EXHIBIT 10.14
FORM OF EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of July 1, 1999 is
between Data Return Corporation, a Texas corporation, and _________________
("Employee").
R E C I T A L S:
A. Employee has been employed by Employer, and Employer and Employee
desire to enter into a written agreement to specify the terms and conditions of
Employee's continued employment with Employer.
B. Employer considers the maintenance of a sound management team,
including Employee, essential to protecting and enhancing its best interests and
those of its stockholders.
C. Employer recognizes that the possibility of a change in control of
Employer may result in the departure or distraction of management to the
detriment of Employer and its stockholders.
D. Employee is an executive officer of Employer and an integral member of
its management team.
E. Employer has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of selected
members of Employer's management team to their assigned duties without the
distraction arising from the possibility of a change in control of Employer.
NOW, THEREFORE, in consideration of Employee's past and future employment
with Employer and other good and valuable consideration the parties agree as
follows:
SECTION 1. Employment. Employer hereby employs Employee, and Employee
hereby accepts employment, upon the terms and subject to the conditions
hereinafter set forth.
SECTION 2. Duties. Employee shall be employed as Vice President of the
Company, or such other position to which he may be appointed by the Board of
Directors. Employee agrees to devote his full time and best efforts to the
performance of the duties attendant to his executive position with Employer.
SECTION 3. Term. The term of employment of Employee hereunder shall
commence on the date of this Agreement (the "Commencement Date") and continue
until June 30, 2002 unless earlier terminated pursuant to Section 6 or Section
10.
SECTION 4. Compensation and Benefits. In consideration for the services
of Employee hereunder, Employer shall compensate Employee as follows:
(a) Base Salary. Until the termination of Employee's employment hereunder,
Employer shall pay Employee, semi-monthly in arrears, a base salary at an annual
rate of not less
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than _____________ (as it may be increased from time to time, the "Base
Salary"). The Base Salary as then in effect may not be decreased at any time
during the term of Employee's employment hereunder and shall be reviewed by
Employer each October. Any increase in the Base Salary shall be in the sole
discretion of the Compensation Committee of the Board of Directors of the
Company.
(b) Management Incentive Bonus. Employee shall be eligible to receive from
Employer such annual management incentive bonuses as may be provided in
management incentive bonus plans adopted from time to time by Employer.
(c) Vacation. Employee shall be entitled to a minimum of 120 hours of paid
vacation per year at the reasonable and mutual convenience of Employer and
Employee. Unless otherwise approved by the Compensation Committee of the Board
of Directors of the Company, accrued vacation not taken in any applicable period
shall not be carried forward or used in any subsequent period.
(d) Insurance Benefits. Employer shall provide Employee with health,
dental and any other insurance generally provided by Employer for its other
executive officers.
SECTION 5. Expenses. The parties anticipate that in connection with the
services to be performed by Employee pursuant to the terms of this Agreement,
Employee will be required to make payments for travel, entertainment of business
associates and similar expenses. Employer shall reimburse Employee for all
reasonable expenses of types authorized by Employer and incurred by Employee in
the performance of his duties hereunder. Employee shall comply with such budget
limitations and approval and reporting requirements with respect to expenses as
Employer may establish from time to time.
SECTION 6. Termination.
(a) General. Employee's employment hereunder shall commence on the
Commencement Date and continue until the end of the term specified in Section 3,
except that the employment of Employee hereunder shall terminate prior to such
time in accordance with the following:
(i) Death or Disability. Upon the death of Employee during the term
of his employment hereunder or, at the option of Employer, in the event of
Employee's Disability, upon 30 days' notice to Employee.
(ii) For Cause. For "Cause" immediately upon written notice by
Employer to Employee. A termination shall be for Cause if:
(1) Employee commits a criminal act involving moral turpitude; or
(2) Employee commits a material breach of any of the covenants, terms
and provisions hereof or fails to obey lawful and written directions
which are proper,
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reasonable and which relate to the business of the employer and are
delivered to Employee by the Company's Chairman of the Board,
President, Chief Executive Officer, Chief Operating Officer or its
Board of Directors or by any of the Company's Executive Vice
Presidents or Senior Vice Presidents.
(iii) Without Cause. Without Cause upon notice by Employer to
Employee. Without limiting the foregoing, for purposes of Section 6(b)(ii)
the termination of Employee's employment hereunder upon the expiration of
the term of his employment specified in Section 3 shall be treated as a
termination by Employer without Cause pursuant to this Section 6(a)(iii).
(b) Severance Pay and Bonuses.
(i) Termination Upon Death or Disability. Employee shall not be
entitled to any Separation Payments or any other severance pay or other
compensation upon termination of his employment hereunder pursuant to
Section 6(a)(i) except for the following (which shall be paid promptly
after termination, except as specified in subsection (4) below):
(1) his Base Salary accrued but unpaid as of the date of termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination;
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect; and
(4) any bonus to which Employee would have been entitled for the Bonus
Period if he were still employed hereunder on the last day of the
Bonus Period. Any such bonus shall be paid to Employee at the same
time bonuses are paid in respect of the Bonus Period to other
employees of Employer entitled to receive bonuses for the Bonus
Period. In the event the determination of Employee's bonus in respect
of the Bonus Period involves any subjective assessment, such
assessment shall be made in a manner most favorable to Employee. For
purposes of this Section 6(b)(i)(4), the term "Bonus Period" means the
full fiscal year or other applicable bonus period during which
Employee's employment hereunder was terminated (or during which
Employee became Disabled, in the event of a termination for
Disability).
