EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 4th day of February,
1997, is entered into by Banyan Systems Incorporated, a Massachusetts
corporation (the "Company"), and Xxxxxxx X. Xxxxx, residing at 00 Xxxxxxx
Xxxxxx, Xxxxxxx, XX 00000 (the "Employee").
The Company desires to employ the Employee, and the Employee desires to be
employed by the Company. In consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Term of Employment. The Company hereby agrees to employ the Employee,
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and the Employee hereby accepts employment with the Company, upon the terms set
forth in this Agreement, for an indefinite term commencing on employee's first
day of employment (the "Commencement Date"), subject to termination as set forth
below.
2. Title; Capacity.
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(a) The Employee shall serve as President and Chief Executive Officer
of the Company, reporting to the Board of Directors of the Company (the
"Board"). The Employee hereby accepts such employment and agrees to undertake
the full-time duties and responsibilities inherent in such positions, including
such duties and responsibilities as the Board shall from time to time reasonably
assign to him consistent with such positions. The Employee agrees to devote his
best efforts, attention and energies to the business and interests of the
Company. The Employee agrees to abide by the rules, regulations, instructions,
personnel practices and policies of the Company and any changes therein which
may be adopted from time to time by the Company and which are not inconsistent
with the terms of this Agreement.
(b) The Company shall use its best efforts to cause the Employee to be
nominated and elected as a member of the Board.
(c) The Company shall use its best efforts to have the Employee elected
as Chairman of the Board within twelve (12) months of the Commencement Date. The
timing of such election will relate to how quickly Employee meets performance
criteria agreed upon by the Employee and the Company for such election. Such
criteria will be based principally upon the establishment of a senior management
team by the Employee and the identification and recruitment of additional
members of the Board.
3. Compensation and Benefits.
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3.1 Salary. The Company shall pay the Employee, in monthly
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installments, a minimum base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year. Such base salary shall be subject to adjustment thereafter
as determined by the Board.
3.2 Bonuses.
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(a) The Employee shall be eligible to receive a minimum bonus
("target bonus") of $150,000 at the end of each year, based on the achievement
of performance objectives (based primarily on operating profit and cash flow
objectives or other mutually acceptable objectives) determined by the Board with
the objectives for the initial year being determined within sixty (60) days
after the Commencement Date, provided, however, that all of such bonuses shall
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be guaranteed during the first (1st) year of the Agreement and fifty percent
(50%) of such bonus shall be guaranteed during the second (2nd) year of the
Agreement. Such annual bonus for the first (1st) and second (2nd) year of this
Agreement shall be paid in quarterly installments of $18,750 in March, June,
September and December of 1997 and 1998, and the balance for each year shall be
paid at the conclusion of the audit for such year (typically sixty (60) days
after the end of the year). Bonuses are not guaranteed after years one (1) and
two (2).
(b) The Employee shall be eligible to receive a minimum stretch
bonus ("stretch bonus") of $150,000 at the end of each year based on the
achievement of performance objectives. During the first two (2) years of this
Agreement the bonus payment shall be based on (1) five percent (5%) of operating
profit and (2) five percent (5%) of operating cash flow that exceeds 1997 and
1998 operating plan targets; provided that no such stretch bonus will be paid
for a year unless the Company at least meets both its operating profit and
operating cash flow plan targets for such years. After the first two (2) years
of this Agreement, the objectives for the stretch bonus shall be determined by
the Board. Such stretch bonuses shall be paid at the conclusion of the audit for
such year (typically sixty (60) days after the end of the year). Stretch bonuses
are not guaranteed.
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3.3 Options
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(a) On the date hereof, the Company shall grant to the Employee a
non-qualified stock option to purchase one million (1,000,000) shares of Common
Stock of the Company at an exercise price equal to the last reported sales price
of the Company's Common Stock on the Nasdaq National Market on the effective
date of this Agreement (the "Option"). The Option shall vest and become
exercisable, at the rate of twenty thousand eight hundred thirty-three (20,833)
shares per month commencing at the end of the first month of employment until
terminated consistent with the terms of this Agreement. The Option shall be
evidenced by a Stock Option Agreement substantially in the form appended hereto
as Exhibit A.
