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EMPLOYMENT AGREEMENT
AGREEMENT dated as of September 9, 1999, between VIDEO NETWORK
COMMUNICATIONS, INC., a Delaware corporation (the "Company") and XXXX XXXXXXX,
residing in Nashua, New Hampshire (the "Executive").
WHEREAS, the Executive is willing to perform services for the Company,
and the Company desires to retain the services of the Executive;
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements of the Executive and the Company herein contained, the
parties hereto agree as follows:
1. Employment.
The Company agrees to employ the Executive and may assign the Executive to
work for it or for any subsidiary or affiliated company and the Executive agrees
to perform the duties assigned to him upon the terms and conditions herein
provided.
2. Position and Responsibilities.
The Company shall employ the Executive and the Executive agrees to serve
as the President and Chief Operating Officer of the Company, subject to
conditions herein set forth. The Executive agrees to perform such reasonable and
lawful duties and services not inconsistent with his position and shall report
to Xxxxx X. Xxxxxx (while he serves as the Chief Executive Officer of the
Company) (hereinafter "Xxxxx X. Xxxxxx") or the Board of Directors of the
Company (the "Board") who shall have the authority to direct and supervise the
Executive's business actions
3. Term of Agreement and Duties.
(a) Term of Employment. The period of the Executive's employment
under this Agreement shall commence on September 9, 1999 and shall
continue for period of four (4) years thereafter.
(b) Duties. During such period of his employment hereunder, except
for illness, vacation periods, and reasonable leaves of absence, the Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties under this Agreement. The
Executive may serve on the board of directors of, or hold any other offices in,
other companies or organizations so long as that service does not conflict with
the interests of the Company or materially affect the Executive's performance of
his duties pursuant to this Agreement.
4. Compensation.
For all services to be rendered by the Executive in any capacity during
the period of his employment under this Agreement, including, without
limitation, services as an employee, officer, director, or member of any
committee of the Company or of any subsidiary, affiliate or division thereof,
the Company will pay or cause to be paid to the Executive and will provide or
cause to be provided to the Executive the following:
(a) Salary. The Executive shall be compensated by the Company for his
services in such capacities at the minimum base salary rate of One Hundred
Eighty-Eight Thousand Dollars ($188,000) per year, or such higher rate as the
Board may in its discretion determine, payable in accordance with the Company's
regular payroll policies. The minimum base salary of the Executive shall be
adjusted upward
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from time to time in the sole discretion of the Board, in which case such
increased amount shall thereafter constitute the Executive's minimum base
salary.
(b) Incentive Compensation.
(i) The Executive shall receive, as an initial cash incentive,
thirty percent (30%) of the Executive's minimum base salary if the Company
demonstrates profitability for two consecutive quarters. This initial cash
incentive shall be paid no later than ten (10) days after the Company files with
the Securities and Exchange Commission its Quarterly Report on Form 10-QSB or
Annual Report on Form 10-KSB (or any successor or comparable form on which such
reports are then filed) covering the second relevant quarter. Profitability for
this purpose shall mean the Company's operating profit (income before payment of
interest, taxes and dividends) as reported on the Company's Quarterly Reports on
Form 10-QSB or Annual Reports on Form 10-KSB.
(ii) If the Company demonstrates profitability for two
consecutive quarters as provided in Section 4(b)(i) above, within one hundred
and thirty-five days(135) days after the end of the second relevant quarter, the
Board shall reach an agreement with the Executive on future annual cash
incentive plans which plans shall offer the Executive equal or greater incentive
compensation than the initial cash incentive set forth above in Section 4(b)(i).
(c) Vacations. The Executive shall annually be entitled to three (3)
weeks of vacation, effective upon the commencement of his employment hereunder.
The Executive may carryover unused vacation time in accordance with the
Company's policies applicable to executive officers as in effect from time to
time.
5. Expenses.
The Company shall reimburse the Executive for all reasonable expenses,
including travel, and other disbursements incurred by him for, or on behalf of
the Company (or its subsidiaries or affiliates), in the performance of his
duties hereunder consistent with the current reimbursement policies of the
Company. The Company shall also reimburse the Executive for his long term
disability insurance premiums for the maximum coverage reasonably available
during such times that the Company does not have a long term disability
insurance plan for its employees. The Company shall reimburse the Executive for
his legal expenses, up to $1,000, for initial preparation of various employment
agreements.
6. Participation in Benefit and Incentive Plans.
The Executive shall participate with full eligibility, upon his date of
hire, in all Company retirement, pension, group life, health, disability, or
accident insurance, stock option, stock purchase, restricted stock, bonus or any
other employee benefit or incentive plans generally available to the executives
and employees of the Company (or any subsidiary or affiliate), whether now in
force or hereafter adopted, in accordance with their terms. With respect to
disability insurance, the Company will provide for $100,000 of disability
coverage.
