EMPLOYMENT AGREEMENT
EXHIBIT
10.23
THIS
AGREEMENT (“Agreement”) is effective as of the 16th day of April, 2007, by and
between XXXXX
X. XXXXXXX,
an
individual resident of the State of Georgia (“Employee”), and INNOTRAC
CORPORATION,
a
Georgia corporation (the “Employer”).
W
I T
N E S S E T H:
WHEREAS,
Employee previously entered into an Employment Agreement with the Employer
dated
August 31, 2000, which expired by its terms on December 31, 2005;
and
WHEREAS,
the parties hereto desire to enter into an agreement for the Employer’s
continued employment of Employee on the terms and conditions contained herein;
and
WHEREAS,
this Employment Agreement supersedes any prior employment agreement or promises
between Employer and Employee regarding the terms of Employee’s employment;
and
NOW,
THEREFORE, in consideration of the premises and the mutual promises and
agreements contained herein, the parties hereto, intending to be legally
bound,
hereby agree as follows:
Section
1. Employment.
Subject
to the terms hereof, the Employer hereby employs Employee, and Employee hereby
accepts such employment. Employee will serve as President and Chief Executive
Officer or in such other executive capacity as the Board of Directors of
Employer (the “Board of Directors”) may hereafter from time to time determine.
Employee agrees to devote his full business time and best efforts to the
performance of the duties that Employer may assign Employee from time to
time.
Section
2. Term
of Employment.
The
term
of Employee's employment (the “Term”) shall continue from the date hereof until
the earlier of (a) December 31, 2009, provided that this date shall
automatically extend until December 31, 2010 and until each December 31
thereafter, unless either the Employer or the Employee provides written notice
of non-renewal to the other party no later than the September 30th
prior to
the upcoming December 31st
expiration date, or (b) the occurrence of any of the following
events:
(i) The
death
or total disability of Employee (total disability meaning the failure to
fully
perform his normal required services hereunder for a period of three (3)
months during any consecutive twelve (12) month period during the term hereof,
as determined by the Board of Directors, by reason of mental or physical
disability);
1
(ii) The
termination by Employer of Employee's employment hereunder, upon prior written
notice to Employee, for “good cause”, as determined by the Board of Directors.
For purposes of this Agreement, “good cause” for termination of Employee's
employment shall exist (A) if Employee is convicted of, pleads guilty to,
or
confesses to any felony or any act of fraud, misappropriation, theft or
embezzlement, (B) if Employee fails to comply with the terms of this Agreement,
and, within thirty (30) days after written notice from Employer of such failure,
Employee has not corrected such failure or, having once received such notice
of
failure and having so corrected such failure, Employee at any time thereafter
again so fails, (C) if Employee violates any of the provisions contained
in
Section 4 of this Agreement, (D) if Employee tests positive for illegal
drugs, or (E) if Employee’s conduct is deemed unprofessional, unethical or
detrimental to the Employer; or
(iii) The
termination of Employee’s employment by either party upon at least ninety (90)
days prior written notice.
Section
3. Compensation.
3.1 Term
of Employment.
Employer
will provide Employee with the following salary, expense reimbursement and
additional employee benefits during the term of employment
hereunder:
(a) Salary.
Employee will be paid a salary (the “Salary”) of no less than Four Hundred
Twenty Five Thousand Dollars ($425,000) per annum, less deductions and
withholdings required by applicable law. The Salary shall be paid to Employee
in
equal monthly installments (or on such more frequent basis as other executives
of Employer are compensated). The Salary shall be reviewed by the Board of
Directors of Employer on at least an annual basis.
(b) Bonus.
Employee will be entitled to an annual bonus, based on personal and company
performance, as awarded by the Board of Directors. The Bonus for each calendar
year shall be paid promptly upon the availability of annual financial results
and no later than March 15 of the following calendar year.
(c) Vacation.
Employee shall receive eight (8) weeks vacation time per calendar year during
the term of this Agreement. Any unused vacation days in any calendar year
may
not be carried over to subsequent years.
(d) Expenses.
Employer shall reimburse Employee for all reasonable and necessary expenses
incurred by Employee at the request of and on behalf of Employer.
(e) Benefit
Plans.
Employee may participate in such medical, dental, disability, hospitalization,
life insurance and other benefit plans (such as pension and profit sharing
plans) as Employer maintains from time to time for the benefit of other senior
executives of Employer, on the terms and subject to the conditions set forth
in
such plans. Employer will contribute to the premiums for reasonable supplemental
life and disability insurance coverage.
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3.2 Effect
of Termination.
(a) Accrued
Benefits.
