EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS AGREEMENT (this "AGREEMENT") is dated October 31, 1996, and is between
ATLANTIC NETWORK SYSTEMS, INC., a North Carolina corporation ("ANS") and B.
XXXXXX XXXXXX, an individual residing in the State of North Carolina
("EMPLOYEE").
RECITALS
A. On October 31, 1996, Eltrax acquired ANS in a merger from Employee and
other shareholders of ANS in exchange for Eltrax common stock, the receipt and
sufficiency of which is hereby acknowledged.
B. ANS is now a wholly-owned subsidiary of Eltrax.
C. ANS wishes to continue the services of Employee for at least the duration
of this Agreement, and Employee wishes to provide his services for such period.
D. The Company desires reasonable protection of its confidential business and
technical information.
E. The Company desires assurance that Employee will not compete with it for a
reasonable period of time after termination of employment, Employee is willing
to refrain from such competition.
F. Employee desires to have the opportunity to earn certain commissions and
incentive payments as provided for herein.
NOW, THEREFORE, in consideration of Employee's acceptance of and
continuance in ANS's employment for the term of this Agreement and the parties'
agreement to be bound by the terms contained herein, the parties hereby agree as
follows:
ARTICLE
1.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings:
1.1. "ACTUAL ANNUAL BONUS" shall have the meaning given such term in
Section 3.2(d) of this Agreement.
1.2. "ACTUAL NET PROFIT" shall have the meaning given such term in Section
3.2 of this Agreement.
1.3. "ANNUAL BONUS" shall mean the annual cash bonus which Employee is
eligible to earn pursuant to Section 3.2 of this Agreement.
1.4. "ANS" shall mean Atlantic Network Systems, Inc., a North Carolina
corporation.
1.5. [Intentionally Left Blank]
1.6. "BASE TERM" shall have the meaning given such term in Section 2.3 of
this Agreement.
1.7. "THRESHOLD NET PROFIT" shall have the meaning given such term in
Section 3.2 of this Agreement.
1.8. "CAUSE" shall have the meaning given such term in Section 4.2 of this
Agreement.
1.9. "COMMITTEE" shall mean a committee of the Board of Directors of Eltrax
consisting solely of directors who are not employees of Eltrax.
1.10. "COMPANY" shall mean Eltrax Systems, Inc., a Minnesota corporation,
and shall include its Subsidiaries and successors in interest.
1.11. "CONFIDENTIAL INFORMATION" shall mean information or material which is
not generally available to or used by others, or the utility or value
of which is not generally known or recognized as standard practice,
whether or not the underlying details are in the public domain,
including:
(a) information or material relating to the Company, and its
businesses as conducted or anticipated to be conducted, business
plans, operations, past, current or anticipated software,
products or services, customers or prospective customers, or
research, engineering, development, manufacturing, purchasing,
accounting, or marketing activities;
(b) information or material relating to the Company's inventions,
improvements, discoveries, "know-how," technological
developments, or unpublished writings or other works of
authorship, or to the materials, apparatus, processes, formulae,
plans or methods used in the development, manufacture or
marketing of the Company's software, products or services;
(c) information which when received is marked as "proprietary,"
"private," or "confidential";
(d) trade secrets;
(e) software in various stages of development, including computer
programs in source code and binary code form, software designs,
specifications, programming aids (including "library subroutines"
and productivity tools), programming languages, interfaces,
visual displays, technical documentation, user manuals, data
files and databases; and
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(f) any similar information of the type described above which the
Company obtained from another party and which the Company treats
as or designates as being proprietary, private or confidential,
whether or not owned or developed by the Company.
Notwithstanding the foregoing, "Confidential Information" does
not include any information which is properly published or in the
public domain; PROVIDED, HOWEVER, that information which is published
by or with the aid of Employee outside the scope of employment or
contrary to the requirements of this Agreement will not be considered
to have been properly published, and therefore will not be in the
public domain for purposes of this Agreement.
1.12. "DISABILITY" shall mean the inability, as reasonably determined by
ANS, of Employee to perform his duties under this Agreement because of
illness or incapacity for a continuous period of six (6) months. In
the event that Employee objects that ANS has not reasonably determined
Employee's inability to perform his duties, the issue shall be
determined by three physicians, one selected by ANS, one by Employee,
and the third selected by the first two selected physicians. The
majority opinion of the three physicians shall be final and binding on
ANS and Employee.
1.13. "ELTRAX" shall mean Eltrax Systems, Inc., a Minnesota corporation, and
shall include its Subsidiaries and successors in interest.
