Exhibit 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of October 15,
2004 ("Effective Date") between DynTek, Inc. ("Company") and Xxxxxx Xxxxxx, Xx.
("Executive").
RECITALS
Company wishes to employ Executive as its Chief Operating Officer, and
Executive wishes to accept such employment under the terms and conditions set
forth in this Agreement.
IT IS AGREED as follows:
1. Employment. Company hereby employs Executive as its Chief Operating
Officer. Executive accepts such employment.
2. Term. The term of employment under this Agreement shall commence on the
Effective Date and shall continue, unless otherwise terminated earlier under
Section 10, until the day before the first anniversary of the Effective Date,
i.e., June 30, 2005 (the "Term"), provided that on the day before each
anniversary of the Effective Date, the Term shall be automatically extended for
successive additional one (1) year periods unless at least thirty (30) days
prior to such anniversary date, either Company or Executive furnishes the other
with written notice that the Term not be so extended.
3. Duties. Executive shall devote his full-time efforts to the proper and
faithful performance of all duties customarily discharged by a Chief Operating
Officer, consistent with Company policies and budgets and directives of
Company's Board of Directors, together with any additional duties assigned to
him from time to time by the Chief Executive Officer or Board of Directors.
Executive agrees to use his best efforts and comply with all fiduciary and
professional standards in the performance of his duties. Executive shall provide
services to any subsidiary or affiliate of Company without additional
compensation and benefits beyond those set forth in this Agreement. Executive
shall be considered for a position with Company's Board of Directors as soon as
there are at least four independent board members on the Company's Board of
Directors.
4. Base Salary. Executive shall be paid a base salary of Three Hundred
Thousand Dollars ($300,000.00) per annum for the Term payable, less applicable
withholding, in equal monthly payments or more frequently in accordance with
Company's regular practice. Upon extension of the Term, Executive's base salary
will be set by the Compensation Committee of Company; provided, however, that
Executive's base salary shall not be reduced from the base salary immediately
previously in effect.
5. Bonus. Executive shall be eligible to receive an incentive bonus during
each fiscal year of the Term. The initial bonus target shall be Seventy-Five
Thousand Dollars ($75,000.00), and shall be based upon the achievement of
criteria and in amounts as set forth in a bonus plan established by the
Compensation Committee, as set forth in Schedule A to this agreement.
6. Restricted Stock. Executive shall be eligible to receive a grant of 0
shares of restricted stock in the Company in each year that (a) the fiscal year
end common stock price exceeds the previous year end common stock price by an
amount established by the Board of Directors, or (b) the Company exceeds by more
than ten percent (10%) the earnings per share target in the fiscal year
operating plan approved by the Board of Directors. (Stock prices shall be based
on the usual 10-day average ending on June 30 of each fiscal year.) The
restricted stock award hereunder shall vest upon Executive's continued
employment one (1) year after the grant, unless Executive is terminated by the
Company without Cause or pursuant to a Change in Control under Section 10(g), in
which event it shall vest upon such termination.
7. Stock Options. Executive is hereby granted options to purchase 350,000
shares of Company common stock at sixty-five ($0.65) cents per share. These
options shall vest upon Executive's continued employment one (1) year after the
grant, unless Executive is terminated by the Company without Cause or pursuant
to a Change in Control under Section 10(g), in which event it shall vest upon
such termination.
8. Benefits.
(a) Executive shall be entitled to participate in all Company sponsored
retirement plans, 401(k) plans, life insurance plans, medical
insurance plans, disability insurance plans, and such other benefit
plans generally available from time to time to executive management
of the Company for which he qualifies under the terms of the plans.
Executive's participation in and benefits under any benefit plan
shall be on the terms and subject to the conditions specified in
such plan. The Company shall supplement the insurance coverage and
benefits in a separate executive benefits plan, including a minimum
of $1 million life insurance coverage, to be fully paid by Company.
(b) Executive will receive at least three (3) weeks of paid vacation per
year.
9. Reimbursement of Expenses. The Company will reimburse Executive for the
ordinary and necessary expenses incurred by him in the performance of his duties
under this Agreement in accordance with the Company's policies in effect from
time to time, including, but not limited to reimbursement for membership in the
Adaptive Business Leader Organization and YPO professional organizations.
10. Termination of Employment.
(a) Executive's employment under this Agreement may be terminated at any
time by the Board of Directors of Company (and by the Board of
Directors of any subsidiary or affiliated organization for
employment with those entities), with or without Cause. Executive's
employment is "at-will."
(b) Executive's employment under this Agreement may terminate as
described in Section 2.