Except
as hereinafter provided, upon the termination of the employment of Employee
hereunder for any reason, Employee shall be entitled to all compensation
and
benefits earned or accrued under Section 3.1 as of the effective date of
termination (the “Termination Date”), but from and after the Termination Date,
no additional compensation or benefits shall be earned by Employee hereunder.
If
Employee’s termination of employment is for any reason other than by Employer
pursuant to Section 2(b)(ii) above, Employee shall be deemed to have earned
any
Bonus payable with respect to the calendar year in which the Termination
Date
occurs on a prorated basis (based on the number of days in such calendar
year
through and including the Termination Date divided by 365) based upon the
year
to date financials and performance of the Employer and assuming performance
at
the target level for any individual performance criteria. Any such prorated
Bonus shall be payable as soon as administratively practicable and no later
than
30 days following the Employee’s Termination Date.
(b) Severance.
If
Employee's employment hereunder is terminated by Employer pursuant to
Section 2(b)(iii) hereof, then, in addition to any other amount payable
hereunder, Employer shall continue to pay Employee his normal Salary pursuant
to
Section 3.1(a) for a six-month period (on the same basis as if Employee
continued to serve as an employee hereunder for such applicable period);
provided, however, that all such continued Salary payments shall be paid
to the
Employee not later than the 15th
day of
the third month following the end of the year in which the Termination Date
occurs, and any such continued Salary payment that would be payable after
such
date will be payable with the last payment that would occur prior to such
date.
(c) Stock
Options.
If
Employee's employment is terminated pursuant to Section 2(b)(i) hereof or
if Employee's employment is terminated by Employer pursuant to
Section 2(b)(iii), all options to purchase stock of the Employer or an
affiliate of the Employer granted to Employee shall immediately become fully
vested and exercisable upon such termination. In the case of a termination
pursuant to Section 2(b)(i) hereof, the options will expire in accordance
with their respective scheduled expiration dates. Except as provided in Section
3.3, in the case of a termination by Employer pursuant to Section 2(b)(iii)
hereof, the options will expire on the earliest of (i) the first anniversary
of
the Employee’s Termination Date, (ii) the later of the 15th
day of
the third month following the date at which, or December 31 of the calendar
year
in which, the options would otherwise have expired in accordance with their
scheduled post-employment exercise term, and (iii) the expiration of the
maximum term provided in the options. Upon the death of Employee, any options
that Employee would otherwise be entitled to exercise hereunder may be exercised
by his personal representatives or heirs, as applicable. Except as provided
in
Section 3.3, if Employee's employment is terminated by Employer pursuant
to
Section 2(b)(ii), all options not then exercisable shall be forfeited as
of the
Termination Date and those options which are exercisable as of the Employee’s
Termination Date shall be exercisable for the period provided in the options,
or
if longer, for a period of 60 days after the Termination Date, but in no
event
beyond the maximum option term provided in the options, and after such 60-day
period, all unexercised options will expire. To the extent necessary, this
provision shall be deemed an amendment of any option agreement between the
Employee and the Employer or an affiliate of the Employer.
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3.3 Effect
of Change in Control.
Notwithstanding Section 3.2 above, if there is a Change in Control (as defined
below) of the Employer and the Employee’s employment is terminated within 18
months following the date of the Change in Control, the following provisions
shall apply.
(a) If
Employee's employment hereunder is terminated by Employer pursuant to
Section 2(b)(iii) hereof or by Employee for “Good Reason” as defined below,
then, in addition to any other amount payable pursuant to Section 3.2(a)
but in
lieu of any amount payable under Section 3.2(b), the Employee shall be entitled
to receive the compensation and benefits set forth in subsections (i) and
(ii)
below:
(i) Severance.
Employee will continue to receive his Salary as then in effect (subject to
withholding of all applicable taxes) for a period of eighteen (18) months
from
his date of termination in the same manner as it was being paid as of the
date
of termination; provided, however, if Employee is a “specified employee” (as
defined in Section 409A of the Code and the regulations thereunder), no such
severance payment shall be made until the date that is six months and a day
following the Employee’s date of termination of employment. Any payments that
would otherwise be made during such six-month period shall be held by the
Company and paid in a lump sum on the day following the end of such six-month
period.
(ii) Stock
Options.
Notwithstanding any provision in any option agreement, all outstanding stock
options granted to Employee by Employer or an affiliate of Employer shall
become
fully vested on the date of Employee’s termination of employment and shall
remain exercisable as provided in the applicable option agreement. To the
extent
necessary, this provision shall be deemed an amendment of any option agreement
between the Employee and the Employer or an affiliate of the
Employer.
