal year, the Board of Directors of Digi may in its
discretion award Executive a bonus that is larger than the target
bonus.
(e) The bonuses for each fiscal year shall be paid to Executive
on September 30 of each year or as soon thereafter as the Company is
able to determine whether the objectives have been met for that year.
(f) The Board of Directors will consult with Executive before
determining the Budget Plan and Multiuser PMU targets for each fiscal
year. However, the Board will have authority to establish
2
the Budget Plan and Multiuser PMU targets for each year in its sole
discretion.
(C) References to "Budget," "Budget Plan" and "Company Budget Plan"
in the remaining provisions of the Employment Agreement shall be deemed to be
references to the budget plan for Digi International Inc., and the reference to
the "Company" in Section 3.2(iii) shall be deemed to be a reference to Digi
International Inc.
2. EFFECTIVE DATE. This Amendment No. 1 shall be effective from and
after October 1, 1994.
3. NO ADDITIONAL CHANGES. Except as expressly amended by this Amendment
No. 1, the Employment Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of
the date first above written.
STAR GATE TECHNOLOGIES, INC.
By /s/ Xxx X. Xxxxx
----------------------------
Its President
-------------------------
EXECUTIVE
/s/ Xxx X. Xxxxx
-------------------------------
Xxx X. Xxxxx
ACKNOWLEDGED AND AGREED TO:
DIGI INTERNATIONAL INC.
By /s/ Xxxxx X. Xxxx
--------------------------------
Its President/CEO
---------------------------
3