7. Termination of Employment.
(a) Discharge for Cause. Notwithstanding any of the foregoing
provisions of this Agreement, the Executive may, at any time during the
term of this Agreement, be discharged by the Board
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for Cause. For the purposes of this Agreement, Cause shall mean: (i) conviction
of a felony or crime involving an act of moral turpitude, dishonesty, or
misfeasance that substantially interferes with the orderly business of the
Company or any of its subsidiaries; or (ii) conduct that substantially
interferes with or damages the business, standing or reputation of the Company
or any of its subsidiaries; or (iii) the repeated failure of Executive to follow
the directives of the Board of Directors or the CEO; or (iv) negligence or
malfeasance by the Executive in the performance of his duties; or (v) material
breach by the Executive of this Agreement; or (vi) a determination by the Board
that Executive has engaged in illegal conduct, after written notice to Executive
and an opportunity for Executive to be heard by the Board.
Termination by the Company. If the Company terminates the Executive for any
reason other than Cause, death, Disability, retirement or at the end of the
applicable term of this Agreement:
(i) The Company shall pay to the Executive, as severance pay,
on the Date of Termination (as hereinafter defined), an amount equal to the
Executive's annual minimum base salary effective at the date of the Notice of
Termination, payable in accordance with the Company's normal payroll practices
over the severance period; plus, any bonuses which the Executive earned and, if
applicable, the Company shall pro rate any bonuses through the Date of
Termination which the Executive would have been paid had he remained an employee
of the Company.
(ii) The Executive shall continue to receive medical, benefits
paid by the Company, through the one year period following the Date of
Termination.
(iii) The Executive shall be entitled to six (6) months from
the Date of Termination in which to exercise any or all of his vested stock
options.
The foregoing shall be in addition to payment of the Executive's full
base salary through the Date of Termination at the rate effective at the time
the Notice of Termination was given, as well as to all of the employee benefits
the Executive shall receive in accordance with this Agreement through the Date
of Termination.
The Executive shall not be required to mitigate the amount of any payment
provided for in this Section 7(b) by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 7(b) be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
However, if the Executive does accept alternative employment during the
period that any payment or benefit is provided by the Company pursuant to this
Section 7(b), and Executive's new employer provides the Executive with medical
insurance, then the Company shall not be obligated to continue to provide such
benefits after the date on which the new employer provides them.
(b) Executive Disability. If at any time while employed hereunder the
Executive, because of accident, disability, or physical or mental illness,
becomes incapable of performing the essential functions of the job with or
without reasonable accommodation, the Company shall have the right to terminate
the Executive's employment only upon sixty (60) days' written notice to the
Executive. "Disability" for purposes of this Agreement shall have the same
meaning as provided under any long-term disability policy of the
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Company that covers the Executive, or if none, as defined in the Executive's
long-term disability insurance policy, a copy of which shall be provided to the
Company.
(c) Change in Control and/or Change in Reporting. Video Network
Communications, Inc. expects that during the Executive's tenure as President and
Chief Operating Officer of the Company, the Executive will contribute to the
growth and success of the Company in significant ways, and that the Executive
will develop an intimate knowledge of the business and affairs of the Company
and its policies, methods, personnel, and problems. The Company also expects
that such contributions and knowledge will be of significant benefit to the
future growth and success of the Company.
The Board of Directors of the Company recognizes that a change in control
of the Company or a change in reporting relationships within the Company may
occur and that the threat of such changes may result in the departure of key
management personnel to the detriment of the Company and its stockholders. The
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued dedication of key members of the Company's management,
including the Executive, to their assigned duties in the face of the potentially
disturbing circumstances arising from the possibility of such changes.
To induce the Executive to remain in the employ of the Company and to
continue to perform the Executive's duties as an officer of the Company in a
manner that is, in the Executive's judgment, in the best interests of the
Company, the Company hereby agrees to provide the Executive with certain
severance benefits in the event that the Executive's employment with the Company
is terminated subsequent to a Change in Control (as defined in Section 7(d)(i)
hereof), or a Change in Reporting Relationships (as defined in Section 7(d)(ii)
hereof) under the circumstances described below.
(i) Change in Control Defined. Except as provided in Section
7(d)(ii), no benefits shall be payable hereunder unless there shall have been a
Change in Control as set forth below, and the Executive's employment by the
Company shall thereafter have been terminated in accordance with Section 7(d)
(iii) below. For purposes of this Agreement, a "Change in Control" shall occur
if: (1) greater than 50% of the total voting power of the capital stock or
membership interests of the surviving entity in any merger, consolidation, or
reorganization to which the Company is a party changes hands during that
transaction; (2) the Company issues shares of its capital stock such that after
the issuance or series of issuances a Person holds greater than 50% of the total
voting power of the capital stock of the Company; (iii) greater than 50% of the
total voting power of the capital stock of the Company is acquired by a Person
in any transaction or series of transactions; or (iv) all or substantially all
of the assets of the Company are sold to another entity and less than 50% of the
total voting power of the capital stock or membership interests of the other
entity is held by Persons who were the holders of Company common stock prior to
the sale. "Person" shall include an individual, entity or a group of individuals
or entities.