2
(c) Executive's employment under this Agreement shall terminate upon his
retirement, resignation or death.
(d) Executive's employment under this Agreement shall terminate upon
written notice by Company to Executive of a termination due to
Disability.
(e) If Executive's employment terminates for Cause or for any reason
other than as set forth in Sections 10(f) or (g), Company shall be
obligated only to continue to pay Executive's base salary and, to
the extent earned, accrued and unpaid, annual incentive bonus and
furnish the then existing benefits under Section 8 up to the date of
termination; provided, that if Executive's employment is terminated
as a result of Executive's Disability, Executive shall remain
eligible for benefits under any long-term disability program of
Company, as amended from time to time, as long as his Disability
continues.
(f) If Executive's employment is terminated by Company without Cause or
upon expiration of the Term without extension or constructive
termination, in addition to the amounts payable under Section 10(e),
Executive shall be entitled to receive his base salary, and medical
and other insurance benefits under Section 8(a) for a period of
twelve (12) months at the times and frequency regularly paid. As a
condition to the salary and benefit continuation under this Section
10(f), Executive must first execute and deliver to Company, in a
form prepared by Company, a release of all claims against Company
and other appropriate parties, excluding Company's performance under
this Section 10(f) and of Executive's vested rights under any
Company sponsored retirement plans, 401(k) plans and stock ownership
plans. If Executive, despite good faith, diligent efforts to obtain
employment, has not become employed during the foregoing twelve (12)
month period after termination or remains unemployed thereafter, the
Company shall continue the payment of Executive's base salary and
medical and other insurance benefits until the earlier of (i) the
expiration of an additional six (6) months or (ii) Executive
becoming employed.
(g) If Executive's employment is terminated by the Company within three
(3) months before or after a Change in Control, or Executive resigns
as the result of a constructive termination following a Change in
Control, in addition to the amounts payable under Section 10(e),
upon execution and delivery of the release of all claims described
in Section 10(f), Executive shall be entitled to receive his base
salary and medical and other insurance benefits under Section 8(a)
for a period of twenty-four (24) months.
(h) All amounts due from Executive to the Company, including all amounts
of principal and interest due under any loans from the Company to
the Executive, shall be immediately due and payable by the Executive
to the Company upon termination of employment. The Company may
offset any such amounts, dollar for dollar, against salary
continuation to which Executive may be entitled under Sections 10(f)
or (g).
3
11. Definitions. The meaning of certain terms in this Agreement are as
follows:
(a) "Cause" shall consist of any of the following:
(i) the Executive is convicted of, or has pleaded guilty or
entered a plea of nolo contendere to, a felony (under the laws
of the United States or any state thereof);
(ii) fraudulent conduct by the Executive in connection with the
business or other affairs of the Company or any related
company or the theft, embezzlement, or other criminal
misappropriation of funds by the Executive from the Company or
any related company;
(iii) the Executive's gross negligence to perform the duties of the
Chief Operating Officer or gross negligence to satisfy
fiduciary obligations toward shareholders, after reasonable
notice has been provided of such non-performance and, if such
failure is curable, Executive has not cured such failure
within a reasonable period following such notice; or
(iv) the Executive's gross negligence to comply with reasonable
directives of the Chief Executive Officer or Board which are
communicated to him in writing, after reasonable notice has
been provided of such non-performance and, if such failure is
curable, Executive has not cured such failure within a
reasonable period following such notice.
(b) "Change in Control" means:
(i) a sale or other disposition of all or substantially all of the
assets of the Company;
(ii) a merger or consolidation in which the Company is not the
surviving entity and in which the shareholders of the Company
immediately prior to such consolidation or merger own less
than fifty percent (50%) of the surviving entity's voting
power immediately after the transaction;
(iii) a reverse merger in which the Company is the surviving entity
but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of
securities, cash, or otherwise, and in which the shareholders
of the Company immediately prior to such merger own less that
fifty percent (50%) of the Company's voting power immediately
after the transaction; or
(iv) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote
are exchanged (other than to form a holding company in which
the shareholders of the Company immediately prior to such
recapitalization own not less than fifty percent
4
(50%) of the holding company's voting power immediately after
the transaction).
(c) "Disability" means the inability of Executive, due to injury,
illness, disease or bodily or mental infirmity, to engage in the
performance of his material duties of employment with Company as
determined in good faith by Company, for (i) any period of one
hundred twenty (120) consecutive days or (ii) a period of one
hundred eighty days (180) in any continuous twenty-four (24) month
period, provided that interim returns to work of less than ten (10)
consecutive business days in duration shall not be deemed to
interfere with a determination of consecutive absent days if the
reason for absence before and after the interim return are the same.