(ii) Termination Without Cause; Separation Payments. In the event
Employee's employment hereunder is terminated pursuant to Section
6(a)(iii), Employer shall pay Employee Separation Payments as Employee's
sole remedy in connection with such termination. "Separation Payments" are
payments made at the semi-monthly rate of
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Employee's Base Salary in effect immediately preceding the date of
termination. Separation Payments shall be made for months after the date
of termination (the "Separation Payment Period") and shall be paid by
Employer in equal semi-monthly payments in arrears. Separation Payments
shall be reduced by the amount of any personal services income earned by
Employee during the Separation Payment Period. Separation Payments shall be
made for the number of months specified above without regard to the number
of months remaining in the term of this Agreement. Notwithstanding the
foregoing, Employer's obligation to make, and Employee's right to receive,
Separation Payments shall terminate immediately upon any violation by
Employee of any covenant contained in Section 8 or 9 hereof. Employer shall
also promptly pay Employee the following:
(1) his Base Salary accrued but unpaid as of the date of termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect.
This Section 6(b)(ii) is subject to the provisions of Section 10(j) dealing
with the coordination of payments in the event of a Change In Control.
(iii) Termination For Cause; Voluntary Termination. Employee shall
not be entitled to any Separation Payments or any other severance pay or
other compensation upon termination of his employment hereunder pursuant to
Section 6(a)(ii), or upon Employee's voluntary termination of his
employment hereunder, except for the following (which shall be paid
promptly after termination):
(1) his Base Salary accrued but unpaid as of the date of termination;
(2) unpaid expense reimbursements under Section 5 for expenses
incurred in accordance with the terms hereof prior to termination; and
(3) compensation for accrued, unused vacation as of the date of
termination, determined in accordance with Employer's policies and
procedures then in effect.
(c) Transfers of Employment. Employee's employment hereunder shall
continue until the earlier of the following:
(i) Employee's employment with all Employers terminates; or
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(ii) the last Employer (other than the Company) by which Employee is
employed under this Agreement ceases to be a subsidiary or affiliate of the
Company. For purposes of Section 6(b)(ii), the termination of Employee's
employment hereunder pursuant to this Section 6(c)(ii) shall be treated as
a termination by Employer without Cause pursuant to Section 6(a)(iii).
SECTION 7. Inventions; Assignment.
(a) Inventions Defined. All rights to discoveries, inventions,
improvements, designs, work product and innovations (including without
limitation all data and records pertaining thereto) that relate to the business
of Employer, whether or not specifically within Employee's duties or
responsibilities and whether or not patentable, copyrightable or reduced to
writing, that Employee may discover, invent, create or originate during the term
of his employment hereunder or otherwise, and for a period of six months
thereafter, either alone or with others and whether or not during working hours
or by the use of the facilities of Employer ("Inventions"), shall be the
exclusive property of Employer. Employee shall promptly disclose all Inventions
to Employer, shall execute at the request of Employer any assignments or other
documents Employer may deem necessary to protect or perfect its rights therein,
and shall assist Employer, at Employer's expense, in obtaining, defending and
enforcing Employer's rights therein. Employee hereby appoints Employer as his
attorney-in-fact to execute on his behalf any assignments or other documents
deemed necessary by Employer to protect or perfect its rights to any Inventions.
(b) Covenant to Assign and Cooperate. Without limiting the generality of
the foregoing, Employee shall assign and transfer, and does hereby assign and
transfer, to Employer the world-wide right, title and interest of Employee in
the Inventions. Employee agrees that Employer may file copyright registrations
and apply for and receive patents (including without limitation Letters Patent
in the United States) for the Inventions in Employer's name in such countries as
may be determined solely by Employer. Employee shall communicate to Employer
all facts known to Employee relating to the Inventions and shall cooperate with
Employer's reasonable requests in connection with vesting title to the
Inventions and related copyrights and patents exclusively in Employer and in
connection with obtaining, maintaining, protecting and enforcing Employer's
exclusive copyrights and patent rights in the Inventions.
(c) Successors and Assigns. Employee's obligations under this Section 7
shall inure to the benefit of Employer and its successors and assigns and shall
survive the expiration of the term of this Agreement for such time as may be
necessary to protect the proprietary rights of Employer in the Inventions.
(d) Consideration and Expenses. Employee shall perform his obligations
under this Section 7 at Employer's expense, but without any additional or
special compensation therefor.
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SECTION 8. Confidential Information.
(a) Acknowledgment of Proprietary Interest. Employee acknowledges that all
Confidential Information is a valuable, special and unique asset of Employer's
business, access to and knowledge of which are essential to the performance of
Employee's duties hereunder. Employee acknowledges the proprietary interest of
Employer in all Confidential Information. Employee agrees that all Confidential
Information learned by Employee during his employment with Employer or
otherwise, whether developed by Employee alone or in conjunction with others or
otherwise, is and shall remain the exclusive property of Employer. Employee
further acknowledges and agrees that his disclosure of any Confidential
Information will result in irreparable injury and damage to Employer.
