EXHIBIT 10(d)
EMPLOYMENT AGREEMENT
This agreement is made as of January 1, 2001, at Columbus, Ohio, between
Pinnacle Data Systems, Inc., an Ohio corporation (the "Company"), and Xxxx X.
Xxxx (the "Employee"), who hereby agree as follows:
(S)1. Employment. The Company hereby renews and continues the Employee's
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employment, and the Employee hereby accepts such employment renewal and
continuation by the Company, on the terms and subject to the conditions set
forth in this agreement.
(S)2. Term of Employment. The term of the Employee's employment as
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renewed pursuant to this agreement shall begin as of the date of this agreement
and shall terminate, unless sooner terminated in accordance with the provisions
of (S)6, below, on August 31, 2003. The term of the Employee's employment under
this agreement shall be automatically renewed upon the same terms and conditions
contained in this agreement, or upon such other terms and conditions to which
the parties mutually agree in writing, for successive one-year periods,
commencing on the day following the termination date of the immediately
preceding term or renewal term and terminating, unless sooner terminated in
accordance with the provisions of (S)6, below, on the first anniversary thereof,
unless either party gives notice of non-renewal not less than 90 days prior to
the end of the employment term in effect.
(S)3. Services. The Employee shall continue to act as the Chief Executive
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Officer and President of the Company. As such, the Employee shall continue
performing substantially the same duties as the Employee has performed for the
Company in the past and he shall be responsible for establishing and supervising
the implementation of the business policies and operating programs, budgets,
procedures, and directions of the Company (reporting only to the Board of
Directors of the Company); monitoring and evaluating the effectiveness of the
management of the Company; implementing strategic plans for the Company;
presiding at all meetings of the shareholders and the Board of Directors of the
Company; and performing such other services as may be reasonably assigned to him
from time to time by the Board of Directors. The Employee shall devote his best
efforts and full business time, attention, energy, and skill to the Company's
business and to the performance of his duties hereunder and he shall have such
authority to act on behalf of the Company as is necessary to carry out the
foregoing duties and which is ordinarily incident to the office of Chief
Executive Officer and President.
(S)4. Compensation. During the term of his employment pursuant to this
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agreement, the Employee shall be entitled to receive the following compensation:
(a) Salary. An annual base salary of $185,000 (or any higher amount
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determined by the Board or the Compensation Committee).
(b) Bonus. An incentive cash bonus equal to a percentage of the pre-
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tax net income of the Company (or based upon other factors deemed
appropriate by the Board or the Compensation Committee) for each fiscal
year ending during the term of employment under this agreement (calculated
prior to deduction of the bonus). The bonus percentage
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or other factors for each year will be determined by the Board or the
Compensation Committee no later than the February board meeting for that
year.
The base salary will be payable in accordance with the Company's general
policies for payment of compensation to salaried personnel. The bonus will be
payable after the end of each fiscal year of the Company as soon as practical
after the Company's independent auditors have completed the year end audit of
the Company's financial statements for such year.
(S)5. Fringe Benefits. During the term of employment pursuant to this
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agreement, the Employee shall be entitled to the following fringe benefits:
(a) Vacation. The number of weeks of paid vacation each year to which
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the Employee is entitled under the Company's vacation policy. Three weeks
of vacation shall be mandatory. At the Employee's option, he may not take
any of the remaining week(s) of vacation and instead be paid an additional
amount equal to his base salary for such week(s).
(b) Stock Options. Stock options in such quantities and at such
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exercise prices as shall be established by the Board of Directors or an
option committee. The options shall be granted pursuant to and be subject
to the terms of the Pinnacle Data Systems, Inc. 1995 Stock Option Plan, as
amended, or any subsequent plan adopted by the Company.
(c) Life Insurance. Payment of life insurance premiums on a $500,000
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face amount whole life insurance policy the Employee has with State Farm
insuring the life of the Employee, with the beneficiaries to be designated
by the Employee.