1.14. "EMPLOYEE" shall mean B. Xxxxxx Xxxxxx.
1.15. "ESTIMATED ANNUAL BONUS" shall have the meaning given such term in
Section 3.2(c) of this Agreement.
1.16. "GAAP" shall mean generally accepted accounting principles.
1.17. "PLAN" shall mean any profit sharing, pension, life insurance,
accident insurance, disability insurance, health insurance,
hospitalization, medical reimbursement or other employee benefit plan
including, without limitation, Eltrax' 401(k) Plan.
1.18. "SUBSIDIARY" shall mean: (a) any corporation at least a majority of
whose securities having ordinary voting power for the election of
directors (other than securities having such power only by reason of
the occurrence of a contingency) is at the time owned by Eltrax and/or
one or more subsidiaries thereof; and (b) any division or business
unit (or portion thereof) of Eltrax or a corporation described in
clause (a) of this Section 1.18.
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ARTICLE
2.
EMPLOYMENT, DUTIES AND TERM
2.1. EMPLOYMENT; POSITION. Upon the terms and conditions set forth in this
Agreement, ANS hereby employs Employee, and Employee accepts such
employment. During the term of this Agreement, Employee shall serve
as Vice President of ANS. Termination of this Agreement prior to the
end of the term stated in Section 2.3 by either party shall also
terminate Employee's employment with ANS.
2.2. DUTIES.
(a) Employee shall devote his full-time and reasonable best efforts
to ANS and to fulfilling the duties of his position which shall
include such duties with respect to ANS and the Company as may
from time to time be assigned to him by the Eltrax Chief
Executive Officer and the Eltrax Board of Directors; PROVIDED,
HOWEVER, that such duties are reasonably consistent with
Employee's education, experience and background.
(b) Employee shall operate the business of ANS in the best interests
of the Company and its shareholders.
(c) Employee shall comply with the Company's policies and procedures
to the extent they are not inconsistent with this Agreement in
which case the provisions of this Agreement prevail. In
addition, Employee shall comply with the Company's policies on
employee conduct and business ethics.
2.3. TERM. The term of this Agreement shall commence November 1, 1996 and
shall terminate on October 31, 2001 (the "BASE TERM"), unless earlier
terminated pursuant to Article 4 of this Agreement. Commencing
November 1, 2001 and on each November 1 thereafter, the term of
Employee's employment hereunder shall be automatically extended for
one (1) additional year unless on or before the November 1 immediately
preceding any such renewal period either party gives written notice to
the other of the cessation of further extensions, in which case no
further automatic extensions shall occur.
ARTICLE
3.
COMPENSATION, EXPENSES, AND BENEFITS
3.1. COMPENSATION. For all services rendered under this Agreement during
the term of Employee's employment, ANS shall pay Employee, in
accordance with Schedule A attached hereto.
3.2. ANNUAL BONUS. In addition to other compensation to be paid under this
Article 3, Employee shall be eligible to receive an Annual Bonus,
subject to the conditions and
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calculated in the manner set forth herein. The Annual Bonus, if any,
shall be equal to the amount by which ANS's Actual Net Profit exceeds
ANS's Threshold Net Profit multiplied by three percent (3%).
(a) ACTUAL NET PROFIT. For purposes of this Section 3.2, ANS's
"Actual Net Profit" shall be equal to ANS's net income before
taxes for the calendar year computed in accordance with GAAP, as
determined by the Company's independent auditors, and adjusted as
follows: (i) excluding any payment or accrual of any Annual
Bonus required to be paid pursuant to this Section 3.2; (ii)
including in the calculation of ANS's net profit only that
portion of Eltrax's expenses which is directly attributable to
ANS (I.E., expenses incurred to conduct the annual audit of ANS
operations and excluding any intercompany administrative or
overhead charges or expenses); and (iii) including in such
calculation as an expense of ANS an interest amount "imputed" on
any funds advanced to ANS by Eltrax at an interest rate equal to
Eltrax' then current interest rate available under Eltrax' line
of credit with its primary lender.
(b) THRESHOLD NET PROFIT. For purposes of this Section 3.2, ANS's
"Threshold Net Profit" for each of the five (5) years shall be as
follows:
Fiscal Year Ending ANS Threshold Net Profit
------------------ ------------------------
December 31, 1996 $ 750,000
December 31, 1997 $ 1,000,000
December 31, 1998 $ 1,250,000
December 31, 1999 $ 1,500,000
December 31, 2000 $ 1,750,000
December 31, 2001 $ 2,000,000
(c) PAYMENT OF ESTIMATED ANNUAL BONUS. An estimate of the Annual
Bonus shall be calculated pursuant to the formula set forth above
and based upon unaudited financial statements of ANS (the
"ESTIMATED ANNUAL BONUS"). The Estimated Annual Bonus, if any,
shall be paid to Employee in cash within thirty (30) days after
the calendar year end.