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(b) Upon the occurrence of a Change in Control (as defined in
Section 8 below), the Option shall become vested and exercisable as to fifty
percent (50%) of the number of shares covered thereby that would not otherwise
then be vested and exercisable (in reverse order of vesting).
3.4 Stock.
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(a) Stock. On the date hereof, the Company shall issue and
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sell to the Employee two hundred thousand (200,000) shares of Common Stock of
the Company (the "Restricted Shares"), at a price of $.01 per share, with no
restrictions on employee's right to sell or otherwise transfer other than
restrictions under the Securities Act of 1933.
(b) Loan. If the Employee is unable, due to restrictions
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imposed by the Securities Act of 1933 ("SEC Restrictions"), or unwilling to sell
a sufficient number of Restricted Shares to satisfy his federal and state tax
obligations with respect to the issuance to him of the Restricted Shares
(including his obligation to pay to the Company any withholding taxes upon such
issuance), the Company shall lend to the Employee such amounts as are necessary
to satisfy such obligations. Such loans shall bear no interest until the SEC
Restrictions, if such restrictions exist, lapse and shall bear interest at the
prime rate less one percent (1%) after such SEC Restrictions lapse or if no such
restrictions exist but Employee is unwilling to sell. Such loans shall be due
and payable one (1) year after the Commencement Date, provided that the after-
tax proceeds of any earlier sale of the Restricted Shares shall be used to
prepay such loans.
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3.5 Fringe Benefits. The Employee shall be entitled to participate
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in all medical (full family coverage), insurance and similar benefit programs
the Company establishes and makes available to its employees to the extent that
Employee's position, tenure, salary, age, health and other qualifications make
him eligible to participate. The Employee shall be entitled to four (4) weeks
paid vacation per year. The Company shall provide health insurance for employee
and his family without exclusions for preexisting conditions. However, if the
health insurance provider excludes preexisting conditions, Company will also pay
employee's COBRA health insurance continuation payments for twelve (12) months.
3.6 Reimbursement of Expenses. The Company shall reimburse the
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Employee for all reasonable travel, entertainment and other expenses incurred or
paid by the Employee in connection with, or related to, the performance of his
duties, responsibilities or services under this Agreement, in accordance with
the Company's policies, upon presentation by the Employee of documentation,
expense statements, vouchers and/or such other supporting information as the
Company may request.
4. Disability
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In the event that Employee becomes physically or mentally disabled or
incapacitated such that he is unable to perform the services required of him
under this Agreement, then six (6) months after the onset of said physical or
mental disability, this Agreement will terminate; provided, however, that during
this six (6) month period all compensation, benefits and other terms of this
Agreement shall continue; however, such continued payments by the Company shall
be integrated with any disability, workers' compensation, or other insurance
payments received, such that the total amount does not exceed the compensation
as provided by this Agreement. For purposes of this Agreement, physical and
mental disability does not include any disability arising from alcoholism or
drug abuse.
5. Termination of Employment.
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(a) Termination Without Cause by the Company. The Company may
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terminate this Agreement at any time and without cause by giving six (6) months
written notice to Employee.
i. In the event the Company terminates this Agreement pursuant to
this section on or before the second (2nd) anniversary of the Commencement Date,
the Company shall pay to the Employee (1) his base salary through the last day
of his actual employment with the Company; (2) the amount by which Nine Hundred
Twenty Five Thousand Dollars ($925,000) exceeds the aggregate
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amount of salary and bonuses previously paid to him under this Agreement, and
(3) Five Hundred Thousand Dollars ($500,000).
