Exhibit 99.1
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), including the
attached Exhibit A, is hereby entered into between Advance Display Technologies,
Inc., ("Company " or "ADTI"), a Colorado corporation, having offices at 0000
Xxxxx Xxxxx Xxx #X, Xxxxxxxxx, Xxxxxxxx 00000, and Xxxx X. Xxxxxx, an individual
currently residing at 00000 X Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000 ("Employee"),
to be effective as of December 1, 2004 (the "Effective Date").
WITNESSETH:
WHEREAS, Employee was previously engaged in the business of technical
services, marketing services, business consulting services and the sales of
large screen electronic displays for and or to various clients worldwide; and
WHEREAS, Employee wishes to cause all such business conducted by him
subsequent to the date of this agreement to inure to the benefit of the
Employer; and
WHEREAS, Employee is willing to be solely employed by Company under the
terms and conditions set forth in this Agreement in lieu of all previous
agreements, arrangements or understandings, written or oral; and
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Company and Employee agree as
follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1 Company agrees to employ Employee, and Employee agrees to be
employed by Company, beginning as of the Effective Date and continuing until the
date set forth on Exhibit A (the "Term"), subject to earlier termination and the
other conditions set forth in this Agreement.
1.2 Employee initially shall be employed in the position set forth on
Exhibit A. Company may subsequently assign Employee to a substantially different
position or substantially modify Employee's duties and responsibilities, in
which event Employee may elect to terminate this Agreement under Section
3.2(ii), which termination shall constitute an Involuntary Termination for
purposes of Section 3.5. Company may assign this Agreement and Employee's
employment to any subsidiaries or other affiliates of ADTI. Employee agrees to
serve in the assigned position and to perform diligently and to the best of
Employee's abilities the duties and services appertaining to such position as
determined by Company, as well as such additional or different duties and
services appropriate to such position which Employee from time to time may be
reasonably directed to perform by Company. Employee shall at all times comply
with and be subject to such reasonable Company policies and procedures for
employees generally as Company may establish from time to time. Notwithstanding
any other provision of this Agreement, during the Term, Company shall take all
steps reasonably necessary to cause Employee to serve on the ADTI Board of
Directors, whether elected by the shareholders or appointed by the other members
of the ADTI Board.
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1.3 Employee shall, during the period of Employee's employment by
Company, devote Employee's full business time, energy, and best efforts to the
business and affairs of Company and its affiliates, including the formation of
potential new strategic partnerships. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that (a) interferes
with Employee's performance of Employee's duties hereunder, (b) is contrary to
the interests of Company, or (c) requires any significant portion of Employee's
business time.
1.4 In connection with Employee's employment by Company, Company shall
provide Employee with access to such confidential information pertaining to the
business and services of Company as is necessary and appropriate for Employee's
employment responsibilities. Company also shall endeavor to provide to Employee
the opportunity to develop business relationships with those of Company's
clients and potential clients as is necessary and appropriate for Employee's
employment responsibilities.
1.5 Employee acknowledges and agrees that, at all times during the
employment relationship Employee owes fiduciary duties to Company, including but
not limited to the fiduciary duties of loyalty, fidelity, due care, and
allegiance to act at all times in the best interests of Company, to make full
disclosure to Company of all information that pertains to Company's business and
interests, to do no act which would injure Company's business, its interests, or
its reputation, and to refrain from using for Employee's own benefit or for the
benefit of others any information or opportunities pertaining to Company's
business or interests that are entrusted to Employee or that he learned while
employed by Company. Employee acknowledges and agrees that, upon termination of
the employment relationship, Employee shall continue to refrain from using for
his own benefit or the benefit of others any information or opportunities
pertaining to Company's business or interests that were entrusted to Employee
during the employment relationship or that he learned while employed by Company.
Employee agrees that, while employed by Company, he shall not knowingly take any
action which interferes with the internal relationships between Company and its
employees or representatives or interferes with the external relationships
between Company and third parties.
1.6 It is agreed that any direct or indirect interest in, connection
with, or benefit from any outside activities, particularly commercial
activities, which interest might in any way adversely affect Company or any of
its affiliates, involves a possible conflict of interest. In keeping with
Employee's fiduciary duties to Company, Employee agrees that, during the
employment relationship, Employee shall not knowingly become involved in a
conflict of interest with Company or its affiliates, or upon discovery thereof,
allow such a conflict to continue. Moreover, Employee agrees to disclose to
Company's President any actual or potential conflict of interest that has not
previously been approved by Company's President or its Board of Directors.
Company and Employee recognize that it is impossible to provide an exhaustive
list of actions or interests which constitute a "conflict of interest."
Moreover, Company and Employee recognize there are many borderline situations.
In some instances, full disclosure of facts by Employee to Company's President
may be all that is necessary to enable Company or its affiliates to protect its
interests. In others, if no improper motivation appears to exist and the
interests of Company or its affiliates have not suffered, prompt elimination of
the outside interest will suffice. In still others, it may be necessary for
Company to terminate the employment relationship. Company and Employee agree
that Company's determination as to whether a conflict of interest exists shall
be conclusive. Company reserves the right to take such action as, in its
judgment, will end the conflict.