(b) Confidential Information Defined. "Confidential Information" means all
confidential and proprietary information of Employer, written, oral or
computerized, as it may exist from time to time, including without limitation
(i) information derived from reports, investigations, experiments, research and
work in progress, (ii) methods of operation, (iii) market data, (iv) proprietary
computer programs and codes, (v) drawings, designs, plans and proposals, (vi)
marketing and sales programs, (vii) client and supplier lists and any other
information about Employer's relationships with others, (viii) historical
financial information and financial projections, (ix) network and system
architecture (x) all other concepts, ideas, materials and information prepared
or performed for or by Employer and (xi) all information related to the business
plan, business, products, purchases or sales of Employer or any of its suppliers
and customers, other than information that is publicly available.
(c) Covenant Not To Divulge Confidential Information. Employer is entitled
to prevent the disclosure of Confidential Information. As a portion of the
consideration for the employment of Employee and for the compensation being paid
to Employee by Employer, Employee agrees at all times during the term of his
employment hereunder and thereafter to hold in strict confidence and not to
disclose or allow to be disclosed to any person, firm or corporation, other than
to persons engaged by Employer to further the business of Employer, and not to
use except in the pursuit of the business of Employer, the Confidential
Information, without the prior written consent of Employer. This Section 8
shall survive and continue in full force and effect in accordance with its terms
after, and will not be deemed to be terminated by, any termination of this
Agreement or of Employee's employment with Employer for any reason.
(d) Return of Materials at Termination. In the event of any termination or
cessation of his employment with Employer for any reason, Employee shall
promptly deliver to Employer all property of Employer, including without
limitation all documents, data and other information containing, derived from or
otherwise pertaining to Confidential Information. Employee shall not take or
retain any property of Employer, including without limitation any documents,
data or other information, or any reproduction or excerpt thereof, containing,
derived from or pertaining
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to any Confidential Information. The obligation of confidentiality set forth in
this Section 8 shall continue notwithstanding Employee's delivery of such
documents, data and information to Employer.
SECTION 9. Noncompetition.
(a) Covenant Not To Compete. Employee acknowledges that during the term of
his employment Employer has agreed to provide to him, and he shall receive from
Employer, special training and knowledge, including without limitation the
Confidential Information. Employee acknowledges that the Confidential
Information is valuable to Employer and, therefore, its protection and
maintenance constitutes a legitimate interest to be protected by Employer by the
enforcement of the covenant not to compete contained in this Section 9.
Employee also acknowledges that such covenant not to compete is ancillary to
other enforceable agreements of the parties, including without limitation the
agreements regarding Confidential Information in Section 8 and the agreements
regarding the payment of Separation Payments and other severance pay and of the
Termination Payment in Section 6 and Section 10, respectively. Therefore, after
termination of Employee's employment hereunder, (unless extended pursuant to the
terms of this Section 9) for a period of (x) two years if Employee is terminated
for Cause or if Employee resigns and (y) one year if Employee is terminated
without Cause, Employee shall not directly or indirectly
(i) engage, alone or as a shareholder, partner, member, manager,
director, officer, employee of or consultant to any other business
organization that engages or is planning to engage, anywhere in North
America or in any other geographic area in or with respect to which
Employee has any duties or responsibilities during the term of his
employment with Employer, in the business of outsourced managed computer
services in a hosted environment or any other business activities that were
either conducted by Employer prior to the termination of Employee's
employment hereunder or proposed to be conducted by Employer at any time
prior to the time of such termination (the "Designated Industry");
(ii) divert to any competitor of Employer any customer of Employer; or
(iii) solicit or encourage any director, officer, employee of or
consultant to Employer to end his relationship with Employer or commence
any such relationship with any competitor of Employer.
Notwithstanding the foregoing, Employee's noncompetition obligations
hereunder shall not preclude Employee from owning less than five percent of the
voting power or economic interest in any publicly traded corporation conducting
business activities in the Designated Industry.
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(b) No Offset. The representations and covenants contained in this Section
9 on the part of Employee shall be construed as ancillary to and independent of
any other provision of this Agreement, and the existence of any claim (monetary
or otherwise) or cause of action of Employee against Employer or any officer,
director or shareholder of Employer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Employer of the
covenants of Employee contained in this Section 9.
(c) Extension of Duration; Survival. If Employee violates any covenant
contained in this Section 9, Employer shall not, as a result of such violation
or the time involved in obtaining legal or equitable relief therefor, be
deprived of the benefit of the full period of any such covenant. Accordingly,
the covenants of Employee contained in this Section 9 shall be deemed to have
the duration specified in Section 9(a), which period shall be extended by a
number of days equal to the sum of (i) the total number of days Employee is in
violation of any of the covenants contained in this Section 9 prior to the
commencement of any litigation relating thereto and (ii) the total number of
days the parties are involved in such litigation, through the date of entry by a
court of competent jurisdiction of a final judgment enforcing the covenants of
Employee in this Section 9. This Section 9 shall survive and continue in full
force and effect in accordance with its terms after, and will not be deemed to
be terminated by, any termination of this Agreement or of Employee's employment
with Employer for any reason.
