EMPLOYMENT AGREEMENT
EXHIBIT
99.7
AGREEMENT
dated as
of the 11th
day of
January, 2006, by and among Computer Networks & Software, Inc., a Virginia
corporation with its principal office c/o c/x Xxxxxxxxxx Holdings I, Inc.,
00000
Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000 (the
“Company”), and Xxxxx Xxxx, residing at 0000 Xxxxxx Xxxx Xxxxx, Xxx Xxxx,
Xxxxxxxx 00000 (“Executive”).
W
I T
N E S S E T H:
WHEREAS,
the
Company has engaged Executive as its chief technology officer and desires to
continue to obtain the benefits of Executive’s knowledge, skill and ability in
connection and to continue to employ Executive on the terms and conditions
hereinafter set forth; and
WHEREAS,
pursuant to an agreement and plan of reorganization (the “Merger Agreement”)
dated January , 2006, by and among Xxxxxxxxxx Holdings I, Inc. (“Parent”), CNS
Acquisition Corp., a Virginia corporation, the Company, Executive and the other
stockholders of the Company, the Company became the wholly-owned subsidiary
of
Parent on or about the date of this Agreement; and
WHEREAS,
the
Company desires to engage Executive to serve at its chief technology officer
on
and subject to the terms of this Agreement;
NOW,
THEREFORE,
in
consideration of the mutual promises set forth in this Agreement, the parties
agree as follows:
1. Employment
and Duties.
(a) Subject
to the terms and conditions hereinafter set forth, the Company hereby employs
Executive as chief technology officer, during the Term, as hereinafter defined.
As chief technology officer of the Company, Executive shall have the duties
and
responsibilities associated with the chief technology officer of a corporation.
Executive shall report to the Company’s chief executive officer or such other
officer as may be designated by the Company’s board of directors (the “Board”).
Executive shall also perform such other duties and responsibilities as may
be
determined by the Board, as long as such duties and responsibilities are
consistent with those of the Company’s chief technology officer.
(b) During
the Term, Executive shall serve, if elected, as a member of the Board or the
board of directors of the parent or subsidiary or as an officer of a subsidiary
as long as such services are reasonably related to his duties set forth in
Section 1(a) of this Agreement. Additionally, with Executive’s consent,
Executive shall serve as in such executive capacity or capacities with respect
to any affiliate (other than the parent or a subsidiary) of the Company to
which
he may be elected or appointed, provided that such duties are consistent with
his duties set forth in said Section 1(a). Executive shall receive no additional
compensation for services rendered pursuant to this Section 1(b). An affiliate
of the Company shall mean any Person who controls, is controlled by or is under
common control with the Company or the Company, as the case may be. The term
“Person” shall mean any individual, corporation, partnership, limited liability
company, trust, government or government agency or any other
entity.
(c) The
“Term” shall mean the period commencing on the date of this Agreement and ending
three (3) years from the date of this Agreement, unless terminated earlier
pursuant to Section 1(d) or Section 5 of this Agreement.
(d) (i) Executive
shall have the right on one occasion, in his sole discretion, on thirty (30)
days’ written notice to the Company, to either:
(A) Terminate
this Agreement and his employment hereunder.
(B) Take
an
unpaid leave of absence for up to six (6) months, at the conclusion of which
Executive shall, at his election on notice to the Company, either (x) terminate
this Agreement and his employment hereunder or (y) resume his employment on
a
full time basis as provided in this Agreement; provided, however, that if
Executive fails to make any election pursuant to this Section 1(d)(i)(B), he
shall be deemed to have terminated this Agreement and his employment hereunder
as of the last day of the period of unpaid leave.
(ii) If
Executive
takes an unpaid leave of absence, he shall:
(A) At
the
time Executive gives notice pursuant to Section 1(d)(i)(B), Executive shall
state in the notice the period of his unpaid leave.
(B) Not
be
entitled to any compensation or benefits during the period of unpaid leave;
provided, however, that nothing in this Section 1(d)(ii)(B) shall be construed
as a waiver of any rights he has pursuant to the Consolidated
Omnibus Budget Reconciliation Act, known as COBRA.