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1.7 Employee understands and acknowledges that Company is required by
applicable securities laws to publicly disclose the terms of this Agreement in
filings with the U.S. Securities and Exchange Commission or otherwise and that
Employee has no right to require Company to keep confidential this Agreement or
its terms.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1 During the Term Employee shall be paid a monthly salary not less
than the amount set forth under the heading "Monthly Base Salary" on Exhibit A,
subject to increase in the sole discretion of Company's Board of Directors,
which increases may be withdrawn at any time by the Board of Directors but not
below the "Monthly Base Salary" amount set forth on Exhibit A by Company.
Employee's monthly salary will be paid in semimonthly installments in accordance
with Company's standard payroll practice. Any calculation to be made under this
Agreement with respect to an adjustment of Employee's Monthly Base Salary shall
be made using the then current Monthly Base Salary in effect at the time of the
event for which such calculation is made.
2.2 While employed by Company, Employee shall be allowed to
participate, on the same terms as other employees of Company, in all employee
benefit plans and programs, including improvements or modifications of the same,
which are made available by Company to all of Company's employees. Such
benefits, plans, and programs may include, without limitation, medical, health,
and dental care, life insurance, disability protection, and pension plans.
2.3 Company shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally. Moreover,
unless specifically provided for in a written plan document adopted by the Board
of Directors of Company, none of the benefits or arrangements described in this
Article 2 shall be secured or funded in any way, and each shall instead
constitute an unfunded and unsecured promise to pay money in the future
exclusively from the general assets of Company.
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2.4 Beginning on the Effective Date, Employee shall be entitled to
receive sales incentives equal to 3% of the gross sales revenue directly
generated by Employee's sales efforts or his outside sales network, less any
outside sales commissions, finder's fees, or other sales incentives paid to
third parties (including commissions or sales incentives paid to any inside
sales force of Company). The 3% sales incentive shall be paid to Employee within
30 days of Company's receipt of the monies generated by the sales efforts of
Employee or his outside sales network, provided, however, that, upon the
earliest to occur of (a) the maximum 6,000,000 shares of Series D Preferred
Stock to be paid by Company in exchange for Employee's contribution to the
Company of various intangible assets owned by Employee pursuant to paragraph 2.6
hereof is fully vested, or (b) December 31, 2005, Employee shall no longer be
eligible to receive a 3% commission on sales generated by his outside sales
network, and will only be eligible to earn a 3% sales commission on sales
generated directly through his own personal sales efforts.
2.5 Subject to the approval of the Compensation Committee of Company's
Board of Directors at its January 2005 meeting, Employee shall be granted an
option to purchase 1,680,000 unregistered shares of Company's common stock at a
strike price of $0.03. The grant shall be effective on the date approved by the
Compensation Committee and, so long as Employee remains employed by Company,
shall vest 120,000 shares on each of April 1, 2005, July 1, 2005, October 1,
2005, January 1, 2006, April 1, 2006, July 1, 2006, October 1, 2006, January 1,
2007, April 1, 2007, October 1, 2007, January 1, 2008, April 1, 2008, July 1,
2008, and October 1 2008.
2.6 Subject to the approval of Company's Board of Directors, as further
consideration for Employee's efforts and for the various intangible assets to be
agreed upon by the parties being contributed to Company by Employee
contemporaneously herewith, including but not limited to outstanding sales
projects with bids submitted, sales agent network, industry contacts, industry
knowledge and industry relationships (the "Intangible Assets"), beginning on
December 1, 2005 and continuing every month thereafter until October 1, 2005,
Company shall issue to Employee a total of 6,000,000 unregistered shares of
Company's Series D Preferred Stock (the "Shares") in eleven (11) installments,
comprised of 1,000,000 Shares as the initial installment on December 1, 2004,
and 500,000 Shares per installment for the remaining ten (10) installments,
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provided, however, that each such installment after the initial installment
shall be reduced proportionately if and to the extent that $100,000 of
incremental Net Sales Revenue has not been generated by Employee for Company
since the prior installment, and provided further that, if and to the extent
that $200,000 of incremental Net Sales Revenue is not generated between December
1, 2004 and March 1, 2005, the Shares issued in the initial installment on
December 1, 2004 shall be likewise proportionately reduced, which reduction
shall be in addition to, and not a substitute for, the proportionate reductions
of the monthly installments made on January 1, 2005, February 1, 2005 and March
1, 2005. If at the time an installment is to be paid, the incremental Net Sales
Revenue is less than or greater than $100,000 (or $200,000 in the case of the
initial installment), such deficit or surplus shall be carried over to the next
installment so that, if Employee generates Net Sales Revenue utilizing the
intangible assets equal to or greater than $1,000,000 on or before December 31,
2005 (60 days after the last installment is due to be paid on November 1, 2005),
Employee will have been issued the maximum total of 6,000,000 shares of Series D
Preferred Stock of Company. Correspondingly, if and to the extent that the total
Net Sales Revenue for the period beginning on the Effective Date and ending on
December 31, 2005 is less than $1,000,000, the number of Series D Preferred
shares to be issued to Employee will have been proportionately reduced and will
not be increased by Net Sales Revenue after December 31, 2005. "Net Sales
Revenue" shall be defined and calculated by subtracting (a) the total cost of
goods, including all sales commissions or incentives paid to anyone, including
but not limited to Employee, and the total cost of sales from the gross selling
price of products sold by Employee and or his outside sales network from (b) the