(d) Severability. If at any time the provisions of this Section 9 are
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 9 shall be
considered divisible and shall be immediately amended to only such area,
duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter, and
Employee agrees that this Section 9 as so amended shall be valid and binding as
though any invalid or unenforceable provision had not been included herein.
SECTION 10. Termination of Employment in Connection With a Change In
Control.
(a) Applicability. The provisions of this Section 10 shall apply in lieu
of all conflicting provisions in this Agreement in the event Employee's
employment with Employer is terminated in a Triggering Termination. Each of the
following events constitutes a "Triggering Termination" when Employee's
employment with Employer is:
(i) actually terminated by Employer during an Applicable Period for
any reason other than for Good Reason;
(ii) Constructively Terminated by Employer during an Applicable Period
for any reason other than for Good Reason;
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(iii) terminated by Employee for any reason other than death, or for
no reason, in the period commencing 180 days after the Change In Control
and ending 210 days after the Change In Control; or
(iv) terminated pursuant to Section 6(c)(ii) during an Applicable
Period.
(b) Termination Payment.
(i) Amount. Upon the occurrence of a Triggering Termination, Employer
shall pay Employee a lump sum payment in cash (the "Termination Payment")
equal to one times the sum of the following items:
(1) Employee's annualized base compensation determined by using the
highest annual base compensation rate in effect at any time during
Employee's employment with Employer; provided, that, in the case of a
Triggering Termination under Section 10(a)(iii), the amount to be
received under this Section 10(b)(i)(1) shall be % of such
annualized base compensation;
(2) two times the Target Bonus that would be payable to Employee by
Employer for the bonus period in which the Change In Control occurred;
provided that the amount determined under this Section 10(b)(i)(2)
shall not be less than 60% of the amount determined under Section
10(b)(i)(1);
(3) the amount of Employee's Base Salary accrued but unpaid as of the
date of the Triggering Termination;
(4) reimbursement under Section 5 for unpaid expenses incurred in
the performance of his duties hereunder prior to the date of the
Triggering Termination;
(5) any other benefit accrued but unpaid as of the date of the
Triggering Termination; and
(6) an amount that represents the estimated cost to Employee of
obtaining the insurance coverage provided to Employee for the 12 month
period following the expiration of his continuation (COBRA) rights;
provided that this Section 10(b)(i)(6) shall be applied without regard
to, and the amount payable under this Section 10(b)(i)(6) is in
addition to, any continuation (COBRA) rights or conversion rights
under any plan provided by Employer, which rights are not affected by
any provision hereof.
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(ii) Time for Payment; Interest. Employer shall pay the Termination
Payment to Employee concurrently with the Triggering Termination or, if the
Triggering Termination occurs before the Change In Control, concurrently
with the Change In Control. Employer's obligation to pay to Employee any
amounts under this Section 10, including without limitation the Termination
Payment and any Gross Up Payment due under Section 10(d), shall bear
interest at the rate of 18% per annum or, if different, the maximum rate
allowed by law until paid by Employer, and all accrued and unpaid interest
shall bear interest at the same rate, all of which interest shall be
compounded daily.
(c) Change In Control. A Change in Control shall be deemed to have
occurred for purposes hereof when a "change in control" of Employer occurs that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or in response to any similar item on any similar schedule or
form) promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not Employer is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 40% or more of the
combined voting power of Employer's then outstanding securities without the
prior approval of at least two-thirds of the members of Employer's Board of
Directors in office immediately prior to such person attaining such percentage
interest; (ii) Employer is a party to a merger, consolidation, share exchange,
sale of assets or other reorganization, or a proxy contest, as a consequence of
which, on the day after such transaction is consummated or event occurs, its
shareholders own less than 50% of the shares of Employer or the surviving
entity, as the case may be, and the members of its Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors of Employer or the surviving entity, as the case may
be, thereafter; (iii) during any 15-month period, individuals who at the
beginning of such period constituted Employer's Board of Directors (including
for this purpose any new director, whose election or nomination for election by
Employer's shareholders, or election or appointment by Employer's Board of
Directors, was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of Employer's Board of Directors;
or (iv) an entity becomes an acquiring person or a distribution of rights occurs
or is triggered (whether or not the distribution occurs) under any rights
agreement or plan of Employer.
(d) Gross Up Payment.
(i) Excess Parachute Payment. If Employee incurs the tax (the "Excise
Tax") imposed by Section 4999 of the Code on "excess parachute payments"
within the
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meaning of Section 280G(b)(1) of the Code as the result of any payments or
distributions by Employer to or for the benefit of Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise) or as a result of the acceleration of vesting of
Options, Restricted Stock or other rights (collectively, the "Payments"),
or if Employee would incur the Excise Tax if the Change In Control
satisfied the requirements of Section 280G(b)(2)(A)(i) of the Code, then
without regard to whether the Change In Control in fact satisfies the
requirements of Section 280G(b)(2)(A)(i) of the Code, Employer shall pay to
Employee an amount (the "Gross Up Payment") such that the net amount
retained by Employee, after deduction of (1) any Excise Tax owed, or that
would be owed if the Change In Control satisfied the requirements of
Section 280G(b)(2)(A)(i) of the Code, upon any Payments (other than
payments provided by this Section 10(d)(i)) and (2) any federal, state and
local income and employment taxes owed (together with penalties and
interest) and Excise Tax owed, or that would be owed if the Change In
Control satisfied the requirements of Section 280G(b)(2)(A)(i) of the Code,
upon the payments provided by this Section 10(d)(i), shall be equal to the
amount of the Payments (other than payments provided by this Section
10(d)(i)).