(d) Disability Payments. If at any time during the term of employment
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the Employee shall be unable to perform his duties hereunder due to a
disability, the Employee shall nonetheless be entitled to receive, for a
period not to exceed one year from the date of commencement of such
disability, any compensation the Employee would otherwise be entitled to
pursuant to (S)4(a), above, during the period of such disability, provided,
however, that his "disability" be documented by a competent medical doctor
selected to examine the Employee at the request of the disinterested Board
of Directors, which examination expense shall be borne by the Company. In
the event said disability shall continue for a period greater than one
year, the Employee shall no longer be entitled to receive any compensation
during the remaining period of such disability. In the event the Employee
is entitled during this one year period to payments under any disability
policy, the Company's obligation shall only be to supplement such payment
to bring the total amount he receives up to the amount of his base
compensation pursuant to (S)4(a).
(e) Executive Development. The Employee shall be required to attend a
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personal executive development or experiential learning seminar of his
choice for up to three days during each year of the employment term, with
spousal accommodations.
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(f) Membership. The Employee will receive a membership in TEC (The
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Executive Committee).
(g) Technical Development. The Employee shall be entitled to attend a
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technical development seminar or training of his choice for up to three
days during each year of the employment term.
(h) Estate Planning. The Company shall reimburse the Employee for
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expenses incurred for estate planning conducted with respect to his
personal estate, provided that this shall be limited to one estate plan
during the employment term.
(i) Other Fringe Benefits. The Employee shall be entitled to such
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other fringe benefits and perquisites as may be provided generally for the
Company's executive management pursuant to policies established or changed
from time to time by the Board.
(S)6. Termination of Employment. The Employee's employment under this
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agreement may be terminated:
(a) By the Employee within six months after a Change in Control of the
Company (as defined below); provided that after such Change in Control of
the Company, the Employee's base salary or other benefits have been reduced
or the Employee's authority or responsibilities have been significantly
reduced. If the Employee terminates his employment pursuant to this
provision, he shall be entitled to receive his salary and benefits to the
date of termination, any bonus for such year to which he would otherwise be
entitled, prorated for the portion of the year during which the Employee
was employed, and a payment from the Company, in a lump sum, in an amount
equal to one year's base salary.
(b) By the Company immediately upon the occurrence of cause (as
defined below) or at any time thereafter. For purposes of this agreement,
"cause" shall mean the Employee's failure to operate the Company's business
in accordance with the policies, programs, budgets, procedures, and
directions established from time to time by the Board, the Employee's
failure fully to perform and observe all obligations and conditions to be
performed and observed by the Employee under this agreement, or the
Employee's dishonesty, conviction of a crime (other than minor traffic
offenses), habitual drunkenness, using illegal drugs, embezzlement,
conflict of interest, willful insubordination, or neglect of duty. If the
Company terminates the Employee's employment pursuant to this provision, he
shall be entitled to receive only his base salary through the date of
termination.
(c) By the Company with or without cause upon giving not less than 60
days advance written notice prior to the date of termination. If the
Company terminates the Employee's employment pursuant to this provision, he
shall be entitled to receive his salary to the date of termination, any
bonus for such year to which he would otherwise be entitled, prorated for
the portion of the year during which the Employee was employed,
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and a payment from the Company, in a lump sum, in an amount equal to one
year's base salary.
(d) By the Company if the Employee is under a long-term disability, at
which time the Employee will receive any amounts due to him under a long-
term disability policy of the Company and due to him pursuant to (S)5(d).
For purposes of this agreement, the term "long-term disability" shall have
the same meaning as long-term disability or other similar term used in any
long-term or permanent disability policy provided by the Company and
covering the Employee. In the event there is no long-term or permanent
disability policy in effect covering the Employee, the term "long-term
disability" shall mean that because of physical or mental incapacity, the
Employee has not performed his duties under this agreement for 60 days or
longer and it is probable, in the opinion of a licensed physician selected
by the Company, that the Employee will not be able to engage actively in
his employment by the Company for an additional period of 90 days or
longer.