2. Executive’s
Performance.
Executive hereby accepts the employment contemplated by this Agreement. During
the Term, Executive shall perform his duties diligently, in good faith and
in a
manner consistent with the best interests of the Company, and shall devote
substantially all of his business time to the performance of his duties under
this Agreement.
3. Compensation
and Other Benefits.
(a) For
his
services during the Term, the Company shall pay Executive a salary (“Salary”) at
the annual rate of two hundred sixty five thousand dollars ($265,000). All
Salary payments shall be payable in such installments as the Company regularly
pays its executive officers, but not less frequently than
semi-monthly.
(b) In
addition to Salary, Executive shall receive the following benefits during the
Term:
(i) Such
insurance, including such medical, health and disability insurance, if any,
as
the Company provides its executive officers, which benefits will not be less
than the insurance benefits presently provided by the Company to its executive
officers.
(ii) Four
weeks
vacation in each calendar year, which may be taken in accordance with Company
policy.
(iii) Eligibility
to participate in such pension, profit-sharing, retirement and other benefits,
if any, that are available to executive officers of the Company.
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(iv) The
Company
shall provide Executive with a monthly automobile allowance of four hundred
dollars ($400.00) in accordance with Company policy.
(c) During
the Term, Executive shall be eligible for such discretionary bonuses and stock
options or other equity-based incentives as shall be determined by Parent’s
compensation committee; provided, however, that after a public market develops
for Parent’s common stock, Parent shall grant Executive a stock option to
purchase 50,000 shares of its common stock at an exercise price equal to the
fair market value on the date of grant.
(d) The
Company shall pay Executive a one-time bonus in the amount of twenty thousand
dollars ($20,000) not later than January 15, 2007 provided that Executive is
a
full-time executive employee of the Company on such date.
4. Reimbursement
of Expenses.
The
Company shall reimburse Executive, upon presentation of proper expense
statements, for all authorized, ordinary and necessary out-of-pocket expenses
reasonably incurred by Executive during the Term in connection with the
performance of his services pursuant to this Agreement in accordance with the
Company’s expense reimbursement policy.
5. Termination
of Employment.
(a) This
Agreement and Executive’s employment shall terminate immediately upon his
death.
(b) This
Agreement and Executive’s employment pursuant to this Agreement may be
terminated by the Executive or the Company on not less than 30 days’ written
notice in the event of Executive’s Disability. The term “Disability” shall mean
any illness, disability or incapacity of the Executive which prevents him from
substantially performing his regular duties for a period of two consecutive
months or three months, even though not consecutive, in any twelve month
period.
(c) The
Company may terminate this Agreement and Executive’s employment pursuant to this
Agreement immediately for Cause, in which event no further compensation shall
be
payable to Executive subsequent to the date of such termination except for
accrued compensation earned prior to the date of termination. The date of
termination shall be the date of the notice from the Company stating that
Executive’s employment is terminated for Cause. The term “Cause” shall
mean:
(i) repeated
failure of Executive to perform material instructions from the Board, provided
that such instructions are reasonable and consistent with Executive’s duties as
set forth in Section 1 of this Agreement, or any other failure or refusal by
Executive to perform his duties required by said Section 1; provided, however,
that Executive shall have received notice from the Board specifying the nature
of such failure in reasonable detail and Executive shall have failed to cure
the
failure within five business days after receipt of such notice, provided,
however, that if such failure is capable of being cured but cannot, with due
diligence, be cured within such five business day period, and if Executive
has
commenced efforts to cure such failure within such five business day period
and
proceeds diligently to cure such failure, then such failure will not constitute
“Cause” if such failure is cured as soon as practical under the circumstances,
but not later than twenty (20) days after such notice from the
Board.