(b) If
Employee's employment hereunder is terminated by Employee pursuant to
Section 2(b)(iii) hereof other than for “Good Reason” as defined below,
then, in addition to any other amount payable pursuant to Section 3.2(a),
the
Employee shall be entitled to receive the compensation and benefits set forth
in
subsections (i) and (ii) of Subsection 3.3(a) above, provided, however, that
a
period of 12 months shall be substituted for 18 months in subsection
3.3(a)(i).
3.4 Definitions.
For purposes of this Agreement, the following terms shall have the meanings
set
forth below:
4
(a) “Change
in Control”
means
any of the following events:
(i) The
acquisition (other than from the Employer) by any person of beneficial ownership
of fifty percent (50%) or more of the combined voting power of the Employer's
then outstanding voting securities; provided, however, that for purposes
of this
Section, person shall not include any person who on the date hereof owns
25% or
more of the Employer’s outstanding securities, and a Change in Control shall not
be deemed to occur solely because fifty percent (50%) or more of the combined
voting power of the Employer's then outstanding securities is acquired by
(i) a
trustee or other fiduciary holding securities under one or more employee
benefit
plans maintained by the Employer or any of its subsidiaries, or (ii) any
corporation, which, immediately prior to such acquisition, is owned directly
or
indirectly by the shareholders of the Employer in the same proportion as
their
ownership of stock in the Employer immediately prior to such
acquisition.
(ii) Consummation
of (1) a merger or consolidation involving the Employer if the shareholders
of
the Employer, immediately before such merger or consolidation do not, as
a
result of such merger or consolidation, own, directly or indirectly, more
than
fifty percent (50%) of the combined voting power of the then outstanding
voting
securities of the corporation resulting from such merger or consolidation
in
substantially the same proportion as their ownership of the combined voting
power of the voting securities of the Employer outstanding immediately before
such merger or consolidation, or (2) a complete liquidation or dissolution
of
the Employer, or (3) an agreement for the sale or other disposition of all
or
substantially all of the assets of the Employer.
(iii) A
change
in the composition of the Board such that the individuals who, as of the
date of
this Agreement, constitute the Board (such Board shall be hereinafter referred
to as the "Incumbent Board") cease for any reason to constitute at least
a
majority of the Board; provided, however, for purposes of this Section that
any
individual who becomes a member of the Board subsequent to the date of this
Agreement whose election, or nomination for election by the Employer's
shareholders, was approved by a vote of at least a majority of those individuals
who are members of the Board and who were also members of the Incumbent Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but, provided, further,
that any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are used
in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, including
any
successor to such Rule), or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board, shall not be
so
considered as a member of the Incumbent Board.
(iv) The
occurrence of any other event or circumstance which is not covered by (i)
through (iii) above which the Board determines affects control of the Company
and adopts a resolution that such event or circumstance constitutes a Change
in
Control for the purposes of this Agreement.
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(b) A
"Good
Reason"
for
termination by Employee of Employee's employment shall mean the occurrence
(without the Employee's express written consent), within the eighteen (18)
month
period following the date of a Change in Control, of any one of the following
acts by the Employer, or failures by the Employer to act, unless, in the
case of
any act or failure to act described in paragraph (i) or (iv) below, such
act or
failure to act is corrected within 30 days after notice by the Employee to
the
Employer of the act or failure to act:
(i)
the
assignment to Employee of any duties inconsistent with Employee's title and
status set forth herein, or a substantial adverse alteration in the nature
or
status of Employee's responsibilities at the Employer from those in effect
immediately prior to the Change in Control;
(ii)
a
substantial reduction by the Employer in Employee's Base Salary;
(iii)
the
relocation of Employee's principal office to a place more than 50 miles from
Atlanta, Georgia;
(iv)
the
failure by the Employer to continue in effect any compensation or benefit
plan
or program in which Employee participates immediately prior to the Change
in
Control, which is material to Employee's total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Employer to continue
the
Employee's participation in such plan (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount
of
benefits provided and the level of Employee's participation relative to other
participants, as existed at the time of the Change in Control.
The
Employee's right to terminate the Employee's employment for Good Reason shall
not be affected by the Employee's incapacity due to physical or mental illness,
except for a total disability as defined in Section 2 above. The Employee's
continued employment shall not constitute consent to, or a waiver of rights
with
respect to, any act or failure to act constituting Good Reason
hereunder.
Section
4. Partial
Restraint on Post-termination Competition and Non-Solicitation.