ii. In the event the Company terminates this Agreement pursuant to
this section after the second (2nd) anniversary of the Commencement Date, the
Company will pay to the Employee (1) his base salary through the last day of his
actual employment with the Company; and (2) an amount equal to the higher of
Five Hundred Thousand Dollars ($500,000) or the sum of the base salary and
target bonus that he would have earned in the year of termination if all
performance criteria for his annual bonus target had been achieved.
iii. Fifty percent (50%) of the total amount due for a termination
under this section shall be paid within sixty (60) days after the effective date
of termination and the balance shall be paid in twelve (12) equal monthly
installments (the "Severance Period"). In addition, in the event of termination
under this section, the Company shall continue to provide to the Employee the
benefits set forth in Section 3.5 and option vesting continuation for a period
of one (1) year after termination.
(b) Termination for Cause by the Company. The Company may terminate
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this Agreement for cause upon the occurrence of any of the following:
1. An intentional act of fraud, embezzlements or theft;
2. An act or omission constituting gross negligence or gross
misconduct which is materially injurious to the Company;
3. Employee's death, disability or incapacity pursuant to
Section 4 above.
If the Company terminates Employee's employment for cause pursuant to
this section, the Company shall pay the employee the compensation and benefits
otherwise payable to him under Sections 3.1 and 3.2 and option vesting
continuation under Section 3.3 through the last day of his actual employment by
the Company.
(c) Termination at Employee's Option Without Good Reason. Employee may
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terminate this Agreement at any time without good reason by giving sixty (60)
days written notice to the Company. In such event, employee shall be entitled
to the compensation and benefits otherwise payable to him under Sections 3.1 and
3.2 and his options vesting continuation under Section 3.3 through the last day
of
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his actual employment with the Company. On or after receiving such notice
from Employee, the Company may pay Employee's compensation benefits and option
vesting continuation through the effective date of his resignation and
immediately terminate employee.
(d) Termination For Good Reason By Employee. Employee may terminate
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this Agreement for good reason by giving notice to the Company at any time
within sixty (60) days after the occurrence of the following events with the
exception that notice may be given within one (1) year of a Change in Control as
defined in Section 8:
1. Material breach of this Agreement by the Company, which is not
cured within 30 days after written notice thereof;
2. Failure of Employee to be nominated/elected as a member of the
board at the first board meeting after Employee's Commencement
Date;
3. Failure of Employee to be nominated and elected as Chairman of
the Board within twelve (12) months of Employee's Commencement
Date;
4. Any requirement by the Company or of any person in control of
the Company that the location at which Employee performs his
principal duties for the Company be changed to a new location
that is outside a radius of thirty (30) miles from the location
at which the Employee performs his principal duties for the
Company;
5. Without the Employee's written consent, the occurrence after a
Change in Control of the Company as defined in Section 8 below
of any of the following circumstances:
(i) Any material diminution in the Employee's position, duties,
responsibilities, power, title or office as in effective
immediately prior to a change in control;
(ii) Any reduction in the Employee's annual base salary or
target bonuses as in effect on the date hereof or as the same
may be increased from time to time;
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If Employee terminates his employment pursuant to this section (d), he
will be entitled to the same compensation, benefits and vesting continuation he
would receive upon termination without cause by the Company under Section 5(a)
above. If the Employee terminates his employment for good reason (as defined
above) within one (1) year of a Change of Control as defined in Section 8 below,
Employee will become immediately and fully vested in all Options granted under
Section 3.3.
6. Non-Compete
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(a) During any period of employment, any Severance Period or for one
(1) year after either Employee terminates his employment without good reason
pursuant to Section 5(c) above or the Company terminates his employment for
cause pursuant to Section 5(b) above, Employee will not directly:
1. As an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of the
total outstanding stock of a publicly held company), engage in developing,
producing, marketing or selling products or services directly competitive with
those developed or being developed, produced, marketed or sold by the Company
while the Employee was employed by the Company; or
2. Recruit, solicit or induce, or attempt to induce, any employee
or employees of the Company to terminate their employment with, or otherwise
cease their relationship with, the Company.