gross sales revenues generated by Employee or his sales network. If Employee
obtains for Company a definitive agreement for the sale of a network of 100 or
more electronic screen signs with a minimum 5 year term and a 50% or greater
revenue sharing arrangement, Employee's Probationary Period, as defined in
Exhibit A, will immediately terminate. In such an event, Employee will be
permitted to (a) apply 3% of Company's projected first year revenues from such
agreement toward the Net Sales Revenue generated by Employee for the purposes of
meeting the requirements of the stock compensation incentive as outlined in this
paragraph and (b) elect, in Employee's sole discretion, to waive his right to
collect the 3% sales commission as noted in paragraph 2.4 herein, and allow
Company to retain those funds so that they are considered to be additional "Net
Sales Revenue" generated by Employee. Because the Shares will be issued subject
to a substantial risk of forfeiture, namely, if and to the extent that Employee
fails to generate sufficient Net Sales Revenue to cause all such shares to be
earned, Employee can elect to be taxed immediately on the Shares at their fair
market value at the time of issuance ($.0167 per share for the initial
installment on December 1, 2004) under Internal Revenue Code ss.83(b) (which
election must be filed with the Internal Revenue Service no later than thirty
(30) days after the issuance of any installment of the Shares for which an
election is desired). If Employee fails to make a timely election under Internal
Revenue Code ss.83(b) for accelerated recognition of any installment of Shares,
then those Shares will be valued for income tax purposes by Company's Board of
Directors, in its sole discretion, at the time that the risk of forfeiture for
Shares expires on account of Company's receipt of Net Sales Revenue. Employee
acknowledges, however, that (i) the tax laws relating to deferred recognition of
compensation have been changed as of January 1, 2005 by the American Jobs
Creation Act of 2004 and regulations to be promulgated under the new law, (ii)
Company is not providing Employee with tax advice concerning existing tax law or
the effect of the new law and (iii) Employee will consult with and rely upon
Employee's own legal, tax and financial advisers concerning the tax and other
effects of the issuance of the Shares to Employee.
2.7 If a majority of the Board (excluding Employee) determines, in its
sole discretion, that Employee has not met the requirements of the Probationary
Period as defined in Exhibit A hereto and Company terminates Employee's
employment as a result of that determination, Employee shall lose all rights to,
and shall surrender to Company, all shares of Company stock and options to
purchase Company stock granted to Employee pursuant to this Agreement upon such
termination and Company shall return the Intangible Assets to Employee.
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2.8 In the event of Employee's termination during the Probationary
Period, Company shall negotiate in good faith, and make a diligent effort to
grant a non-exclusive worldwide sales representative agreement to the former
Employee, whereby the sale of Company's products, services and or technologies
will be represented by Employee to third parties. Also, the termination of
Employee during the Probationary Period shall trigger the effectiveness of the
previously executed Confidentiality and Non-Circumvention Agreement (the "NDA").
In the absence of Employee's termination during the Probationary Period and the
resulting effectiveness of the NDA, Employee shall be bound by the
non-disclosure, non-compete, and non-circumvention obligations contained in this
Agreement.
2.9 Company shall withhold from any compensation, benefits, or other
amounts payable to Employee under this Agreement all federal, state, city, or
other taxes required by law.
ARTICLE 3: TERMINATION PRIOR TO EXPIRATION OF TERM AND EFFECTS OF
SUCH TERMINATION:
3.1 Notwithstanding any other provisions of this Agreement, Company
shall have the right to terminate Employee's employment under this Agreement at
any time prior to the expiration of the Term for any of the following reasons:
(i) "For cause" upon the determination by Company's Board of
Directors that "cause" exists for the termination of the employment
relationship. As used in this Section 3.1(i), the term "cause" shall
mean [a] Employee's gross negligence or willful misconduct in the
performance of the duties and services required of Employee pursuant to
this Agreement; [b] Employee has been convicted of a felony; [c]
Employee's willful refusal, without proper legal reason, to perform the
duties and responsibilities required of Employee under this Agreement
which remains uncorrected for thirty (30) days following written notice
to Employee by Company; [d] Employee's involvement in a conflict of
interest as referenced in Section 1.6 which remains uncorrected for
thirty (30) days following written notice to Employee by Company on
account of which Company then makes a determination to terminate the
employment of Employee; [e] Employee's willful conduct that Employee
knows or should know is materially injurious to Company; [f] Employee's
material breach of any material provision of this Agreement or of any
corporate code of conduct or formal written policy which remains
uncorrected for thirty (30) days following written notice to Employee
by Company; or [g] Employee's violation of the Foreign Corrupt
Practices Act or other applicable United States law as proscribed by
Section 5.1. It is agreed that the decision as to whether "cause"
exists for termination of the employment relationship by Company is
within the sole discretion of Company's Board of Directors for
determination. If Employee disagrees with the decision reached by
Company's Board of Directors, the dispute will be limited to whether
Company's Board of Directors reached its decision in good faith;
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(ii) for any other reason whatsoever, with or without cause,
in the sole discretion of the Board of Directors of Employer;
(iii) upon Employee's death; or
(iv) upon Employee's becoming disabled, defined as permanently
and totally unable to perform Employee's duties for Company as a result
of any medically determinable physical or mental impairment as
supported by a written medical opinion to the foregoing effect by a
physician selected by Company or a determination by the insurer under a
long term disability policy covering Employee, if Company elects, in
its sole discretion, to obtain any such policy.