(ii) a
breach of
Sections 6, 7 or 8 of this Agreement;
(iii) a
breach of
trust whereby Executive obtains personal gain or benefit at the expense of
or to
the detriment of the Company or any of its affiliates;
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(iv) any
fraudulent or dishonest conduct by Executive or any other wrongful or tortious
conduct by Executive which damages the Company, Parent or any of their
affiliates or their property, business or reputation.
(v) a
conviction
of, or guilty plea or plea of nolo contendere by, of Executive of (x) any felony
or (y) any other crime involving fraud, theft, embezzlement or use or possession
of illegal substances; or
(vi) the
admission
by Executive of any matters set forth in Section 5(c)(v) of this
Agreement.
(d) Executive’s
resignation prior to the expiration of the Term shall be treated in the same
manner as a termination for Cause, except that if Executive resigns for Good
Reason, as hereinafter defined, then Executive’s resignation shall be treated as
a termination by the Company pursuant to Section 5(e) of this Agreement. A
resignation shall be for Good Reason if, without Executive’s consent, either:
(i) his duties, responsibilities and title have been changed to duties and
responsibilities other than those set forth in Section 1(a) of this Agreement,
or (ii) the location of Executive’s principal office is moved from the Eastern
Virginia, Maryland and Washington, DC area.
(e) In
the
event that the Company terminate this Agreement and Executive’s employment other
than for reasons set forth in Sections 5(a), 5(b) or 5(c) or in the event of
Executive’s resignation for Good Reason:
(i) The
Company
shall pay to Executive within 30 days after the date of his termination an
amount equal to his Salary for the balance, if any, of the Term, including
the
one-time bonus referred to in Section 3(d) of this Agreement; and
(ii) The
Company
shall for the balance of the Term pay, on behalf of Executive, the premiums
payable by Executive under COBRA for Executive to continue to participate in
the
Company’s group health plan; and
(iii) The
restrictions set forth in Section 7(a) of this Agreement shall terminate
immediately and automatically.
6. Trade
Secrets and Proprietary Information.
(a) Executive
recognizes and acknowledges that the Company, through the expenditure of
considerable time and money, has developed and will continue to develop in
the
future confidential information. “Confidential information” shall mean all
information of a proprietary or confidential nature relating to Covered Persons,
including, but not limited to, such Covered Person’s trade secrets or
proprietary information, confidential know-how, and marketing, services,
products, business, research and development activities, inventions and
discoveries, whether or not patentable, and information concerning such Covered
Person’s services, business, customer or client lists, proposed services,
marketing strategy, pricing policies and the requirements of its clients and
relationships with its lenders, suppliers, licensors, licensees and others
with
which a Covered Person has a business relationship, financial or other data,
technical data or any other confidential or proprietary information possessed,
owned or used by the Company, the disclosure of which could or does have a
material adverse effect on the Company, its businesses, any business in which
it
proposes to engage. Executive agrees that he will not at any time use or
disclose to any Person any confidential information relating to CNS, Parent
or
any affiliate of Parent or any client of CNS or Parent which provided
confidential information to Executive; provided, however, that nothing in this
Section 6(a) shall be construed to prohibit Executive from using or disclosing
such information if he can demonstrate that such information (i) became public
knowledge other than by or as a result of disclosure by a Person not having
a
right to make such disclosure or (ii) was disclosure that was authorized by
the
Company. The term “Covered Person” shall include the Company, its parent and
subsidiaries and any other Person who provides information to the Company
pursuant to a secrecy or non-disclosure agreement.
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(b) In
the
event that any confidential information is required to be produced by Executive
pursuant to legal process (including judicial process or governmental
administrative subpoena), Executive shall give the Company notice of such legal
process within a reasonable time, but not later than ten business days prior
to
the date such disclosure is to be made, unless Executive has received less
notice, in which event Executive shall immediately notify the Company. The
Company shall have the right to object to any such disclosure, and if the
Company objects (at the Company’s cost and expense) in a timely manner so that
Executive is not subject to penalties for failure to make such disclosure,
Executive shall not make any disclosure until there has been a court
determination on the Company’s objections. If disclosure is required by a court
order, final beyond right of review, or if the Company does not object to the
disclosure, Executive shall make disclosure only to the extent that disclosure
is required by the court order, and Executive will
exercise reasonable efforts at the Company’s expense, to obtain reliable
assurance that confidential treatment will be accorded the Confidential
Information.