(ii) Change in Reporting Relationship Defined. Except as
provided in Section 7(d)(i), no benefits shall be payable hereunder unless there
shall have been a Change in Reporting Relationship as set forth below, and the
Executive's employment by the Company shall thereafter have been terminated in
accordance with Section 7(d)(iii) below. For purposes of this Agreement, a
"Change in Reporting Relationship" shall occur if the Executive is required to
report to or to seek authorization or approval for his actions on behalf of the
Company from any other officer, individual director or employee of the Company
other than Xxxxx X. Xxxxxx or the Board.
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(iii) Termination Following Change in Control or Change in
Reporting Relationship. The Executive shall be entitled to the benefits provided
for in Section 7(d)(iv) hereof if the Executive's employment as an officer of
the Company terminates within six months after a Change in Control or Change in
Reporting Relationship for any reason, voluntary or involuntary, including the
Executive's resignation, other than death, retirement, disability or termination
by the Company for Cause (as hereinbefore defined) or at the end of the
applicable term of this Agreement.
(iv) Compensation Upon Termination Following Change in Control or
Change in Reporting Relationship. Upon termination of Executive within six
months following a Change in Control or Change in Reporting Relationship as
described in Sections 7(d)(i), (ii) and (iii):
(1) The Company shall pay to the Executive, as severance
pay, within ten (10) business days of termination, a lump sum amount equal to
the Executive's then effective annual minimum base salary; plus, all reasonable
legal fees and expenses incurred by the Executive as a result of such
termination (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain or enforce
any right or benefit provided for by this Agreement).
(2) The Company shall pay to the Executive, within ten (10)
business days of termination, any bonuses which the Executive earned and, if
applicable, the Company shall pro rate any bonuses through the Date of
Termination which the Executive would have been paid had he remained an employee
of the Company.
(3) The Executive shall continue to receive medical, dental,
long term disability and life insurance benefits paid by the Company, through
the one year period following the Executive's termination.
(4) The Executive shall be entitled to six (6) months from
the termination in which to exercise any or all of his vested stock options.
The foregoing shall be in addition to payment of the Executive's full base
salary through the Date of Termination at the rate effective at the time of
termination, as well as to all of the employee benefits the Executive shall
receive in accordance with this Agreement through the Date of Termination.
The Executive shall not be required to mitigate the amount of any payment
provided for in this Section 7(b) by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 7(b) be reduced by
any compensation earned by the Executive as the result of employment by another
employer after the Date of Termination, or otherwise. However, if the Executive
does accept alternative employment during the period that any payment or benefit
is provided by the Company pursuant to this Section 7(b), and Executive's new
employer provides the Executive with medical insurance, then the Company shall
not be obligated to continue to provide such benefits after the date on which
the new employer provides them.
(d) Notice of Termination. Any termination by the Company for Cause
(as such term is defined in Section 7(a)), pursuant to Section 7(b), or
Disability (as such term is defined in Section 7(c)), shall be communicated by
Notice of Termination to the Executive given in accordance with Section 14. For
purposes of this Agreement, a "Notice of Termination" means a written notice
that,
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(i) indicates the specific termination provision in this
Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be,
(ii) if the Executive's employment is terminated by the Company
pursuant to Section 7(b), the Date of Termination shall be specified in the
Notice of Termination, and
(iii) if the Executive's employment is terminated by reason of
death or Disability pursuant to Section 7(c), the Date of Termination shall be
the date of death of the Executive or the date the Executive is determined to
have a Disability in accordance with this Agreement, as the case may be.
8. Indemnification.
(a) The Company hereby agrees to indemnify the Executive for expenses
(including legal fees and related expenses), costs, losses, damages and other
liabilities incurred in connection with or arising out of any threatened,
pending, or completed proceeding, by reason of the fact that the Executive is or
was a director, officer or employee of the Company, or is or was serving at the
request of the Company as a director, officer, trustee, employee or agent of
another entity or by reason of any action alleged to have been taken or not
taken by the Executive while acting in any such capacity during the term of this
Agreement, except to the extent that such expenses, costs or liabilities are
shown to have arisen out of or been the result of the Executive's gross
negligence or willful misconduct or as otherwise may be prohibited by applicable
law. The right to indemnification conferred herein shall include the right to be
paid by the Company the expenses incurred, from time to time, in connection with
the proceeding in advance of the final disposition thereof promptly after
receipt by the Company of requests therefor stating the expenses incurred;
provided, however, the payment of such expenses in advance of the final
disposition of a proceeding shall be made only upon receipt of an undertaking by
or on behalf of the Executive to repay such amounts if it shall ultimately be
determined that the Executive is not entitled to indemnification.