(d) RECONCILIATION WITH ACTUAL ANNUAL BONUS. Within 120 days of the
Company's fiscal year end, the actual Annual Bonus shall be
calculated pursuant to the formula set forth above and shall be
based upon the financial results of ANS which are included in the
audited financial statements of Eltrax (the "ACTUAL ANNUAL
BONUS"). Promptly thereafter, the Estimated Annual Bonus, if
any, shall be reconciled with the Actual Annual Bonus and the
appropriate adjustments (if any) shall be made accordingly at
such time and as mutually agreed to by the parties.
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3.3. WARRANT. In addition to other compensation to be paid under this
Article 3, Employee shall be granted a warrant, in substantially the
form of warrant attached hereto as Exhibit A, to purchase up to 37,500
shares of common stock, par value $.01 per share, of Eltrax (the
"WARRANT") at an exercise price of $6.00 per share.
3.4. BENEFITS. In addition to other compensation to be paid under this
Article 3, Employee shall be entitled to participate in all benefit
Plans available to all full-time, eligible employees currently
maintained or hereafter established by Eltrax or ANS generally, in
accordance with the terms and conditions of such Plans.
3.5. EXPENSES. ANS shall reimburse Employee for all expenses reasonably
and necessarily incurred by Employee in the Base Term and all renewals
thereof in the performance of the services rendered by him. Expenses
for which reimbursement shall be made shall include, without
limitation, travel expenses, meals and lodging expenses, long distance
telephone charges and business entertainment expenses. The
reimbursement of Employee for expenses incurred by him shall be
subject to and made in accordance with such policies and procedures as
maybe established by ANS and the Eltrax Board of Directors from time
to time.
ARTICLE
4.
EARLY TERMINATION
4.1. EARLY TERMINATION. Subject to Article 3 and the respective continuing
obligations of the parties pursuant to Articles 5, 6, 7 and 8, this
Article sets forth the terms for early termination of this Agreement.
4.2. TERMINATION FOR CAUSE. ANS may terminate this Agreement and
Employee's employment immediately for cause. For the purpose hereof,
"CAUSE" means (1) fraud, (2) theft or embezzlement of the Company's
assets, (3) willful violation of law constituting a felony, (4) the
continued failure by Employee to perform his duties as reasonably
assigned to Employee pursuant to Section 2.2 of Article 2 of this
Agreement for a period of sixty (60) days after a written demand for
such performance, which written demand specifically identifies the
manner in which it is alleged Employee has not satisfactorily
performed such duties. At any time during the sixty (60) day "cure"
period described in clause (4) above, at Employee's request the Eltrax
Chief Executive Officer, together with at least one member of the
Committee, shall meet in person to discuss the alleged performance
deficiencies. In the event of termination for cause pursuant to this
Section 4.2, Employee shall be paid all commissions earned through the
date of termination specified in any notice of termination and any
amounts to which the Executive is entitled under any Plan in
accordance with the terms of such Plan.
4.3. TERMINATION WITHOUT CAUSE. Either Employee or ANS may terminate this
Agreement and Employee's employment without cause on seventy-five (75)
days' written notice. In
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the event of termination of this Agreement and of Employee's
employment pursuant to this Section 4.3, compensation shall be paid as
follows:
(a) If the termination is by Employee, Employee shall be paid all
commissions earned through the date of termination specified in
such notice (but not to exceed sixty (60) days from the date of
such notice);
(b) If the termination is by ANS, Employee's draw shall terminate and
he shall be paid: (i) all commissions earned through the date of
termination specified in such notice and (ii) on a monthly basis
through the Base Term or any applicable renewal term an amount
equal to one-twelfth (1/12) of his commissions earned over the
twelve (12) months immediately preceeding the date of termination
specified in such notice. In addition, Employee shall be paid
the pro-rata portion of any Annual Bonus to which Employee may be
entitled in accordance with Section 3.2.
4.4. TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement and
Employee's employment shall terminate in the event of death or
Disability of Employee.
(a) In the event of Employee's death, commission payments shall be
terminated as of the end of the month in which Employee's death
occurs. In such case, Employee's estate will be paid a pro-rata
portion of any Annual Bonus to which Employee may be entitled in
accordance with Section 3.2.