(c) Executive
shall, upon expiration or termination of the Term, or earlier at the request
of
the Company, turn over to the Company or destroy all documents, papers, computer
disks or other material in Executive’s possession or under Executive’s control
which may contain or be derived from confidential information. To the extent
that any confidential information is on Executive’s hard drive or other storage
media, he shall, upon the request of the Company, cause either such information
to be erased from his computer disks and all other storage media or otherwise
take reasonable steps to maintain the confidential nature of the
material.
(d) Executive
further realizes that any trading in Parent’s common stock or other securities
or aiding or assisting others in trading in Parent’s common stock or other
securities, including disclosing any non-public information concerning Parent
or
its affiliates to a Person who uses such information in trading in the Company’s
common stock or other securities, may constitute a violation of federal and
state securities laws. Executive will not engage in any transactions involving
the Company’s common stock or other securities while in the possession of
material non-public information in a manner that would constitute a violation
of
federal and state securities laws.
(e) For
the
purposes of Sections 6, 7, 8 and 9 of this Agreement, the term “Company”
shall include the Company, Parent, their subsidiaries and
affiliates.
7. Covenant
Not To Solicit or Compete.
(a) During
the period from the date of this Agreement until one year following the date
on
which Executive’s employment is terminated, Executive will not, directly or
indirectly:
(i) persuade
or
attempt to persuade any Person which is or was a customer, client or supplier
of
the Company to cease doing business with the Company, or to
reduce
the amount of business it does with the Company (the terms “customer” and
“client” as used in this Section 7 to include any potential customer or
client to whom the Company submitted bids or proposals, or with whom the Company
conducted negotiations, during the term of Executive’s employment or consulting
relationship hereunder or during the twelve (12) months preceding the
termination of his employment or consulting relationship, as the case may
be);
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(ii) solicit
for
himself or any other Person other than the Company the business of any Person
which is a customer or client of the Company, or was a customer or client of
the
Company within one (1) year prior to the termination of his employment or
consulting relationship;
(iii) persuade
or
attempt to persuade any employee of the Company, or any individual who was
an
employee of the Company during the one (1) year period prior to the lawful
and
proper termination of this Agreement, to leave the Company’s employ, or to
become employed by any Person in any business in the United States whether
as an
officer, director, consultant, partner, guarantor, principal, agent, employee,
advisor or in any manner, which directly competes with the business of the
Company as it is engaged in at the time of the termination of this Agreement,
unless, at the time of such termination or thereafter during the period that
the
Executive is bound by the provisions of this Section 7, the Company ceases
to be
engaged in such activity, provided, however, that nothing in this Section 7
shall be construed to prohibit the Executive from owning an interest of not
more
than five (5%) percent of any public company engaged in such
activities.
(b) Executive
will not, during or after the Term, make any disparaging statements concerning
the Company, its business, officers, directors and employees that could injure,
impair, damage or otherwise affect the relationship between the Company, on
the
one hand, and any of the Company’s employees, suppliers, customers, clients or
any other Person with which the Company has or may conduct business or otherwise
have a business relationship of any kind and description; provided, however,
that this sentence shall not be construed to prohibit either from giving factual
information required to be given pursuant to legal process, subject to the
provisions of Section 6(b) of this Agreement. The Company will not make any
disparaging statements concerning Executive. This Section 7(b) shall not be
construed to prohibit the either party from giving factual information
concerning the other party in response to inquiries that such party believes
are
bona fide.