4.1 Definitions.
For the
purposes of this Section 4, the following definitions shall apply:
(a) “Company
Activities” means the business of providing
fulfillment services, order processing, call center and customer care services,
technology solutions, e-commerce services including e-commerce fulfillment
and
e-commerce return services as well as other similar services that Innotrac
or
its subsidiaries is involved in at the date of this agreement.
6
(b) “Competitor”
means any business, individual, partnership, joint venture, association,
firm,
corporation or other entity, other than the Employer or its affiliates or
subsidiaries, engaged, wholly or partly, in Company Activities.
(c) “Competitive
Position” means (i) the direct or indirect ownership or control of all or any
portion of a Competitor; or (ii) any employment or independent contractor
arrangement with any Competitor whereby Employee will serve such Competitor
in
any managerial capacity.
(d) “Confidential
Information” means any confidential, proprietary business information or data
belonging to or pertaining to Employer that does not constitute a “Trade Secret”
(as hereinafter defined) and that is not generally known by or available
through
legal means to the public, including, but not limited to, information regarding
Employer’s customers or actively sought prospective customers, suppliers,
manufacturers and distributors gained by Employee as a result of his employment
with Employer.
(e) “Customer”
means actual customers or actively sought prospective customers of Employer
during the Term.
(f) “Noncompete
Period” or “Nonsolicitation Period” means the period beginning the date hereof
and ending on (i) the first anniversary of the termination of Employee's
employment with Employer if Employee is not entitled to any payment under
the
Retention Plan and (ii) the second anniversary of the termination of
Employee’s employment with Employer if Employee receives any payment under the
Retention Plan.
(g) “Territory”
means the area within a fifty (50) mile radius of any corporate office of
Employer or any of its subsidiaries, affiliates or divisions.
(h) “Trade
Secrets” means information or data of or about Employer, including but not
limited to technical or non-technical data, formulas, patterns, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
financial plans, products plans, or lists of actual or potential customers,
clients, distributees or licensees, information concerning Employer’s finances,
services, staff, contemplated acquisitions, marketing investigations and
surveys, that (i) derive economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from their disclosure or use;
and
(ii) are the subject of efforts that are reasonable under the circumstances
to
maintain their secrecy.
(i) “Work
Product” means any and all work product, property, data documentation or
information of any kind, prepared, conceived, discovered, developed or created
by Employee for Employer or its affiliates, or any of Employer’s or its
affiliates’ clients or customers.
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4.2 Trade
Name and Confidential Information.
(a) Employee
hereby agrees that (i) with regard to each item constituting all or any portion
of the Trade Secrets, at all times during the Term and all times during which
such item continues to constitute a Trade Secret under applicable law; and
(ii)
with regard to any Confidential Information, during the Term and the Noncompete
Period:
(i) Employee
shall not, directly or by assisting others, own, manage, operate, join, control
or participate in the ownership, management, operation or control of, or
be
connected in any manner with, any business conducted under any corporate
or
trade name of Employer or name similar thereto, without the prior written
consent of Employer;
(ii) Employee
shall hold in confidence all Trade Secrets and all Confidential Information
and
will not, either directly or indirectly, use, sell, lend, lease, distribute,
license, give, transfer, assign, show, disclose, disseminate, reproduce,
copy,
appropriate or otherwise communicate any Trade Secrets or Confidential
Information, without the prior written consent of Employer; and
(iii) Employee
shall immediately notify Employer of any unauthorized disclosure or use of
any
Trade Secrets or Confidential Information of which Employee becomes aware.
Employee shall assist Employer, to the extent necessary, in the procurement
or
any protection of Employer’s rights to or in any of the Trade Secrets or
Confidential Information.
4.3 Noncompetition.
(a) The
parties hereto acknowledge that Employee is conducting Company Activities
throughout the Territory. Employee acknowledges that to protect adequately
the
interest of Employer in the business of Employer it is essential that any
noncompete covenant with respect thereto cover all Company Activities and
the
entire Territory.
(b) Employee
hereby agrees that, during the Term and the Noncompete Period, Employee will
not, in the Territory, either directly or indirectly, alone or in conjunction
with any other party, accept, enter into or take any action in conjunction
with
or in furtherance of a Competitive Position. Employee shall notify Employer
promptly in writing if Employee receives an offer of a Competitive Position
during the Noncompete Term, and such notice shall describe all material terms
of
such offer.
Nothing
contained in this Section 4 shall prohibit Employee from acquiring not more
than
five percent (5%) of any company whose common stock is publicly traded on
a
national securities exchange or in the over-the-counter market.
8
4.4 Nonsolicitation
of Customers
(a) During
Employment Term.