(ii) Applicable Rates. For purposes of determining the Gross Up
Payment amount, Employee shall be deemed:
(1) to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individual taxpayers in the
calendar year in which the Gross Up Payment is made (which rate shall
be adjusted as necessary to take into account the effect of any
reduction in deductions, exemptions or credits otherwise available to
Employee had the Gross Up Payment not been received);
(2) to pay additional employment taxes as a result of the receipt of
the Gross Up Payment in an amount equal to the highest marginal rate
of employment taxes applicable to wages; provided that if any
employment tax is applied only up to a specified maximum amount of
wages, such limit shall be taken into account for purposes of such
calculation; and
(3) to pay state and local income taxes at the highest marginal rates
of taxation in the state and locality of Employee's residence on the
date of the Triggering Termination, net of the maximum reduction in
federal income taxes that could be obtained from deduction of such
state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
the Gross Up Payment amount shall be made, at Employer's expense, by Ernst
& Young LLP or another nationally recognized public accounting firm
selected by Employee (in
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either case, the "Accountants"). If the Excise Tax amount payable by
Employee, based upon a "Determination," is different from the Excise Tax
amount computed by the Accountants for purposes of determining the Gross Up
Payment amount, then appropriate adjustments to the Gross Up Payment amount
shall be made in the manner provided in Section 10(d)(iv). For purposes of
determining the Gross Up Payment amount prior to any Determination of the
Excise Tax amount, the following assumptions shall be utilized:
(1) that portion of the Termination Payment that is attributable to
the items described in Sections 10(b)(i)(1), (2), (3) and (7), and the
Gross Up Payment, shall be treated as Parachute Payments;
(2) no portion of any payment made pursuant to Sections 10(b)(i)(4),
(5) or (6) or Section 11(c) shall be treated as a Parachute Payment;
(3)the "ascertainable fair market value" (as set forth in Prop. Treas.
Reg. (S)1.280G-1, Q&A 13) of the Options, the vesting of which was
accelerated by the Change In Control as provided in the Incentive Plan
and as further provided in Section 10(i), shall be equal to the
product of (I) and (II) as set forth below:
(I) the number of shares covered by such Options; and
(II) the difference between:
a. the fair market value per share of the underlying
common stock as of the date of the Change In Control; and
b. the exercise price per share of stock subject to
such Options; and
(4)for purposes of applying the rules set forth in Prop. Treas. Reg.
(S)1.280G-1, Q&A 24(c) to a payment described in Prop. Treas. Reg.
(S)1.280G-1, Q&A 24(b), the amount reflecting the lapse of the
obligation to continue performing services shall be equal to the
minimum amount allowed for such payment as set forth in Prop. Treas.
Reg. (S)1.280G-1, Q&A 24(c)(2) (or if Prop. Treas. Reg. (S)1.280G-1
has been superseded by temporary or final regulations, the minimum
amount provided for in any temporary or final regulations that
supersede Prop. Treas. Reg. (S)1.280G-1 and that are applicable to the
Termination Payment, Gross Up Payment, or both).
(iv) Time For Payment. Employer shall pay the estimated Gross Up
Payment amount in cash to Employee concurrent with the payment of the
Termination Payment.
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Employee and Employer agree to reasonably cooperate in the determination of
the actual Gross Up Payment amount. Further, Employee and Employer agree to
make such adjustments to the estimated Gross Up Payment amount as may be
necessary to equal the actual Gross Up Payment amount based upon a
Determination, which in the case of Employee shall refer to refunds of
prior overpayments and in the case of Employer shall refer to makeup of
prior underpayments.
(e) Term. Notwithstanding the provisions of Section 3, if a Change In
Control occurs prior to June 29, 2002, Sections 10, 11 and 12 shall continue in
effect for a period of 24 months after the date of the Change In Control.
(f) No Duty to Mitigate Damages. Employee's rights and privileges under
this Section 10 shall be considered severance pay in consideration of his past
service and his continued service to Employer from the Commencement Date, and
his entitlement thereto shall neither be governed by any duty to mitigate his
damages by seeking further employment nor offset by any compensation that he may
receive from future employment.
(g) Arbitration. Except as provided in Section 10(i) and in Section 11(d)
with respect to Section 10(k), any controversy or claim arising out of or
relating to this Section 10, or the breach thereof, shall be settled exclusively
by arbitration in Dallas, Texas, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. Judgment upon the
award rendered by the arbitrator may be entered in, and enforced by, any court
having jurisdiction thereof.
(h) No Right To Continued Employment. This Section 10 shall not give
Employee any right of continued employment or any right to compensation or
benefits from Employer except the rights specifically stated herein.