The termination of Employee's employment by Company prior to the expiration of
the Term shall constitute a "Termination for Cause" if made pursuant to Section
3.1(i); the effect of such termination is specified in Section 3.4. The
termination of Employee's employment by Company prior to the expiration of the
Term shall constitute an "Involuntary Termination" if made pursuant to Section
3.1(ii); the effect of such termination is specified in Section 3.5. The effect
of the employment relationship being terminated pursuant to Section 3.1(iii) as
a result of Employee's death shall be as specified in Section 3.6. The effect of
the employment relationship being terminated pursuant to Section 3.1(iv) is
specified in Section 3.7 herein.
3.2 Notwithstanding any other provisions of this Agreement, Employee
shall have the right to terminate the employment relationship under this
Agreement at any time prior to the expiration of the Term of employment for any
of the following reasons:
(i) a material breach by Company of any material provision of
this Agreement which remains uncorrected for 30 days following written
notice of such breach by Employee to Employer; or
(ii) or any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee prior to the expiration of
the Term shall constitute an "Involuntary Termination" if made pursuant to
Section 3.2(i); the effect of such termination is specified in Section 3.5. The
termination of Employee's employment by Employee prior to the expiration of the
Term shall constitute a "Voluntary Termination" if made pursuant to Section
3.2(ii); the effect of such termination is specified in Section 3.3.
3.3 Upon a "Voluntary Termination" of the employment relationship by
Employee prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease and terminate as of the date of termination. Employee shall be
entitled to pro rata salary through the date of such termination, but Employee
shall not be entitled to any individual bonuses or individual incentive
compensation not yet due at the date of such termination.
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3.4 If Employee's employment hereunder shall be terminated by Company
for Cause prior to expiration of the Term, all future compensation to which
Employee is entitled and all future benefits for which Employee is eligible
shall cease as of the date of termination. Employee shall be entitled to pro
rata salary through the date of such termination, but Employee shall not be
entitled to any individual bonuses or individual incentive compensation not yet
due at the date of such termination.
3.5 After the completion of the Probationary Period, upon an
Involuntary Termination of the employment relationship by Company prior to the
expiration of the Term (including an Involuntary Termination described in
Section 3.2(i)), Employee shall be entitled, in consideration of Employee's
continuing obligations hereunder after such termination (including, without
limitation, Employee's non-competition obligations), to receive one hundred
twenty five percent (125%) of the then current Monthly Base Salary as if
Employee's employment had continued for the full Term of this Agreement,
provided, however, that if Company fails to make any payment due to Employee
under this Section 3.5 in a timely manner, Employee may elect, for a period of
thirty (30) days after such payment was due or until such payment is actually
made, whichever is later, to terminate his obligations under the non-compete
provisions of this Agreement, which election shall have the effect of
terminating Company's obligations to make further payments to Employee under
this Section 3.5, and provided further that Company may inform Employee of its
intent to cease making any payments to Employee under this Section 3.5, which
election shall have the effect of (i) terminating Employee's obligations under
the non-compete provisions of this Agreement, (ii) terminating Company's
obligations to make further payments to Employee under this Section 3.5, and
(iii) requiring Company to grant Employee a non-exclusive, fully assignable
sublicense to the "PMV" & "UltraNet", Light Emitting Diode (LED) display
technologies which are licensed to Company by Employee pursuant to Section 6.6
of this Agreement. Employee shall not be under any duty or obligation to seek or
accept other employment following Involuntary Termination and the amounts due
Employee hereunder shall not be reduced or suspended if Employee accepts
subsequent employment which does not violate the non-compete provisions of this
Agreement. Employee's rights under this Section 3.5 are Employee's sole and
exclusive rights against Company and Company's sole and exclusive liability to
Employee under this Agreement, in contract, tort, or otherwise, for any
Involuntary Termination of the employment relationship. Employee covenants not
to xxx or lodge any claim, demand or cause of action against Company for any
sums for Involuntary Termination other than those sums specified in this Section
3.5. If Employee breaches this covenant, Company shall be entitled to recover
from Employee all sums expended by Company (including costs and attorneys fees)
in connection with such suit, claim, demand or cause of action.
3.6 Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination, but
Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses or individual incentive compensation not yet due to Employee
at the date of such termination.
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3.7 Upon termination of the employment relationship as a result of
Employee's disability, Employee shall be entitled to his pro rata salary through
the date of such termination, but Employee shall not be entitled to any
individual bonuses or individual incentive compensation not yet due to Employee
at the date of such termination.
3.8 Notwithstanding any provision herein to the contrary, upon a
termination of Employee's employment under any of the circumstances described in
Sections 3.5, 3.6 or 3.7 above, Employee shall be entitled to receive a pro-rata
annual incentive compensation payment through the date of such termination of
employment and Employee shall become fully vested in specific grants and awards
made or awarded to Employee under long term incentive plans maintained by
Company and its affiliates.
3.9 In all cases, the compensation and benefits payable to Employee
under this Agreement upon termination of the employment relationship shall be in
lieu of any amounts to which Employee may otherwise be entitled under any and
all severance plans and policies of Company.
3.10 Termination of the employment relationship does not terminate
those obligations of Employee imposed by this Agreement which are continuing
obligations, including, without limitation, Employee's obligations under
Articles 6 and 7.
3.11 This Agreement governs the rights and obligations of Company and
Employee with respect to Employee's salary, bonuses, and other perquisites of
employment. Except as provided above in Section 2.5, 2.7 and 3.8, Employee's
rights and obligations with respect to stock options and restricted stock shall
be governed by ADTI's Stock Option Plan.