(b) If any restriction set forth in this Section 6 is found by any
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Employee to be reasonable for such purpose. The Employee agrees that any breach
of this Section 5 will cause the Company substantial and irrevocable damage and
therefore, in the event of any such breach, in addition to such other remedies
which may be available, the Company shall have the right to seek specific
performance and injunctive relief.
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7. Proprietary Information and Developments.
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7.1 Proprietary Information.
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(a) Employee agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, and customer and supplier
lists. Employee will not disclose any Proprietary Information to others outside
the Company or use the same for any unauthorized purposes without written
approval by an officer of the Company, either during or after his employment,
unless and until such Proprietary Information has become public knowledge
without fault by the Employee.
(b) Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of his duties for the
Company.
(c) Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
7.2 Developments.
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(a) Employee will make full and prompt disclosure to the Company
of all inventions, improvements, discoveries, methods, developments, software,
and works of authorship, whether patentable or not, which are created, made,
conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
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(b) Employee agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company) all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development by the Company or which are made
and conceived by the Employee not during normal working hours, not on the
Company's premises or not using the Company's tools, devices, equipment or
Proprietary Information.
(c) Employee agrees to cooperate fully with the Company, both
during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights and patents (both in the
United States and foreign countries) relating to Developments. Employee shall
sign all papers, including, without limitation, copyright applications, patent
applications, declarations, oaths, formal assignments, assignment of priority
rights, and powers of attorney, which the Company may deem necessary or
desirable in order to protect its rights and interests in any Development.
7.3 Other Agreements. Employee represents that his performance of the
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terms of this Agreement does not and will not breach any agreement Employee has
with any current or former employer or entity.
8. Change in Control.
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(a) A "Change in Control" shall occur or be deemed to have occurred
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only if any of the following events occur:
1. Any "person,"as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock in the Company) is or becomes the
"beneficial owner" (as defined in Rule 133d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing a majority or more of
the combined voting power of the Company's then outstanding securities;
2. Individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's
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stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, a such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
3. The stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person (as hereinabove defined), other than a person holding more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding securities immediately prior to such recapitalization, acquires more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding securities; or (c) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
9. Arbitration. The parties agree that to the fullest extent permitted by
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law, any and all controversies between them, arising out of this Agreement,
Employee's employment or termination thereof, including whether any termination
is with or without cause and excluding only violations arising under Sections 6
and 7 above, will be submitted for resolution to arbitration, in accordance with
the attached Arbitration Agreement, which is incorporated herein by reference.
This means that all parties agree that arbitration will be their exclusive forum
for resolving disputes between them, involving this Agreement or Employee's
employment with the Company or termination thereof. Thus, all parties expressly
waive their entitlement, if any, to have such controversies between them decided
by a court or jury. The prevailing party in any dispute arising hereunder shall
have their attorneys' fees and costs paid by the nonprevailing party.
10. Notices. All notices required or permitted under this Agreement shall
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be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to
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the other party at the address shown above, or at such other address or
addresses as either party shall designate to the other in accordance with this
Section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties on the subjects covered herein and supersedes all prior
agreements and understandings, whether written or oral, relating to the subject
matter of this Agreement.
12. Amendment. This Agreement may be amended or modified only by a
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written instrument executed by both the Company and the Employee.
13. Governing Law. This Agreement shall be construed, interpreted and
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enforced in accordance with the laws of the Commonwealth of Massachusetts.
14. Successors and Assigns. This Agreement shall be binding upon and
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inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Employee are personal and shall not be assigned by him.
15. Miscellaneous.
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15.1 No delay or omission by the Company or Employee in exercising any
right under this Agreement shall operate as a waiver of that or any other right.