(c) The
Executive acknowledges that the restrictive covenants (the “Restrictive
Covenants”) contained in Sections 6 and 7 of this Agreement are a condition
of his employment and are reasonable and valid in geographical and temporal
scope and in all other respects. If any court determines that any of the
Restrictive Covenants, or any part of any of the Restrictive Covenants, is
invalid or unenforceable, the remainder of the Restrictive Covenants and parts
thereof shall not thereby be affected and shall remain in full force and effect,
without regard to the invalid portion. If any court determines that any of
the
Restrictive Covenants, or any part thereof, is invalid or unenforceable because
of the geographic or temporal scope of such provision, such court shall have
the
power to reduce the geographic or temporal scope of such provision, as the
case
may be, and, in its reduced form, such provision shall then be
enforceable.
(d) Nothing
in this Section 7 shall be construed to prohibit Executive from owning a
passive, non-management interest of less than 5% in any public company that
is
engaged in activities prohibited by this Section 7.
8. Inventions
and Discoveries.
Executive agrees promptly to disclose in writing to the Company any invention,
design, system, process, development or other discovery or intellectual property
(collectively, “inventions and discoveries”) conceived, created or made by him
during the Term, whether created or developed by himself or with others, whether
during or after working hours, in any business in which the Company is then
engaged or which otherwise relates to any product or service dealt in by the
Company and such inventions and discoveries shall be the Company’s sole
property, regardless of whether such inventions and discoveries are otherwise
treated as work performed for hire and regardless of whether such inventions
and
discoveries are or can be patented, registered or copyrighted. Upon the
Company’s request, and at the Company’s cost and expense, Executive shall
execute and assign to the Company all applications for copyrights, trademarks
and letters patent of the United States and such foreign countries as the
Company may designate, and Executive shall execute and deliver to the Company
such other instruments as the Company deems necessary to vest in the Company
the
sole ownership of all rights, title and interest in and to such inventions
and
discoveries, as well as all copyrights and/or patents. Executive shall also
give
the Company all assistance it may reasonably require, including the giving
of
testimony in any suit, action, investigation or other proceeding in connection
with the foregoing. If Executive is required to give such testimony subsequent
to the Term, the Company shall pay his reasonable out-of-pocket expenses
incurred in connection with such testimony.
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9. Injunctive
Relief.
Executive agrees that his violation or threatened violation of any of the
provisions of Sections 6, 7 or 8 of this Agreement shall cause immediate
and irreparable harm to the Company. In the event of any breach or threatened
breach of any of said provisions, Executive consents to the entry of preliminary
and permanent injunctions by a court of competent jurisdiction prohibiting
Executive from any violation or threatened violation of such provisions and
compelling Executive to comply with such provisions. This Section 9 shall
not affect or limit, and the injunctive relief provided in this Section 9
shall be in addition to, any other remedies available to the Company at law
or
in equity or in arbitration for any such violation by Executive. Subject to
Section 7(c) of this Agreement, the provisions of Sections 6, 7, 8 and 9 of
this
Agreement shall survive any termination of this Agreement and Executive’s
employment and consulting relationship pursuant to this Agreement.
10. Indemnification.
The
Company shall provide Executive with payment of legal fees and indemnification
to the maximum extent permitted by the Company’s or the Company’s, as the case
may be, certificate of incorporation, by-laws and applicable law. Parent shall
provide Executive with the same indemnification as are provided by Parent to
officers and directors of its subsidiaries and, if Executive is an officer
or
director of Parent, Parent shall provide Executive with the same indemnification
as Parent provides for its officers and directors.
11. Representations
by the Parties.
(a) Executive
represents, warrants, covenants and agrees that he has a right to enter into
this Agreement, that he is not a party to any agreement or understanding, oral
or written, which would prohibit performance of his obligations under this
Agreement, and that he will not use in the performance of his obligations
hereunder any proprietary information of any other party which he is legally
prohibited from using.
(b) The
Company represents, warrants and agrees that it has full power and authority
to
execute and deliver this Agreement and perform its obligations hereunder.