ARTICLE 4: CONTINUATION OF EMPLOYMENT BEYOND TERM;
TERMINATION AND EFFECTS OF TERMINATION:
4.1 Should Employee remain employed by Company beyond the expiration of
the Term specified on Exhibit A, such employment shall convert to a
month-to-month relationship terminable at any time by either Company or Employee
for any reason whatsoever, with or without cause. Upon such termination of the
employment relationship by either Company or Employee for any reason whatsoever,
all future compensation to which Employee is entitled and all future benefits
for which Employee is eligible shall cease and terminate. Employee shall be
entitled to pro rata salary through the date of such termination, but Employee
shall not be entitled to any individual bonuses or individual incentive
compensation not yet due at the date of such termination.
ARTICLE 5: VIOLATIONS OF LAW
5.1 Employee shall at all times comply with all United States laws
applicable to Employee's actions on behalf of Company, including, but not
limited to, the Foreign Corrupt Practices Act and other United States or state
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securities laws. If Employee pleads guilty or nolo contendere or admits civil or
criminal liability under any state or federal securities law, or if a court
finds that Employee has personal civil or criminal liability under any such law,
such action or finding shall constitute "cause" for termination under this
Agreement unless Company's Board of Directors) determines that the actions found
to be in violation of such law were taken in good faith and in compliance with
all applicable policies of Company.
ARTICLE 6: OWNERSHIP AND PROTECTION OF INFORMATION;
COPYRIGHTS:
6.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Company (whether during business hours or otherwise and
whether on Company's premises or otherwise) which relate to Company's business,
products or services (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names, and marks) shall be disclosed to Company and are and shall be the sole
and exclusive property of Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, drawings, manuals, models, specifications,
computer programs, maps and all other writings or materials of any type
embodying any of such information, ideas, concepts, improvements, discoveries,
and inventions are and shall be the sole and exclusive property of Company.
6.2 Employee acknowledges that the business of Company, ADTI, and its
affiliates is highly competitive and that its strategies, methods, books,
records, and documents, its technical information concerning its products,
equipment, services, and processes, procurement procedures and pricing
techniques, the names of and other information (such as credit and financial
data) concerning its customers and business affiliates, all comprise
confidential business information and trade secrets which are valuable, special,
and unique assets which Company uses in its business to obtain a competitive
advantage over its competitors. Employee further acknowledges that protection of
such confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to Company, in maintaining its
competitive position. Employee hereby agrees that Employee will not, at any time
during or after his or his employment by Company, make any unauthorized
disclosure of any confidential business information or trade secrets of Company,
or make any use thereof, except in the carrying out of his or his employment
responsibilities hereunder. As a result of Employee's employment by Company,
Employee may also from time to time have access to, or knowledge of,
confidential business information or trade secrets of third parties, such as
customers, suppliers, partners, joint ventures, and the like, of Company.
Employee also agrees to preserve and protect the confidentiality of such third
party confidential information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information and trade secrets.
Employee acknowledges that money damages would not be a sufficient remedy for
any breach or threatened breach of this Article 6 by Employee, and Company shall
be entitled to enforce the provisions of this Article 6 by terminating any
payments then owing to Employee under this Agreement and/or specific performance
and injunctive relief as remedies for such breach or threatened breach. Such
remedies shall not be deemed the exclusive remedies for a breach of this Article
6, but shall be in addition to all remedies available at law or in equity to
Company, including the recovery of damages from Employee and his or his agents
involved in such breach.
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6.3 All written materials, records, and other documents made by, or
coming into the possession of, Employee during the period of Employee's
employment by Company which contain or disclose confidential business
information or trade secrets of Company shall be and remain the property of
Company. Upon termination of Employee's employment by Company, for any reason,
Employee promptly shall deliver the same, and all copies thereof, to Company.
6.4 If, during Employee's employment by Company, Employee creates any
original work of authorship fixed in any tangible or intangible medium of
expression which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, drawings, maps, architectural
renditions, models, manuals, brochures, or the like) relating to Company's
business, products, or services, whether such work is created solely by Employee
or jointly with others (whether during business hours or otherwise and whether
on Company's premises or otherwise), Employee shall disclose such work to
Company. Company shall be deemed the author of such work if the work is prepared
by Employee in the scope of his employment; or, if the work is not prepared by
Employee within the scope of his employment but is specially ordered by Company
as a contribution to a collective work, as a part of a motion picture or other
audiovisual work, as a translation, as a supplementary work, as a compilation,
or as an instructional text, then the work shall be considered to be work made
for hire and Company shall be the author of the work. If such work is neither
prepared by Employee within the scope of his employment nor a work specially
ordered and is deemed to be a work made for hire, then Employee hereby agrees to
assign, and by these presents does assign, to Company all of Employee's
worldwide right, title, and interest in and to such work and all rights of
copyright therein.
6.5 Both during the period of Employee's employment by Company and
thereafter, Employee shall assist Company and its nominee, at any time, in the
protection of Company's worldwide right, title, and interest in and to
information, ideas, concepts, improvements, discoveries, and inventions, and its
copyrighted works, including without limitation, the execution of all formal
assignment documents requested by Company or its nominee and the execution of
all lawful oaths and applications for applications for patents and registration
of copyright in the United States and foreign countries.