(i) Restricted Stock and Exercise of Stock Options. Employee may hold
options ("Options") issued under the Incentive Plan, that become immediately
exercisable upon a Change In Control. In addition, Employee may hold restricted
stock ("Restricted Stock") issued under the Incentive Plan, pursuant to which
applicable restrictions will lapse upon a Change In Control. Upon a Change In
Control, the portion of Employee's Options that would have vested, and the
portion of Employee's Restricted Stock that would have become unrestricted, on
the next annual vesting date, shall immediately vest and become unrestricted,
respectively, and the vesting date for the remainder of such Options and
Restricted Stock shall be accelerated by one year. In addition, if Employee is
terminated for any reason other than for Good Reason during an Applicable
Period, (a) all of Employee's Options shall immediately vest and Employee shall
have the right to exercise such Options for 90 days following such termination
and (b) all Restricted Stock shall be become unrestricted. Notwithstanding
anything to the contrary contained herein, if Employee would receive more
favorable treatment under the Incentive Plan or any agreement thereunder, such
treatment shall control. Employer shall take no action to facilitate a
transaction involving a Change In Control, including without limitation
redemption of any rights issued pursuant to any rights agreement, unless it has
taken such action as may be necessary to ensure that Employee has the
opportunity to exercise all Options he may then hold, and obtain certificates
containing no restrictive legends in respect of any Restricted Stock he may then
hold, at a time and in a manner that shall give Employee the opportunity to sell
or exchange the securities of Employer acquired upon exercise of his Options and
upon receipt of unrestricted certificates for shares of Common Stock in respect
of his Restricted Stock, if any (collectively, the "Acquired Securities"), at
the earliest time and in the most advantageous manner any holder of the same
class of securities as the Acquired Securities is able to sell or exchange such
securities in connection with such Change In Control. Employer acknowledges
that its covenants in the preceding sentence (the "Covenants")are reasonable and
necessary in order to protect the legitimate interests of Employer in
maintaining Employee as one of its employees and that any violation of the
Covenants by Employer would result in irreparable injuries to Employee, and
Employer therefore acknowledges that in the event of any violation of the
Covenants by Employer or its directors, officers or employees, or any of their
respective agents, Employee shall be entitled to obtain from any court of
competent jurisdiction temporary, preliminary and permanent injunctive relief in
order to (i) obtain specific performance of the Covenants, (ii) obtain specific
performance of the exercise of his Options, delivery of certificates containing
no restrictive legends in respect of his Restricted Stock and the sale or
exchange of the Acquired Securities in the advantageous manner contemplated
above or (iii) prevent violation of the Covenants; provided nothing in this
Agreement shall be deemed to prejudice Employee's rights to damages for
violation of the Covenants.
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(j) Coordination With Other Payments.
(i) After the termination of Employee's employment hereunder:
(1) if Employee is entitled to receive Separation Payments; and
(2) Employee subsequently becomes entitled to receive a Termination
Payment, Gross Up Payment or both, then,
(ii) prior to the disbursement of the Termination Payment and Gross Up
Payment:
(1) the payment date of all unpaid Separation Payments shall be
accelerated to the payment date of the Termination Payment and such
Separation Payments shall be made (in this event, Employer waives any
requirement that Employee reduce the Separation Payments by the amount
of any income earned by Employee thereafter); and
(2) the Termination Payment shall be reduced by the amount of the
Separation Payments so accelerated and made.
(k) Noncompetition.
(i) Employee acknowledges that during the term of his employment
Employer has agreed to provide to him, and he shall receive from Employer,
special training and knowledge, including without limitation the
Confidential Information.
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Employee acknowledges that the Confidential Information is valuable to
Employer and, therefore, its protection and maintenance constitutes a
legitimate interest to be protected by Employer by the enforcement of the
covenant not to compete contained in this Section 10(k). Employee also
acknowledges that such covenant not to compete is ancillary to other
enforceable agreements of the parties, including without limitation the
agreements regarding Confidential Information in Section 8 and the
agreements regarding the payment of the Termination Payment in this Section
10. Therefore, following the occurrence of a Triggering Termination,
Employee shall not directly or indirectly
(1) for a period of one year following the date of the Triggering
Termination (unless extended pursuant to the terms of this Section
10(k)) engage, alone or as a shareholder, partner, member, manager,
director, officer, employee of or consultant to, any entity other than
Employer that is in existence on the date of the Triggering
Termination and is at that time engaged directly, or indirectly
through any subsidiary, division or other business unit (individually,
an "Entity"), anywhere in North America or in any other geographic
area in or with respect to which Employee has any duties or
responsibilities during the term of his employment with Employer, in
the Designated Industry; or
(2) for a period of one year following the date of the Triggering
Termination (unless extended pursuant to the terms of this Section
10(k)) solicit or encourage any director, officer, employee of or
consultant to Employer to end his relationship with Employer and
commence any such relationship with any competitor of Employer in the
Designated Industry.
(ii) Notwithstanding the foregoing, an Entity shall not be deemed to
be engaged in the Designated Industry if the business of the Designated
Industry is incidental to such Entity's business. The business of the
Designated Industry shall be deemed incidental to an Entity's business so
long as
(1) the aggregate revenue of such Entity attributable to such
business is 40% or less of the total revenues of such Entity for the
full fiscal quarter of such Entity immediately preceding the date of
the Triggering Termination or any of the eight immediately subsequent
fiscal quarters of such Entity; and
(2) such Entity is not a member of a group of Entities under
common control that includes one or more Entities in the Designated
Industry;
(iii) The representations and covenants contained in this Section
10(k) on the part of Employee shall be construed as ancillary to and
independent of any other provision of this Agreement, and the existence of
any claim (monetary or otherwise) or
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cause of action of Employee against Employer or any officer, director or
shareholder of Employer, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Employer of the
covenants of Employee contained in this Section 10(k).