Employee hereby agrees that Employee will not, during the Term, either directly
or indirectly, alone or in conjunction with any other party solicit, divert
or
appropriate or attempt to solicit, divert or appropriate, any Customer for
the
purpose of providing the Customer with services or products competitive with
those offered by Employer during the Term.
(b) During
Nonsolicitation Period.
Employee hereby agrees that Employee will not, during the Nonsolicitation
Period, either directly or indirectly, alone or in conjunction with any other
party solicit, divert or appropriate or attempt to solicit, divert or
appropriate, any Customer for the purpose of providing the Customer with
services or products competitive with those offered by Employer during the
Term;
provided, however, that the covenant in this clause shall limit Employee’s
conduct only with respect to those Customers with whom Employee had substantial
contact (through direct, managerial or supervisory interaction with the Customer
or the Customer’s account) during a period of time up to but no greater than two
(2) years prior to the last day of the Term.
4.5 Nonsolicitation
of Employees.
Employee hereby agrees that Employee will not, during the Term and
Nonsolicitation Periods, directly or indirectly (i) solicit or actively seek
to
hire any employees of the Employer, or
(ii)
solicit or encourage any personnel employed by the Employer to terminate
his or
her relationship with the Employer.
Section
5. Miscellaneous.
5.1 Severability.
The
covenants in this Agreement shall be construed as covenants independent of
one
another and as obligations distinct from any other contract between Employee
and
Employer. Any claim that Employee may have against Employer shall not constitute
a defense to enforcement by Employer of this Agreement.
5.2 Survival
of Obligations.
The
covenants in Section 4 of this Agreement shall survive termination of Employee's
employment, regardless of who causes the termination and under what
circumstances.
5.3 Notices.
Any
notice or other document to be given hereunder by any party hereto to any
other
party hereto shall be in writing and delivered in person or by courier, by
telecopy transmission or sent by any express mail service, postage or fees
prepaid at the following addresses:
9
Employer
Innotrac
Corporation
0000
Xxxxxxxxx Xxxxxxx
Xxxxxx,
XX 00000
Attention:
General Counsel
Employee
Xx.
Xxxxx
X. Xxxxxxx
0000
Xxxxxx Xxxxx Xxxx
Xxxxxxx,
XX 00000
or
at
such other address or number for a party as shall be specified by like notice.
Any notice which is delivered in the manner provided herein shall be deemed
to
have been duly given to the party to whom it is directed upon actual receipt
by
such party or its agent.
5.4 Section
409A.
To the
extent applicable, this Agreement shall at all times be operated in accordance
with the requirements of Section 409A of the Internal Revenue Code of 1986,
as
amended, including the regulations promulgated thereunder. The Employer shall
have authority to take action, or refrain from taking any action, with respect
to the payments and benefits under this Agreement that is reasonably necessary
to comply with Section 409A. Specifically, the Employer shall have the authority
to delay the commencement of payments to “specified employees” of the Employer
to the extent such delay is mandated by the provisions of Section
409A.
5.5 Binding
Effect.
This
Agreement inures to the benefit of, and is binding upon, Employer and their
respective successors and assigns, and Employee, together with Employee's
executor, administrator, personal representative, heirs, and
legatees.
5.6 Entire
Agreement.
This
Agreement is intended by the parties hereto to be the final expression of
their
agreement with respect to the subject matter hereof and is the complete and
exclusive statement of the terms thereof, notwithstanding any representations,
statements or agreements to the contrary heretofore made. This Agreement
may be
modified only by a written instrument signed by all of the parties hereto.
5.7 Governing
Law.
This
Agreement shall be deemed to be made in, and in all respects shall be
interpreted, construed, and governed by and in accordance with, the laws
of the
State of Georgia. No provision of this Agreement shall be construed against
or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority or by any board of arbitrators by reason
of
such party or its counsel having or being deemed to have structured or drafted
such provision.
5.8 Headings.
The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
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5.9 Specific
Performance.
Each
party hereto hereby agrees that any remedy at law for any breach of the
provisions contained in this Agreement shall be inadequate and that the other
parties hereto shall be entitled to specific performance and any other
appropriate injunctive relief in addition to any other remedy such party
might
have under this Agreement or at law or in equity.
5.10 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original but all of which together shall constitute one and
the
same instrument.
5.11 Public
Announcement.
Neither
party shall disclose that this Agreement has been executed until such time
as
both parties mutually agree to such disclosure.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
INNOTRAC
CORPORATION
By: /s/
Xxxxxx
Xxxxx
EMPLOYEE
/s/
Xxxxx X.
Xxxxxxx
Xxxxx
X.
Xxxxxxx
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