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6.6 Employee and Company hereby agree that, immediately upon Employee's
completion of the Probationary Period, Employee and Company will enter into a
definitive license agreement granting Company an exclusive worldwide and
perpetual license for all Employee's prior inventions and intellectual property
known as the "PMV" & "UltraNet", Light Emitting Diode (LED) display technologies
(the "Licensed Technology"). Employee represents and warrants that he has full
authority and all rights necessary to grant this exclusive, worldwide, perpetual
license of the Licensed Technology to Company. As compensation for the grant of
the exclusive license, Company will pay a total of 4% royalty on gross sales of
the Licensed Technology except that Company shall have the right to recover any
and all funds expended by Company in development, engineering, legal, marketing
and other costs of the products and/or technologies prior to being obligated to
pay the 4% royalty as described herein. Company shall not be obligated to, or
entitled to, enter into this license agreement until such time as Employee has
successfully completed his Probationary Period as described in Article 2 of this
Agreement and Exhibit A hereto. In the event of a termination of the
post-employment non-compete period by Company under Section 3.5 of this
Agreement and the grant of the non-exclusive sublicense to Employee required
thereby, the license granted to Company under this Section 6.6 shall remain
exclusive except for such sublicense and Company shall not be obligated to pay
the 4% royalty to Employee or Employee's assigns pursuant to such sublicense.
ARTICLE 7: NON-COMPETE OBLIGATIONS:
7.1 As part of the consideration for the compensation and benefits to
be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary
and in order to protect Company's interests in the confidential information of
Company and the business relationships developed by Employee with the clients
and potential clients of Company, and as an additional incentive for Company to
enter into this Agreement, Company and Employee agree to the non-compete
provisions of this Article 7. Employee agrees that during the period of
Employee's non-competition obligations hereunder, Employee will not, directly or
indirectly for Employee or for others, in any geographic area or market where
Company is conducting any business as of the date of termination of the
employment relationship or have during the previous twelve months conducted any
business:
(i) engage in any business competitive with the business
conducted by Employer;
(ii) render advice or services to, or otherwise assist, any
other person, association, or entity who is engaged, directly or
indirectly, in any business competitive with the business conducted by
Employer;
(iii) induce any employee of Company to terminate his or her
employment with Company or hire or assist in the hiring of any such
employee by any person, association, or entity not affiliated with
Company.
12
These non-competition obligations shall extend until December 31, 2008 unless
Employee is terminated prior to the end of the Probationary Period as described
in Article 2 and Exhibit A.
7.2 Employee understands that the foregoing restrictions may limit his
ability to engage in certain businesses anywhere in the world during the period
provided for above, but acknowledges that Employee will receive sufficiently
high remuneration and other benefits (e.g., the right to receive compensation
under Section 3.5 for the remainder of the Term upon Involuntary Termination)
under this Agreement to justify such restriction. Employee acknowledges that
money damages would not be a sufficient remedy for any breach of this Article 7
by Employee, and Company shall be entitled to enforce the provisions of this
Article 7 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 7, but shall be in addition to
all remedies available at law or in equity to Company, including, without
limitation, the recovery of damages from Employee and his or his agents involved
in such breach.
7.3 It is expressly understood and agreed that Company and Employee
consider the restrictions contained in this Article 7 to be reasonable and
necessary to protect the proprietary information of Company. Nevertheless, if
any of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such courts so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.
ARTICLE 8: MISCELLANEOUS:
8.1 For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with
Company.
8.2 Employee shall refrain, both during the employment relationship and
after the employment relationship terminates, from publishing any oral or
written statements about Company or any of its officers, employees, agents or
representatives that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about Company or any of its subsidiaries or
affiliates, or any of such entities' business affairs, officers, employees,
agents, or representatives; or that constitute an intrusion into the seclusion
or private lives of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts. The rights afforded Company under this provision are in
addition to any and all rights and remedies otherwise afforded by law.
8.3 For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
13
If to Company:
Advance Display Technologies, Inc.
0000 Xxxxx Xxxxx Xxx, Xxxxx X
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
If to Employee, to the address shown on the first page hereof.
Either Company or Employee may furnish a change of address to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective only upon receipt.
8.4 This Agreement shall be governed in all respects by the laws of the
State of Colorado, excluding any conflicts of law rule or principle that might
refer the construction of the Agreement to the laws of another state or country.
8.5 No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
8.6 If a dispute arises out of or related to this Agreement, other than
a dispute regarding Employee's obligations under Article 6 or Article 7, and if
the dispute cannot be settled through direct discussions, then Company and
Employee agree to first endeavor to settle the dispute in an amicable manner by
mediation, before having recourse to any other proceeding or forum.
8.7 Each of Company and Employee is a citizen of the United States of
America. Company's principal place of business is in Englewood, Arapahoe County,
Colorado. Employee resides in Ocean Park, Washington. This Agreement was
negotiated and signed in Englewood, Colorado. This Agreement shall be performed
in Englewood, Colorado. Any litigation that may be brought by either Company or
Employee involving the enforcement of this Agreement or the rights, duties, or
obligations of this Agreement, shall be brought exclusively in the state or
federal courts sitting in Arapahoe or Denver County, Colorado. In the event that
service of process cannot be effected upon a party, each party hereby
irrevocably appoints the Secretary of State for the State of Colorado as its or
his agent for service of process to receive the summons and other pleadings in
connection with any such litigation.
8.8 It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term, provision,
covenant, or remedy of this Agreement or the application thereof to any person,
association, or entity or circumstances shall, to any extent, be construed to be
invalid or unenforceable in whole or in part, then such term, provision,
covenant, or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person, association, or entity or circumstances other than those
to which they have been held invalid or unenforceable, shall remain in full
force and effect.