12. Miscellaneous.
(a) The
Company is presently the beneficiary of key-person life insurance on Executive’s
life in the amount of $250,000. Executive will cooperate with the Company in
connection with maintaining such insurance and, if the Company so elects, the
Company’s application to obtain any additional key-person life insurance on his
life, on which the Company will be the beneficiary. Such cooperation shall
include the execution of any applications or other documents requiring his
signature and submission of insurance applications and submission to a
physical.
(b) Any
notice, consent or communication required under the provisions of this Agreement
shall be given in writing and sent or delivered by hand, overnight courier
or
messenger service, against a signed receipt or acknowledgment of receipt, or
by
registered or certified mail, return receipt requested, or telecopier or similar
means of communication if receipt is acknowledged or if transmission is
confirmed by mail as provided in this Section 12(b), to the parties at
their respective addresses set forth at the beginning of this Agreement or
by
telecopier to the Company at ( ) - or
to Executive at ( ) , with notice to the Company being sent to the attention
of
the individual who executed this Agreement on its behalf. Any party may, by
like
notice, change the Person, address or telecopier number to which notice is
to be
sent. If no telecopier number is provided for Executive, notice to him shall
not
be sent by telecopier.
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(c) This
Agreement shall in all respects be construed and interpreted in accordance
with,
and the rights of the parties shall be governed by, the laws of the Commonwealth
of Virginia applicable to contracts executed and to be performed wholly within
such State, without regard to principles of conflicts of laws. Each party hereby
(i) consents to the exclusive jurisdiction of the federal courts in Fairfax
County, Virginia, (ii) agrees that any process in any action commenced in
such court under this Agreement may be served upon it or him personally, either
(x) by certified or registered mail, return receipt requested, or by courier
service which obtains evidence of delivery, with the same full force and effect
as if personally served upon such party in Fairfax County, Virginia, or (y)
by
any other method of service permitted by law, and (iii) waives any claim
that the jurisdiction of any such court is not a convenient forum for any such
action and any defense of lack of in personam
jurisdiction with respect thereof.
(d) If
any
term, covenant or condition of this Agreement or the application thereof to
any
party or circumstance shall, to any extent, be determined to be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term,
covenant or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby and each
term, covenant or condition of this Agreement shall be valid and be enforced
to
the fullest extent permitted by law, and any court or arbitrator having
jurisdiction may reduce the scope of any provision of this Agreement, including
the geographic and temporal restrictions set forth in Section 7 of this
Agreement, so that it complies with applicable law.
(e) This
Agreement constitute the entire agreement of the Company and Executive as to
the
subject matter hereof, superseding all prior or contemporaneous written or
oral
understandings or agreements, including any and all previous employment
agreements or understandings, all of which are hereby terminated, with respect
to the subject matter covered in this Agreement; provided, however, that nothing
in this Agreement shall be deemed to modify any obligations which Executive
may
have as a stockholder of the Company pursuant to the Merger Agreement. This
Agreement may not be modified or amended, nor may any right be waived, except
by
a writing which expressly refers to this Agreement, states that it is intended
to be a modification, amendment or waiver and is signed by both parties in
the
case of a modification or amendment or by the party granting the waiver. No
course of conduct or dealing between the parties and no custom or trade usage
shall be relied upon to vary the terms of this Agreement. The failure of a
party
to insist upon strict adherence to any term of this Agreement on any occasion
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Agreement.
(f) No
party
shall have the right to assign or transfer any of its or his rights hereunder
except that the Company’s rights and obligations may be assigned in connection
with a merger of consolidation of the Company or a sale by the Company of all
or
substantially all of its business and assets.
(g) This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, executors, administrators and permitted
assigns.
(h) The
headings in this Agreement are for convenience of reference only and shall
not
affect in any way the construction or interpretation of this
Agreement.
(i) This
Agreement may be executed in counterparts, each of which when so executed and
delivered will be an original document, but both of which counterparts will
together constitute one and the same instrument.
[Signatures
on following page]
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IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above
written.
COMPUTER
NETWORKS & SOFTWARE, INC.
By:
Name:
Title:
EXECUTIVE:
Xxxxx
Xxxx
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