EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") made and entered into
effective as of the 1st day of January 1997, by and between Datakey, Inc., a
Minnesota corporation (the "Company" or "Datakey") and Xxxx X. Xxxxxxx
("Executive").
RECITALS
Xxxx X. Xxxxxxx joined the Company in January 1995 as Vice President of
Sales and Marketing. He was appointed President and Chief Executive Officer on
December 1, 1996. The parties desire to memorialize their relationship in the
following Agreement.
AGREEMENT
1. Employment
a. Datakey agrees to continue to employ Executive on a full-time basis
as the President and Chief Executive Officer ("CEO") of Datakey pursuant to the
terms and conditions hereof.
b. Executive agrees that he will, at all times, faithfully,
industriously, and, to the best of his abilities, experience and talents,
continue to perform all the duties and responsibilities that may be required of
him as President and CEO of Datakey.
2. Term of Employment
a. Subject to the terms and conditions hereof, Executive shall be
employed for a term ("Employment Term") commencing on January 1, 1997, and
terminating on January 1, 1998, unless extended as set forth in Subsection 2b
below.
b. This Agreement will be renewed automatically after January 1, 1998,
for additional one-year periods unless either party gives the other party
written notice 30 days before January 1, 1998 or 30 days before the end of any
one-year period thereafter of his or its intention to terminate the Agreement.
3. Base Compensation
As compensation for his services to Datakey, Executive shall be paid an
initial monthly salary of $10,000, payable in accordance with Datakey's payment
periods. Executive's base compensation will be reviewed on an annual basis
throughout the term of this Agreement.
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4. Incentive Compensation
Executive will be paid a target bonus of 30% of his base salary which
will be dependent on attainment of performance targets set by the Company's
Compensation Committee by February 15, 1997. In addition, Executive will be
eligible to participate in any long-term incentive plan approved by Datakey's
Board of Directors.
5. Other Benefits
a. Vacation. Executive will receive four weeks of vacation for every
twelve months of employment. Unused vacation may not be carried over from one
year to the next. Datakey will pay Executive for any earned and unused vacation
upon termination.
b. Automobile Allowance. During the term of this Agreement, Datakey
will pay Executive $500 per month to be applied toward his automobile expenses.
c. Stock Options. Executive has been granted the following incentive
stock options: (i) 50,000 shares at an exercise price of $3.50 per share and
(ii) 25,000 shares at an exercise price of $3.00 per share. Both options have
been or will be memorialized in Stock Option Agreements and will contain
standard terms and conditions, including vesting.
d. Miscellaneous. During the term of this Agreement, Executive will
receive such other benefits which are provided by Datakey to other officers as a
group.
6. Termination
Notwithstanding Section 2 above, the Employment Term or any extension
thereof shall terminate upon the happening of any of the following events:
a. Mutual written agreement between the Board of Directors of
Datakey and Executive to terminate his employment.
b. Executive's death.
c. Executive's disability defined as physically or mentally
unable to perform as CEO with or without reasonable
accommodation for a period of six consecutive months, or
d. For cause (as defined below) upon written notice from the
Board of Directors specifying the nature of the cause. For
purposes of this Agreement, "cause" shall include commission
of any felony, gross misdemeanor, or any act of fraud or
dishonesty in connection with the affairs of Datakey.
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e. By either party with or without cause upon thirty days written
notice to the other.
7. Payment Upon Termination of Employment For Cause
If Executive is terminated for cause as defined in Section 6 above,
Executive shall not be eligible to receive any severance benefits. The date of
termination under this Section 7 shall be on the day the notice of termination
for cause is given and Executive shall be entitled to no additional compensation
past the date of such notice.