14
8.9 This Agreement shall be binding upon and inure to the benefit of
Company and any other person, association, or entity which may hereafter acquire
or succeed to all or substantially all of the business or assets of Company by
any means whether direct or indirect, by purchase, merger, consolidation, or
otherwise. Employee's rights and obligations under Agreement hereof are personal
and such rights, benefits, and obligations of Employee shall not be voluntarily
or involuntarily assigned, alienated, or transferred, whether by operation of
law or otherwise, without the prior written consent of Company.
8.10 This Agreement replaces and merges previous agreements and
discussions pertaining to the following subject matters covered herein: the
nature of Employee's employment relationship with Company and the term and
termination of such relationship. This Agreement constitutes the entire
agreement of the parties with regard to such subject matters, and contains all
of the covenants, promises, representations, warranties, and agreements between
the parties with respect such subject matters. Each party to this Agreement
acknowledges that no representation, inducement, promise, or agreement, oral or
written, has been made by either party with respect to such subject matters,
which is not embodied herein, and that no agreement, statement, or promise
relating to the employment of Employee by Company that is not contained in this
Agreement shall be valid or binding. Any modification of this Agreement will be
effective only if it is in writing and signed by each party whose rights
hereunder are affected thereby, provided that any such modification must be
authorized or approved by the Board of Directors of Company.
IN WITNESS WHEREOF, Company and Employee have duly executed this
Agreement in multiple originals to be effective on the 1st day of December,
2004.
Date: December 20, 2004
COMPANY: EMPLOYEE:
ADVANCE DISPLAY TECHNOLOGIES, INC. By: /s/ Xxxx X. Xxxxxx
-------------------------
Xxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxx
President and CEO
15
EXHIBIT A
TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN ADVANCE DISPLAY TECHNOLOGIES AND
XXXX X. XXXXXX
Employee Name: Xxxx X. Xxxxxx
Term: Effective December 1, 2004 (the "Effective
Date") through December 31, 2007, with an
option for Company to extend the Term for an
additional six months or until June 30,
2008.
Position: Executive Vice President of Sales and
Marketing and Member of the Board of
Directors for Advance Display Technologies,
Inc.
Location: Englewood, Colorado
Reporting Relationship: Reports directly to President
Monthly Base Salary: Eight Thousand Three Hundred Thirty-Three
and 33/100 Dollars ($8,333.33)
Sales Incentives: Beginning on the Effective Date, Employee
shall be eligible to receive sales
incentives equal to 3% of the gross sales
revenue directly generated by the Employee's
sales efforts and or his outside sales
network, less any outside sales commissions,
finder's fees, or sales incentives paid to
any third parties. The 3% sales incentives
shall be paid to Employee within 30 days of
Company's receipt of the monies generated by
the Employee's sales efforts and or those of
his outside sales network. However, at the
date Employee has earned the 6,000,000
shares as outlined in paragraph 2.6 herein,
or after December 31, 2005 whichever occurs
first, the Employee shall no longer be
eligible to receive a 3% commission on sales
generated by his outside sales network, and
will only be eligible to earn a 3% sales
commission on sales generated directly
through his own personal sales efforts.
16
Probationary Period: Beginning on the Effective Date and
continuing through February 28, 2005,
Employee shall be employed under a
Probationary Period giving Company and the
Board of Directors ample time to evaluate
the benefits generated by Employee and for
the various intangible assets being
contributed to the Company by Employee (the
"Intangible Assets") (defined below). During
the Probationary Period, if a majority of
Company's Board of Directors (excluding
Employee) determine that Employee is unfit,
in any manner, to continue his employment
under this Agreement, Company may terminate
Employee's employment under this Agreement
without any further liability whatsoever, in
which event (i) Company shall return to
Employee all sales commission revenues
received by Company on account of Employee's
efforts and sales of the Licensed
Technologies (as defined below), less all
commissions paid to Employee or others, all
salaries and benefits paid to Employee,
expenses, all cost of sales and other direct
sales expenses paid by Company, (ii)
Employee shall return all stock compensation
and stock options granted to Employee, and
(iii) Company will return the Intangible
Assets it possesses at such time to
Employee.
Stock Compensation: Subject to the approval of Company's Board
of Directors, as further consideration for
Employee's efforts and for the Intangible
Assets being contributed to Company by
Employee contemporaneously herewith,
including but not limited to outstanding
sales projects with bids submitted, sales
agent network, industry contacts, industry
knowledge and industry relationships,
beginning on December 1, 2004 and continuing
every month thereafter until October 1,
2005, Company shall issue to Employee a
total of 6,000,000 unregistered shares of
Company's Series D Preferred Stock (the
"Shares") in eleven (11) installments,
comprised of 1,000,000 Shares as the initial
installment on December 1, 2004, and 500,000
Shares per installment for the remaining ten
(10) installments, provided, however, that
each such installment after the initial
installment shall be reduced proportionately
if and to the extent that $100,000 of
incremental Net Sales Revenue has not been
generated by Employee for Company since the
prior installment, and provided further
that, if and to the extent that $200,000 of
incremental Net Sales Revenue is not
generated between December 1, 2004 and March
1, 2005, the Shares issued in the initial
installment on December 1, 2004 shall be
likewise proportionately reserved, which
reduction shall be in addition to, and not a
substitute for, the proportionate reductions
of the monthly installments made on January
1, 2005, February 1, 2005 and March 1, 2005.