(b) If a claim for indemnification is not paid in full by the Company
within forty-five (45) days after a written claim has been received by the
Company, the Executive may, at any time thereafter, bring suit against the
Company to recover the unpaid amount of the claim. The Executive shall also be
entitled to the expenses, including without limitation legal fees and related
expenses of prosecuting such claim to the extent the Executive is successful in
establishing his right to indemnification.
(c) The right to indemnification shall not be exclusive of any other
rights to which the Executive seeking indemnification may be entitled, both as
to action in his official capacity and as to action in any other capacity while
holding that office. Subject to applicable law, to the extent that any rights to
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indemnification of the Executive under any bylaw, agreement, vote of
shareholders, directors or otherwise, are more favorable to the Executive, the
more favorable rights shall control.
(d) The right to indemnification shall continue as to the Executive
who has ceased to be an employee or to serve in any other of the capacities
described herein, and shall inure to the benefit of the heirs, personal
representatives, and administrators of such Executive. Notwithstanding any
amendment or repeal of, or the adoption of any provision inconsistent with, this
Section 8, if the Executive serves at the request of the Company as a director,
officer, employee, trustee, or agent of another entity, the Executive shall be
entitled to indemnification in accordance with the provisions hereof with
respect to any action taken or omitted prior to such amendment or repeal or
adoption of such inconsistent provision, except to the extent such amendment,
repeal, or inconsistent provision provides broader rights to indemnification
than the Company was permitted to provide prior thereto or to the extent
otherwise prescribed by law.
(e) Notwithstanding anything herein to the contrary, the Company shall
not be obligated to indemnify the Executive to the extent prohibited by
applicable law. In the event that any successor law thereto is amended with
respect to the permissive limits of indemnification of the Executive, this
Section 8 shall be deemed to provide the fullest indemnification permitted under
such amended law.
9. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive's
employment terminated in accordance with Section 7(b) hereof, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and delivers
the agreement provided for in this Section 9 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If the Executive should
die while any amount would still be payable to the Executive hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or, if there be no such designee,
to the Executive's estate.
10. Entire Agreement.
This Agreement contains the entire understanding of the Company and the
Executive with respect to the subject matter hereof.
11. Arbitration.
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Any dispute or controversy between the parties relating to this Agreement
shall be settled by binding arbitration pursuant to the governing rules of the
American Arbitration Association and shall be subject to the provisions of NH
RSA Chapter 542. Judgment upon the award may be entered in any court of
competent jurisdiction.
12. Assignability.
This Agreement is binding on and is for the benefit of the parties hereto
and their respective successors, heirs, executors, administrators and other
legal representatives. Neither this Agreement nor any right or obligation
hereunder may be assigned by the Company (except to any subsidiary or affiliate)
or by the Executive.
13. Amendment; Waiver.
This Agreement may be amended only by an instrument in writing signed by
the parties hereto, and any provision hereof may be waived only by an instrument
in writing signed by the party or parties against whom or which enforcement of
such waiver is sought. The failure of either party hereto at any time to require
the performance by the other party hereto of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter,
nor shall the waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such provision or a
waiver of the provision itself or a waiver of any other provision of this
Agreement.
14. Notices.
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxx Xxxxxxx
00 Xxxxxxxxx Xxxxx, Xxx. 00
Xxxxxx, XX 00000
If to the Company:
Video Network Communications, Inc.
Chairman
00 Xxxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000-0000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
15. Validity.
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The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect, nor shall the
invalidity or unenforceability of a portion of any provision of this Agreement
affect the validity or enforceability of the balance of such provision. If any
provision of this Agreement, or portion thereof is so broad, in scope or
duration, as to be unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
16. Beneficiary.
The Executive hereby designates as his beneficiary under this Agreement
The Xxxx Xxxxxxx Revocable Trust, provided that the Executive may change his
beneficiary, or provide for alternate beneficiaries, at any time by notifying
the Company in writing of such change, and no consent shall be required from the
beneficiary or from the Company.
17. Applicable Law.
This Agreement shall be governed by and construed in accordance with the
substantive internal law and not the conflict of law provisions of the State of
New Hampshire.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first mentioned above.
VIDEO NETWORK COMMUNICATIONS, INC.
By:
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Xxxxxx Xxxxx, Vice President
Administration & Finance and Secretary
EXECUTIVE:
By:
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Xxxx Xxxxxxx