For purposes of this agreement, a Change in Control shall be deemed to
occur:
(i) When any "person" as defined in (S)3(a)(9) of the Securities
Exchange Act of 1934 (the "Exchange Act") and as used in (S)(S)13(d)
and 14(d) thereof, including a "group" as defined in (S)13(d) of the
Exchange Act, but excluding the Company and any subsidiary and any
employee benefit plan sponsored or maintained by the Company or any
subsidiary (including any trustee of such plan acting as trustee),
directly or indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act, as amended from time to time), of
securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities;
(ii) When, during any period of 24 consecutive months during the
existence of this agreement, the individuals who, at the beginning of
such period, constitute the Board (the "Incumbent Directors") cease
for any reason other than death to constitute at least a majority
thereof; provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent Director) if
such director was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the directors who then qualified
as Incumbent Directors either actually (because they were directors at
the beginning of such 24-month period) or by prior operation of this
paragraph; or
(iii) Upon the occurrence of a transaction requiring shareholder
approval for the acquisition of the Company by an entity other than
the Company or a subsidiary through purchase of assets, by merger, or
otherwise.
(S)9. Noncompetition; Nondisclosure; Ownership of Developments. In
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consideration of the substantial increase in base salary and other benefits
provided to the Employee, the Company and the Employee agree as follows:
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(a) During the term of the Employee's employment by the Company,
pursuant to this agreement or otherwise, and for a period of three years
immediately after termination of such employment, the Employee shall not
directly or indirectly:
(i) Engage in or participate in any business similar to the
business of the Company within the United States and within any other
country in which the Company has engaged in business during the term
of the Employee's employment by the Company; or
(ii) Sell or perform the same or similar services or products as
then provided by the Company to, or solicit, any of the Company's
present customers or accounts or persons or businesses which were
customers or accounts within three years preceding the Employee's
termination of employment with the Company; or
(iii) Promote or assist, financially or otherwise, any person,
firm, association, corporation, or other entity which directly or
indirectly competes with the Company; or
(iv) Otherwise enter into or engage in any business which
directly or indirectly competes with the business carried on by the
Company.
(b) The Employee shall not at any time, either during the term of his
employment with the Company or after the termination of such employment for
whatever reason:
(i) Disclose to anyone (except to the extent necessary as a
benefit to the Company in the performance of his duties) any trade
secrets or confidential information (as defined below):
(ii) Solicit any of the Company's employees to leave the employ
of the Company; or
(iii) Seek to employ any of the Company's employees (other than
on behalf of the Company).
(c) All inventions, discoveries, concepts, improvements, formulas,
processes, devices, methods, innovations, designs, ideas, and product
developments (collectively, the "Developments") developed or conceived by
the Employee, solely or jointly with others, whether or not patentable or
copyrightable, at any time during the term of his employment with the
Company or within one year after the termination of such employment for any
reason, whether or not during normal working hours, and which relate in any
way to the actual or planned business activities of the Company shall be
considered to be developed or conceived by the Employee on behalf of the
Company within the scope of his employment, and all of the Employee's
right, title, and interest
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therein shall be the exclusive property of the Company. The Employee hereby
assigns, transfers, and conveys to the Company all of his right, title, and
interest in and to any and all such Developments. Employee shall disclose
fully, as soon as practicable and in writing, all Developments to the
Board. At any time and from time to time, upon the request of the Company,
the Employee shall execute and deliver to the Company any and all
instruments, documents, and papers, give evidence, and do any and all other
acts which, in the opinion of counsel for the Company, are or may be
necessary or desirable to document such transfer or to enable the Company
to file and prosecute applications for, and to acquire, maintain, and
enforce, any and all patents, trademark registrations, or copyrights under
United States or foreign law with respect to any such Developments or to
obtain any validation, reissuance, continuance, or renewal of any such
patent, trademark, or copyright. The Company will be responsible for the
preparation of any such instruments, documents, and papers and for the
prosecution of any such proceedings and will reimburse the Employee for all
reasonable expenses the Employee incurs upon authorization of the Board.