If at the time an installment is to be paid,
the incremental Net Sales Revenue is less
than or greater than $100,000 (or $200,000
17
in the case of the initial installment),
such deficit or surplus shall be carried
over to the next installment so that, if
Employee generates Net Sales Revenue
utilizing the intangible assets equal to or
greater than $1,000,000 on or before
December 31, 2005 (60 days after the last
installment is due to be paid on November 1,
2005), Employee will have been issued the
maximum total of 6,000,000 shares of Series
D Preferred Stock of Company.
Correspondingly, if and to the extent that
the total Net Sales Revenue for the period
beginning on the Effective Date and ending
on December 31, 2005 is less than
$1,000,000, the number of Series D Preferred
shares to be issued to Employee will have
been proportionately reduced and will not be
increased by Net Sales Revenue after
December 31, 2005. "Net Sales Revenue" shall
be defined and calculated by subtracting (a)
the total cost of goods, including all sales
commissions or incentives paid to anyone,
including but not limited to Employee, and
the total cost of sales from the gross
selling price of products sold by Employee
and or his outside sales network from (b)
the gross sales revenues generated by
Employee or his sales network. If Employee
obtains for Company a definitive agreement
for the sale of a network of 100 or more
electronic screen signs with a minimum 5
year term and a 50% or greater revenue
sharing arrangement, Employee's Probationary
Period, as defined in Exhibit A, will
immediately terminate. In such an event,
Employee will be permitted to (a) apply 3%
of Company's projected first year revenues
from such agreement toward the Net Sales
Revenue generated by Employee for the
purposes of meeting the requirements of the
stock compensation incentive as outlined in
this paragraph and (b) elect, in Employee's
sole discretion, to waive his right to
collect the 3% sales commission as noted in
paragraph 2.4 herein, and allow Company to
retain those funds so that they are
considered to be additional "Net Sales
Revenue" generated by Employee. Because the
Shares will be issued subject to a
substantial risk of forfeiture, namely, if
and to the extent that Employee fails to
generate sufficient Net Sales Revenue to
cause all such shares to be earned, Employee
can elect to be taxed immediately on the
Shares at their fair market value at the
time of issuance ($.0167 per share for the
initial installment on December 1, 2004)
under Internal Revenue Code ss.83(b) (which
election must be filed with the Internal
Revenue Service no later than thirty (30)
days after the issuance of any installment
of the Shares for which an election is
desired). If Employee fails to make a timely
election under Internal Revenue Code
ss.83(b) for accelerated recognition of any
installment of Shares, then those Shares
will be valued for income tax purposes by
Company's Board of Directors, in its sole
discretion, at the time that the risk of
forfeiture for Shares expires on account of
Company's receipt of Net Sales Revenue.
Employee acknowledges, however, that (i) the
tax laws relating to deferred recognition of
compensation have been changed as of January
1, 2005 by the American Jobs Creation Act of
2004 and regulations to be promulgated under
the new law, (ii) Company is not providing
Employee with tax advice concerning existing
tax law or the effect of the new law and
(iii) Employee will consult with and rely
upon Employee's own legal, tax and financial
advisers concerning the tax and other
effects of the issuance of the Shares to
Employee.
18
Prior Inventions: Employee and Company hereby agree that, upon
Employee's completion of the Probationary
Period, Employee and Company will enter into
a definitive license agreement granting
Company an exclusive worldwide and perpetual
license for all Employee's prior inventions
and intellectual property known as the "PMV"
& "UltraNet", Light Emitting Diode (LED)
display technologies (the "Licensed
Technology"). Employee represents and
warrants that he has full authority and all
rights necessary to grant this exclusive,
worldwide, perpetual license of the Licensed
Technology to Company. As compensation for
the grant of the exclusive license, Company
will pay a total of 4% royalty on gross
sales of the Licensed Technology except that
Company shall have the right to recover any
and all funds expended by Company in
development, engineering, legal, marketing
and other costs of the products and/or
technologies prior to being obligated to pay
the 4% royalty as described herein. Company
shall not be obligated to, or entitled to,
enter into this license agreement until such
time as Employee has successfully completed
his Probationary Period as described in
Article 2 of the Agreement and this Exhibit
A. In the event of a termination of the
post-employment non-compete period by
Company under Section 3.5 of the Agreement
and the grant of the non-exclusive
sublicense to Employee required thereby, the
license granted to Company under Section 6.6
of the Agreement shall remain exclusive
except for such sublicense and Company shall
not be obligated to pay the 4% royalty to
Employee or Employee's assigns pursuant to
such sublicense.
19
Long Term Incentive Plan: Subject to the approval of the Compensation
Committee of the ADTI Board of Directors at
its January 2005 meeting, Employee shall be
granted an option to purchase 1,680,000
unregistered shares of ADTI's common stock
at a strike price of $0.03. The grant shall
be effective on the date approved by the
Compensation Committee and, so long as
Employee remains employed by Company, shall
vest 120,000 shares on each of April 1,
2005, July 1, 2005, October 1, 2005, January
1, 2006, April 1, 2006, July 1, 2006,
October 1, 2006, January 1, 2007, April 1,
2007, October 1, 2007, January 1, 2008,
April 1, 2008, July 1, 2008, and October 1
2008.
Date: December 20, 2004
COMPANY: EMPLOYEE:
ADVANCE DISPLAY TECHNOLOGIES, INC. By: /s/ Xxxx X. Xxxxxx
--------------------------------
Xxxx X. Xxxxxx
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxx
President and CEO
20