(iv) If Employee violates any covenant contained in this Section
10(k), Employer shall not, as a result of such violation or the time
involved in obtaining legal or equitable relief therefor, be deprived of
the benefit of the full period of any such covenant. Accordingly, the
covenants of Employee contained in this Section 10(k) shall be deemed to
have durations as specified in Section 10(k)(i)(1) and (2), which periods
shall be extended by a number of days equal to the sum of (i) the total
number of days Employee is in violation of any of the covenants contained
in this Section 10(k) prior to the commencement of any litigation relating
thereto and (ii) the total number of days the parties are involved in such
litigation, through the date of entry by a court of competent jurisdiction
of a final judgment enforcing the covenants of Employee in this Section
10(k). This Section 10(k) shall survive and continue in full force and
effect in accordance with its terms after, and will not be deemed to be
terminated by, any termination of this Agreement.
(v) If at any time the provisions of this Section 10(k) are determined
to be invalid or unenforceable by reason of being vague or unreasonable as
to area, duration or scope of activity, this Section 10(k) shall be
considered divisible and shall be immediately amended to only such area,
duration or scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter;
and Employee agrees that this Section 10(k) as so amended shall be valid
and binding as though any invalid or unenforceable provision had not been
included herein. Notwithstanding the foregoing, Employee's noncompetition
obligations hereunder shall not preclude Employee from owning stock with
less than five percent of the voting power or economic interest in any
publicly traded corporation conducting business activities in the
Designated Industry.
SECTION 11. General.
(a) Notices. All notices and other communications hereunder shall be
in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail,
return receipt requested or by written telecommunication, to the relevant
address set forth below, or to such other address as the recipient of such
notice or communication shall have specified to the other party in
accordance with this Section 11(a):
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If to Employer, to: with a copy to:
Data Return Corporation Xxxxxxxx & Xxxxxx, P.C.
000 Xxxxxxx Xxxxx, Xxxxx 000 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx 00000 Ft. Xxxxx, Xxxxx 00000
Attention: Chief Executive Officer Attention: Xxxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000 Facsimile Number (000) 000-0000
If to Employee, to:
(b) Withholding; No Offset. All payments required to be made to Employee
by Employer under this Agreement shall be subject to the withholding of such
amounts, if any, relating to federal, state and local taxes as may be required
by law. No payments under Section 10 shall be subject to offset or reduction
attributable to any amount Employee may owe to Employer or any other person.
(c) Legal and Accounting Costs. Employer shall pay all attorneys' and
accountants' fees and costs incurred by Employee as a result of any breach by
Employer of its obligations under this Agreement, including without limitation
all such costs incurred in contesting or disputing any determination made by
Employer under Section 10 or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the Code to any
payment under Section 10. Reimbursements of such costs shall be made by
Employer within 15 days after Employee's presentation to Employer of any
statements of such costs and thereafter shall bear interest at the rate of 18%
per annum or, if different, the maximum rate allowed by law until paid by
Employer, and all accrued and unpaid interest shall bear interest at the same
rate, all of which interest shall be compounded daily.
(d) Equitable Remedies. Each of the parties hereto acknowledges and agrees
that upon any breach by Employee of his obligations under any of Sections 7, 8,
9 and 10(k), Employer shall have no adequate remedy at law and accordingly shall
be entitled to specific performance and other appropriate injunctive and
equitable relief.
(e) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof, and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part
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of this Agreement a provision as similar in its terms to such illegal, invalid
or unenforceable provision as may be possible and be legal, valid and
enforceable.
(f) Waivers. No delay or omission by either party in exercising any right,
power or privilege hereunder shall impair such right, power or privilege, nor
shall any single or partial exercise of any such right, power or privilege
preclude any further exercise thereof or the exercise of any other right, power
or privilege.
(g) Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
(h) Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
(i) Reference to Agreement. Use of the words "herein," "hereof," "hereto,"
"hereunder" and the like in this Agreement refer to this Agreement only as a
whole and not to any particular section or subsection of this Agreement, unless
otherwise noted.
(j) Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties and shall be enforceable by the personal
representatives and heirs of Employee and the successors and assigns of
Employer. This Agreement may be assigned by the Company or any Employer to any
Employer; provided that in the event of any such assignment, the Company shall
remain liable for all of its obligations hereunder and shall be liable for all
obligations of all such assignees hereunder. If Employee dies while any amounts
would still be payable to him hereunder, such amounts shall be paid to
Employee's estate. This Agreement is not otherwise assignable by Employee.
(k) Entire Agreement. This Agreement contains the entire understanding of
the parties, supersedes all prior agreements and understandings relating to the
subject matter hereof, with the exception of written option (or other incentive
award) and shareholders' or stock restriction agreements, and may not be amended
except by a written instrument hereafter signed by each of the parties hereto.
Employee and the Company hereby agree that, if any other employment agreement
between Employee and the Company (or any other Employer) is in existence on the
Commencement Date, then this Agreement shall supersede such other employment
agreement in its entirety, and such other employment agreement shall no longer
be of any force and effect after the date hereof.