8. Payment Upon Termination of Employment Without Cause or Termination
Upon Failure to Renew Agreement
a. If Executive is terminated without cause or terminated for failure
of Datakey to renew Agreement, Executive shall receive a severance payment equal
to his base compensation payable for twelve months in accordance with Datakey's
payment periods beginning on the 10th day of the first month following the last
month of employment.
b. The payments provided for under this Section 8 shall, in the event
of Executive's death, continue and shall be payable to his wife if she survives
or, if not, to his estate.
c. The Company will also expend up to $6,000 to be applied only to
outplacement counseling of Executive's choice. Payments will be made directly to
the outplacement counselor.
d. The Company will continue to provide to Executive and his covered
dependents access to medical and health coverage under its plans as they
currently exist or may hereafter be amended at company subsidized rates during
the twelve-month severance pay period. Thereafter, Executive and his covered
dependents will be entitled to elect to continue coverage under COBRA to the
extent it is available. Coverage by the Company or under COBRA will end on the
earlier of Executive's obtaining new employment which gives him the ability to
provide medical and health insurance coverage for himself and his family through
his new employer, or the failure to pay any premium when due.
9. Nondisclosure
Except by written permission from Datakey, Executive shall never
disclose or use any trade secrets, sales projections, formulations, customer
lists or information, product specifications or information, credit information,
production know-how, research and development plans or other information not
generally known to the public ("Confidential Information") acquired or learned
by Executive during the course, and on account, of his employment, whether or
not developed by Executive, except as such disclosure or use may be required by
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his duties to Datakey, and then only in strict accordance with his obligations
of service and loyalty thereto. Upon termination of employment, Executive agrees
to deliver to Datakey all Confidential Information.
10. Noncompetition
a. For a period of one (1) year after the end of the Employment Term or
any extension thereof or after termination of employment for any reason,
Executive will not, directly or indirectly, alone or in any capacity with
another legal entity: (i) engage in any activity that competes in any respect
with Datakey, (ii) contact or in any way interfere or attempt to interfere with
the relationship of Datakey with any current or potential customers of Datakey,
or (iii) employ or attempt to employ any employee of Datakey (other than a
former employee thereof after such employee has terminated employment with the
Datakey);
b. Executive acknowledges that Datakey markets products throughout the
United States and that Datakey would be harmed if Executive conducted any of the
activities described in this Section 10 anywhere in the United States.
Therefore, Executive agrees that the covenants contained in this Section 10
shall apply to all portions of, and throughout, the United States; and
c. To the extent any provision of this Section 10 shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of such
provision and this Section 10 shall be unaffected and shall continue in full
force and effect. In furtherance to and not in limitation of the foregoing,
should the duration or geographical extent of, or business activities covered
by, any provision of this Section 10 be in excess of that which is valid and
enforceable under applicable law, then such provision shall be construed to
cover only that duration, extent or activities which are validly and enforceably
covered. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Section 10 be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its expressed terms) possible under applicable laws.
d. Executive and Datakey acknowledge that the noncompetition provision
of this Section 10 is enforceable against Executive under Minnesota law only if
it is supported by independent consideration because Executive is entering into
this noncompetition agreement after having already accepted employment with
Datakey. Executive specifically acknowledges and agrees that Datakey is
providing him adequate independent consideration for this noncompetition
provision by way of this Agreement, including but not limited to the term of
employment (Section 2), increased base compensation (Section 3), increased
incentive compensation (Section 4), and one-year severance upon termination
(Section 8).
11. Specific Performance
Executive acknowledges that a breach of this Employment Agreement would
cause Datakey irreparable injury and damage which could not be remedied or
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adequately compensated by damages at law; therefore, Executive expressly agrees
that Datakey shall be entitled, in addition to any other remedies legally
available, to injunctive and/or other equitable relief to prevent a breach of
this Employment Agreement.
12. Miscellaneous
a. Waiver by Datakey of a breach of any provision of this Agreement by
Executive shall not operate or be construed as a waiver of any subsequent breach
by Executive.
b. This Agreement shall be binding upon and inure to the benefit of
Datakey, its successors and assigns, and as to Executive, his heirs, personal
representatives, estate, legatees and assigns.
c. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements whether written or oral relating hereto.
d. This Agreement shall be governed by and construed under the laws of
the State of Minnesota.
IN WITNESS WHEREOF, the parties have hereto executed this Employment
Agreement effective as of the day and year first above written.
DATAKEY, INC.
/s/ Xxxx X. Xxxxxxx
By: Xxxx Xxxxxxx, Chairman of the Board
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx, Executive
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