(d) The Employee understands that this section is an essential element
of this agreement and that the Company would not have entered into this
agreement without this section being included in it. The Employee has
consulted with his legal counsel and has been fully advised concerning the
reasonableness and propriety of this section in the specific context of the
operations and business of the Company, and the Employee acknowledges that
this section is reasonable and appropriate in all respects. In the event
of any violation or attempted violation of this section, Employee
specifically acknowledges and agrees that the Company's remedy at law will
be inadequate, that the Company, its business, and business relationships
will suffer irreparable injury and, therefore, that the Company shall be
entitled to injunctive relief upon such breach in addition to any other
remedy to which it may be entitled, either at law or in equity, without the
necessity of proof of actual damage.
(e) As used in this agreement, the terms "trade secrets" and
"confidential information" shall mean any information which is not
generally known to the public, and include without limitation any
information relating to the Company's business operations and structure,
sales methods, practices and techniques, technical know-how, Developments,
advertising, marketing methods and practices, and the Company's
relationships with suppliers, employees, or other persons or entities doing
business with the Company.
(f) For purposes of this agreement, "directly or indirectly" shall
mean and include participation for the Employee's own account or as an
owner, shareholder, member, partner, director, officer, employee,
creditor, or agent of any other person or organization or through the
Employee's spouse or other family relation, but shall not include a passive
investment of not more than two percent of the outstanding stock of a
company whose shares are then being regularly traded in open-market
brokerage transactions (either on a stock exchange or over-the-counter).
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(g) In the event that a court of competent jurisdiction finally
determines that any provision of this section is unenforceable, the Company
and the Employee agree that such court shall have jurisdiction to reform
this agreement and such provision so that it is enforceable to the maximum
extent permitted by law, and the parties agree to abide by such court's
determination.
(S)12. General. This document contains the entire agreement between the
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parties and supersedes any prior discussions, negotiations, representations, or
agreements between them relating to the employment of the Employee. No
additions or other changes to this agreement shall be made or be binding on
either party unless made in writing and signed by each party to this agreement.
Any notice or other communication required or desired to be given to any party
under this agreement shall be in writing and shall be deemed given when either
delivered personally to that party or deposited in the United States mail,
first-class postage prepaid, addressed to that party at the address set forth
below its or his name below. Any party may change the address to which notices
and other communications are to be given by giving the other parties notice of
such change. All questions concerning the validity, intention, or meaning of
this agreement or relating to the rights and obligations of the parties with
respect to performance hereunder shall be construed and resolved under the laws
of Ohio. If and to the extent that any court of competent jurisdiction
determines that it is impossible or violative of any legal prohibition to
construe any provision of this agreement consistently with any law, legal
prohibition, or public policy and consequently holds that provision to be
invalid or prohibited, such holding shall in no way affect the validity of the
other provisions of this agreement, which shall remain in full force and effect.
No failure by any party to insist upon strict compliance with any term of this
agreement, to exercise any option, to enforce any right, or to seek any remedy
upon any default of any other party shall affect, or constitute a waiver of, the
first party's right to insist upon such strict compliance, exercise that option,
enforce that right, or seek that remedy with respect to that default or any
prior, contemporaneous, or subsequent default; nor shall any custom or practice
of the parties at variance with any provision of this agreement affect, or
constitute a waiver of, any party's right to demand strict compliance with all
provisions of this agreement. The captions of the various sections of this
agreement are not part of the context of this agreement, but are only labels to
assist in locating those sections, and shall be ignored in construing this
agreement. This agreement shall be personal to the Employee and no rights or
obligations of the Employee under this agreement may be assigned by him.
PINNACLE DATA SYSTEMS, INC.
/s/ Xxxx X. Xxxx By /s/ Xxxxxx X. X'Xxxxx
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XXXX X. XXXX Xxxxxx X. X'Xxxxx, Chairman of the
Compensation Committee
Address: 0000 Xxxxx Xxxx Address: 0000 Xxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
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