A waiver or consent given by the Company or Employee on any one occasion shall
be effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
15.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
15.3 In case any provision of this Agreement shall be invalid, illegal
or otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
16. Legal Expenses. The Company will reimburse the Employee for $3,000 of
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his legal expenses in connection with this Agreement.
17. Effective Date. The effective date of this Agreement shall be the
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date it is signed by all parties.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
BANYAN SYSTEMS INCORPORATED
By: /s/ Xxxx Xxxxxx
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Title: Chairman
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EMPLOYEE
/s/ Xxxxxxx X. Xxxxx 2/4/97
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Xxxxxxx X. Xxxxx
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ARBITRATION AGREEMENT
This Agreement is between Banyan Systems Incorporated (hereinafter "the
Company") and Xxxxxxx X. Xxxxx (the "Employee"). In consideration for the
promises and undertakings set forth below, the Company and Employee agree to the
following terms:
1. Agreement to Arbitrate All Disputes: Private arbitration is the
referral of a dispute to an impartial third party instead of a court or jury for
a final and binding decision. Any dispute arising out of your employment or
other relations with the Company, including termination of employment, including
statutory claims, will be submitted to binding arbitration pursuant to the
Federal Arbitration Act to the fullest extent permitted by law. The Company and
you each expressly waive entitlement, if any, to have any such controversy heard
before a court or a jury.
2. Time Limits For Initiating Arbitration: Either party may, within one
(1) year of the occurrence of the event giving rise to the dispute, initiate
arbitration by notifying the other in writing. Failure to initiate arbitration
within such one (1) year period, or such extended period as may be mutually
agreed upon in writing, shall constitute a waiver of any and all claims which
shall be forever barred.
3. Selection Of The Arbitrator: Both parties will attempt to agree upon a
mutually acceptable arbitrator. If unable to agree upon an arbitrator then an
arbitrator shall be selected in accordance with the then current Employment
Dispute Resolution rules of the American Arbitration Association.
4. Arbitrator's Authority: The hearing will be conducted according to
American Arbitration Association Employment Dispute Resolution procedures. The
arbitrator shall base the decision on the facts presented at the hearing and in
accordance with governing law, including statutory and judicial authority. The
arbitrator must follow the policies of the Company in effect at the time of the
event giving rise to the dispute. The arbitrator shall not have authority to
modify or revoke this Agreement or any Company policy. The arbitrator's
decision shall be final and binding upon both parties. The prevailing party
shall have all their costs and attorney's fees paid by the nonprevailing party.
The cost of the arbitrator will be paid by the nonprevailing party.
5. Remedies: Any remedies awarded shall be awarded for the purpose of
making the injured party whole and shall be limited to actual and foreseeable
damages proximately caused by the event giving rise to liability and shall,
where applicable, be limited by the terms of this agreement. No punitive
damages or damages in the nature of a penalty shall be awarded unless the
arbitrator determines that there was a violation of a statute or common law
principal which expressly provides for such damages.
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6. LOCATION: Any proceeding under this Agreement shall take place in the
greater Boston Area.
7. GOVERNING LAW: This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts, U.S.A.
8. VOLUNTARY AGREEMENT: The parties acknowledge that they enter into this
Agreement voluntarily, free from any coercion.
9. SAVINGS CLAUSE: If any of the provisions of this Agreement are
determined to be invalid by a court or government agency of competent
jurisdiction, it is agreed that such determination shall not affect the
enforceability of the other provisions of this Agreement.
10. ENTIRE AGREEMENT: This Agreement supersedes any and all other
agreements, whether written, oral, express, or implied, between the parties and
is the entire agreement of the parties concerning the subjects covered herein.
BANYAN SYSTEMS INCORPORATED
Dated: 2/4/97 By: /s/ Xxxx Xxxxxx
____________________ ____________________________
Dated: 2/4/97 /s/ Xxxxxxx X. Xxxxx
____________________ ____________________________
Xxxxxxx X. Xxxxx
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