Benefits to which Executive is entitled under any disability policy
or plan provided by Company shall reduce the base salary paid to
Executive during any period of Disability on a dollar-for-dollar
basis.
12. Confidential Information. During Executive's employment with the
Company and at all times after the termination of such employment, regardless of
the reason for such termination, Executive shall hold all Confidential
Information relating to the Company in strict confidence and shall not use,
disclose or otherwise communicate the Confidential Information to anyone other
than the Company without the prior written consent of the Company. "Confidential
Information" includes, without limitation, financial information, trade secrets,
business plans, business methods or practices, market studies, customer lists,
referral lists and other proprietary business information of the Company.
"Confidential Information" shall not include information which is or becomes in
the public domain through no action by Executive or information which is
generally disclosed by the Company to third parties without restrictions on such
third parties. Executive shall return all Confidential Information to the
Company upon termination of employment.
13. Solicitation of Customers. During his employment with the Company and
for a period after the termination of Executive's employment, regardless of the
reason for the termination, equal to the greater of (a) one (1) year or (b) the
period for which Executive receives payment of his base salary under Section
10(f) or (g) (the "Non-Competition Period"), Executive shall not influence or
attempt to influence, directly or indirectly, any customer of the Company to
divert its business away from the Company.
14. Soliciting Employees. Executive agrees that during his employment with
the Company and during the Non-Competition Period, he will not directly or
indirectly solicit any person who is then, or at any time within six months
prior thereto was, an employee of the Company to work for any person or entity
then in competition with the Company.
15. Non-Competition. During his employment with the Company and during the
Non-Competition Period, Executive shall not, directly or indirectly, in any
capacity:
(a) Engage, own or have any interest in;
(b) Manage, operate, join, participate in, accept employment with,
render advice to, or become interested in or be connected with;
5
(c) Furnish consultation or advice to; or
(d) Permit his name to be used in connection with;
any person or entity that competes with the business of the Company.
Notwithstanding the foregoing, holding five percent (5%) or less of an interest
in the equity, stock options or debt of any publicly traded company, and serving
as a director, shareholder and/or advisor to the successor entity of the small
to medium business group of Integration Technologies, Inc., shall not be
considered a violation of this Section 15.
16. Remedies. In the event of a material breach or threatened material
breach of Section 12, Section 13, Section 14 or Section 15, Company, in addition
to its other remedies at law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent any violations of the
aforementioned Sections. In the event of any such material breach, if applicable
Company may immediately cease payment of Executive's base salary and the
providing to Executive of benefits under Section 10(f) or (g).
17. Severability and Savings. Each provision in this Agreement is
separate. If necessary to effectuate the purpose of a particular provision, the
Agreement shall survive the termination of Executive's employment with the
Company. If any provision of this Agreement, in whole or in part, is held to be
invalid or unenforceable, the parties agree that any such provision shall be
deemed modified to make such provision enforceable to the maximum extent
permitted by applicable law. As to any provision held to be invalid or
unenforceable, the remaining provisions of this Agreement shall remain in
effect.
18. Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of Company and its successors and assigns. This Agreement shall
be binding upon and inure to the benefit of Executive, his heirs and personal
representatives. This Agreement is not assignable by Executive.
19. Entire Agreement. This Agreement, including the Schedules hereto,
embodies the entire agreement of the parties hereto respecting the matters
within its scope. This Agreement supersedes all prior agreements of the parties
hereto on the subject matter hereof. There are no representations, warranties,
or agreements, whether express or implied, or oral or written, with respect to
the subject matter hereof, except as set forth in this Agreement.
20. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in
writing and signed by the Company and Executive. The waiver or
nonenforcement by the Company of a breach by Executive of any
provision of this Agreement shall not be construed as a waiver of
any subsequent breach by Executive.
(b) Any notice under this Agreement must be in writing and delivered
personally or by overnight courier, sent by facsimile transmission
or mailed by registered or certified mail to the parties at their
respective addresses.
6
(c) This Agreement shall be governed by the laws of the State of
California.
(d) This Agreement may be executed in counterparts, which together shall
constitute one Agreement.
(e) By their signatures below, the parties acknowledge that they have
had sufficient opportunity to read and consider, and that they have
carefully read and considered, each provision of this Agreement and
that they are voluntarily signing this Agreement.
The parties have executed this Agreement as of the Effective Date.
___________________________________
Xxxxxx Xxxxxx, Xx.
DynTek, Inc.
By ________________________________
Its _______________________________
7