(l) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without regard to its choice of law principles.
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(m) Gender and Number. The masculine gender shall be deemed to denote the
feminine or neuter genders, the singular to denote the plural, and the plural to
denote the singular, where the context so permits.
(n) Assistance in Litigation. During the term of this Agreement and for a
period of two years thereafter, Employee shall, upon reasonable notice, furnish
such information and proper assistance to Employer as may reasonably be required
by Employer in connection with any litigation in which Employer is, or may
become, a party and with respect to which Employee's particular knowledge or
experience would be useful. Employer shall reimburse Employee for all
reasonable out-of-pocket expenses incurred by Employee in rendering such
assistance. The provisions of this Section 11(n) shall continue in effect
notwithstanding termination of Employee's employment hereunder for any reason.
SECTION 12. Definitions. As used in this Agreement, the following terms
will have the following meanings:
(a) Accountants has the meaning ascribed to it in Section 10(d)(iii).
(b) Acquired Securities has the meaning ascribed to it in Section 10(i).
(c) Agreement has the meaning ascribed to it in the heading of this
document.
(d) Applicable Period means, with respect to any Change In Control, the
period of 27 months commencing 3 months before the Change In Control and ending
24 months after the Change In Control.
(e) Base Salary has the meaning ascribed to it in Section 4(a).
(f) Cause has the meaning ascribed to it in Section 6(a)(ii).
(g) Change In Control has the meaning ascribed to it in Section 10(c).
(h) Code means the Internal Revenue Code of 1986, as amended.
(i) Commencement Date has the meaning ascribed to it in Section 3.
(j) Company means Data Return Corporation, a Texas corporation.
(k) Confidential Information has the meaning ascribed to it in Section
8(b).
(l) Constructively Terminated with respect to an Employee's employment with
Employer will be deemed to have occurred if Employer:
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(i) demotes Employee to a lesser position, either in title or
responsibility, than the highest position held by Employee with Employer at
any time during Employee's employment with Employer;
(ii) decreases Employee's compensation below the highest level in
effect at any time during Employee's employment with Employer or reduces
Employee's benefits and perquisites below the highest levels in effect at
any time during Employee's employment with Employer (other than as a result
of any amendment or termination of any employee or group or other executive
benefit plan, which amendment or termination is applicable to all
executives of Employer); or
(iii) requires Employee to relocate to a principal place of business
more than 100 miles from the principal place of business occupied by
Employer on the first day of an Applicable Period.
(m) Covenants has the meaning ascribed to it in Section 10(i).
(n) Designated Industry has the meaning ascribed to it in Section
9(a)(i)(1).
(o) Determination has the meaning ascribed to such term in Section 1313(a)
of the Code.
(p) Disability with respect to Employee shall be deemed to have occurred
whenever Employee is rendered unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or that has lasted or can be expected to
last for a continuing period of not less than 12 months. In the case of any
dispute, the determination of Disability will be made by a licensed physician
selected by Employer, which physician's decision will be final and binding.
(q) Employee has the meaning ascribed to it in the heading of this
Agreement.
(r) Employer refers collectively to the Company and its subsidiaries and
other affiliates. In Section 10, the term "Employer" shall be deemed to refer
to the Company, and for purposes of Section 10, Employee shall be deemed to be
employed by the Company and all compensation and benefits paid or provided to
Employee by any Employer under this Agreement at any time shall be deemed to
have been paid or provided to Employee by the Company.
(s) Entity has the meaning ascribed to it in Section 10(k)(i)(1).
(t) Excise Tax has the meaning ascribed to it in Section 10(d)(i).
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(u) Good Reason means the termination of Employee's employment with
Employer as a result of Employee's commission of a felony or failure to obey
written directions which are proper, reasonable and which relate to the business
of the employer and are delivered to Employee by Employer's Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer or its Board
of Directors or by any of Employer's Executive Vice Presidents or Senior Vice
Presidents.
(v) Gross Up Payment has the meaning ascribed to it in Section 10(d)(i).
(w) Incentive Plan means any stock option or equity incentive plan adopted
by Employer from time to time.
(x) Inventions has the meaning ascribed to it in Section 7(a).
(y) Options has the meaning ascribed to it in Section 10(i).
(z) Parachute Payments has the meaning ascribed to such term in Section
280G(b)(2) of the Code.
(aa) Payments has the meaning ascribed to it in Section 10(d)(i).
(bb) Restricted Stock has the meaning ascribed to it in Section 10(i).
(cc) Separation Payment Period has the meaning ascribed to it in Section
6(b)(ii).
(dd) Separation Payments has the meaning ascribed to it in Section
6(b)(ii).
(ee) Target Bonus means, with respect to each Employee, the dollar amount
that is equal to the established percentage of such Employee's Base Salary that
would be paid to Employee under the management incentive bonus plan of Employer
assuming the measurement criteria contained in such plan with respect to
Employee were achieved for the bonus period in which the Change In Control
occurred.
(ff) Termination Payment has the meaning ascribed to it in Section
10(b)(i).
(gg) Triggering Termination has the meaning ascribed to it in Section
10(a).
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EXECUTED as of the date and year first above written.
Data Return Corporation
By _______________________________________
Sunny X. Xxxxxxxxxx,
Chief Executive Officer
__________________________________________
[Employee]
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