(b) In the event of Disability, Employee shall be paid: (i) all
commissions earned through the date of the event of Disability
and (ii) on a monthly basis through the end of the month in which
the last day of the six-month period of Employee's inability to
perform his duties occurs, an amount equal to one twelfth (1/12)
of his commissions earned over the twelve (12) months immediately
preceeding the date of the event of Disability. In addition,
Employee shall be paid the pro-rata portion of any Annual Bonus
to which Employee may be entitled in accordance with Section 3.2.
4.5. ENTIRE TERMINATION PAYMENT. The compensation provided for in Articles
3 and 4 for early termination of this Agreement shall constitute
Employee's sole remedy for such termination. Employee shall not be
entitled to any other termination or severance payment which may be
payable to Employee under any other agreement between Employee and ANS
or any policy of the Company. This Section 4.5 shall not have any
effect on distributions to which Employee may be entitled at
termination from any tax-qualified Plan or any other Plan (other than
a severance payment or similar Plan).
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ARTICLE
5.
CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
5.1. CONFIDENTIALITY. Employee will not, during the term or after the
termination or expiration of this Agreement, publish, disclose, or
utilize in any manner any Confidential Information obtained while
employed by ANS. If Employee leaves the employ of ANS, Employee will
not, without its prior written consent, retain or take away any
drawing, writing or other record in any form containing any
Confidential Information.
5.2. BUSINESS CONDUCT AND ETHICS. During the term of employment with ANS,
Employee will engage in no activity or employment which may conflict
with the interest of the Company, and will comply with the Company's
policies and guidelines pertaining to business conduct and ethics.
5.3. DISCLOSURE. Employee will disclose promptly in writing to Eltrax all
inventions, discoveries, software, writings and other works of
authorship which are conceived, made, discovered, or written jointly
or singly on Eltrax' business time or on Employee's own time during
the term of the Agreement, provided the invention, improvement,
discovery, software, writing or other work of authorship is capable of
being used by Eltrax in the normal course of business, and all such
inventions, improvements, discoveries, software, writings and other
works of authorship shall belong solely to Eltrax.
5.4. INSTRUMENTS OF ASSIGNMENT. Employee will sign and execute all
instruments of assignment and other papers to evidence vestiture of
Employee's entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of
authorship in Eltrax, at the request and the expense of Eltrax, and
Employee will do all acts and sign all instruments of assignment and
other papers Eltrax may reasonably request relating to applications
for patents, patents, copyrights, and the enforcement and protection
thereof. If Employee is needed, at any time, to give testimony,
evidence, or opinions in any litigation or proceeding involving any
patents or copyrights or applications for patents or copyrights, both
domestic and foreign, relating to inventions, improvements,
discoveries, software, writings or other works of authorship
conceived, developed or reduced to practice by Employee, Employee
agrees to do so, and if Employee leaves the employ of ANS, Eltrax
shall pay Employee at a rate mutually agreeable to Employee and
Eltrax, plus reasonable traveling or other expenses.
5.5. NOTICE OF LIMITATION. The requirements of Sections 5.3 and 5.4 above
do not apply to an invention for which no equipment, supplies,
facility or trade secret information of the Company was used and which
was developed entirely on Employee's own time, and (a) which does not
relate (i) directly to the business of the Company or (ii) to the
Company's actual or demonstrably anticipated research or development,
or (b) which does not result from any work performed by Employee for
the Company.
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5.6. SURVIVAL. The obligations of this Article 5 shall survive the
expiration or termination of this Agreement.
ARTICLE
6.
NON-COMPETITION
6.1. NON-COMPETITION. Employee agrees that for a period of: (a) two (2)
years following termination of employment with ANS if the termination
is by Employee or (b) one (1) year following termination of employment
with ANS if the termination is by ANS for "cause," Employee will not,
directly or indirectly, alone or as a partner, officer, director,
shareholder or employee of any other firm or entity, engage in any
commercial activity in competition with any part of the Company's
business which was under Employee's management or supervision at any
time during the term of this Agreement or any part of the Company's
business with respect to which Employee has Confidential Information
as governed by Article 5 of this Agreement. For purposes of this
Section 6.1, "shareholder" shall not include beneficial ownership of
less than five percent (5%) of the combined voting power of all issued
and outstanding voting securities of a publicly held corporation whose
voting stock is traded in a public market. Also for purposes of this
Section 6.1, "the Company's business" shall include businesses
conducted by the Company, any Subsidiary of the Company and any
affiliate of the Company and any partnership or joint venture.
Employee will not be subject to the foregoing non-competition covenant
if the termination of employment with ANS is by ANS without "cause."
6.2. EFFECT OF TERMINATION. In the event Employee's employment terminates
for any reason, no additional compensation shall be paid for the
non-competition obligation.
6.3. SURVIVAL. The obligations of this Article 6 shall survive the
expiration or termination of this Agreement.
ARTICLE
7.
CHANGE OF OWNERSHIP OF THE BUSINESS
7.1. EFFECT. In the event (i) of the merger of Eltrax with or into any
other corporation (other than a merger in which Eltrax is the
surviving corporation) or (ii) that all or substantially all of the
assets or capital stock of Eltrax or ANS are sold (other than to a
person or entity which is an "affiliate," as defined in the Securities
Act of 1933, as amended, of Eltrax):
(a) If Employee gives his written consent to the assignment of this
Agreement to the successor or (and such assignment is accepted),
this Agreement shall remain in full force and effect between
Employee and the assignee.
(b) If such assignment is not accepted by the successor or purchaser,
then this Agreement shall be deemed to have been terminated by
ANS without cause pursuant to Article 4; and
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(c) If a proposed assignment is accepted by the successor or
purchaser, but Employee does not provide his written consent to
such assignment (unless such consent is withheld because the
purchaser does not have creditworthiness reasonably equivalent to
ANS's and ANS does not agree to guarantee the purchaser's
performance of ANS's payment obligations hereunder), this
Agreement shall be deemed terminated for cause pursuant to
Article 4.
ARTICLE
8.
GENERAL PROVISIONS
8.1. NO ADEQUATE REMEDY. The parties declare that it is impossible to
measure in money the damages which will accrue to either party by
reason of a failure to perform any of the obligations under this
Agreement. Therefore, if either party shall institute any action or
proceeding to enforce the provisions hereof, such party against whom
such action or proceeding is brought hereby waives the claim or
defense that such party has an adequate remedy at law, and such party
shall not urge in any such action or proceeding the claim or defense
that such party has an adequate remedy at law.
8.2. SUCCESSORS AND ASSIGNS. Except as otherwise provided in Article 7,
this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of ANS whether by way of merger, consolidation,
operation of law, assignment, purchase or other acquisition of
substantially all of the capital stock, assets or business of ANS, and
any such successor or assign shall absolutely and unconditionally
assume all of ANS's obligations hereunder.
8.3. NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and
be delivered or mailed to any such party at its address which:
(a) In the case of ANS shall be:
Atlantic Network Systems, Inc.
c/o Eltrax Systems, Inc.
Rush Lake Business Park
0000 Xxx Xxxxxxx 0
Xx. Xxxx, XX 00000
Attn: Chief Executive Officer
(b) In the case of Employee shall be:
B. Xxxxxx Xxxxxx
0000 Xxxxxxxxx Xxx
Xxxxxxx, XX 00000
Any party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or certified
mail, shall be deemed dispatched on
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the registered date or that stamped on the certified mail receipt, and shall be
deemed received within the second business day thereafter or when it is actually
received, whichever is sooner.
8.4. CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
8.5. GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota
without giving effect to the conflict of laws principles thereof. The
parties hereto expressly recognize and agree that the implementation
of this Governing Law provision is essential in light of the fact that
the Company's corporate headquarters and its principal executive
offices are located within the State of Minnesota, and there is a
critical need for uniformity in the interpretation and enforcement of
the employment agreements between the Company and its key employees.
8.6. CONSTRUCTION. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
8.7. WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or by law.
8.8. MODIFICATION. This Agreement may not be and shall not be modified or
amended except by written instrument signed by the parties hereto.
8.9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the
matters herein agreed upon and supersedes all prior or contemporaneous
agreements, understandings and negotiations with respect to the
subject matter hereof.
8.10. ATTORNEYS' FEES. In the event there is litigation between the parties
hereto with respect to their rights and obligations under this
Agreement, the prevailing party in any such litigation shall be
entitled to recover from the opposing party all reasonable attorneys'
fees and expenses (including fees of accountants) incurred by the
prevailing party in connection with such proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
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EMPLOYEE ATLANTIC NETWORK SYSTEMS, INC.
/s/ B. Xxxxxx Xxxxxx By /s/ Xxxxxx X. Xxxxxx
------------------------------ --------------------------------
X. Xxxxxx Xxxxxx Xxxxxx X. Xxxxxx
Vice President and Treasurer
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