EXHIBIT 2
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made as of September 1, 1998,
between CADAPULT GRAPHIC SYSTEMS, INC., a Delaware corporation with offices at
000 Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000 ("Employer"), and XXXXXXX X.
XXXXX ("Employee") residing at 0 Xxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000,
amending the employment agreement dated May 1, 1998 between Employer and
Employee.
W I T N E S S E T H:
WHEREAS, Employer desires to retain the services of Employee and Employee
desires to be employed by Employer upon the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the agreements herein contained, the
parties hereto agree as follows:
I. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
agrees to serve, as President and Chief Executive Officer of Employer, for the
Term of Employment (as defined in Section 2). Employee agrees to perform such
services as are customary for such office. Employee further agrees to use
Employee's best efforts to promote the interest of Employer and to devote
Employee's full business time and energies during normal business hours to the
business and affairs of Employer during the Term of Employment.
2. TERM OF EMPLOYMENT. The employment hereunder which commenced on May 1,
1998 and shall continue for a term of five (5) years (the "Term of Employment"),
unless earlier terminated: (a) upon death of Employee; (b) at the option of
Employer upon 30 days' prior written notice to Employee, in the event Employee,
by reason of physical injury or illness, is unable to materially perform his
duties hereunder for a continuous period of 120 days and has no expectation of
returning to work within a reasonable time thereafter; or (c) upon the discharge
of Employee by the Board of Directors of Employer for "cause" (as defined in
Section 10 hereof). The Term of Employment may be renewed for an additional five
years commencing five years after the execution of this Agreement, upon written
notice of the Board of Directors of Employer given at any time in the first
eight months of the fifth year of the Term of Employment, subject to acceptance
thereof by Employee.
3. COMPENSATION.
A. Base Salary. As compensation for the services to be provided
hereunder and in consideration of Employee's agreement not to compete as set
forth in Section 4, during the Term of Employment, Employer shall pay Employee
an annual salary of one hundred eighty thousand dollars ($130,000) with
adjustments of not less than the change in the Consumer Price Index, or such
greater annual salary as may be established by Employer's Board of Directors,
which shall be payable in appropriate installments to conform with the regular
payroll dates for salaried personnel of Employer. Commencing in the third year
of this Agreement, Employee's base annual salary shall be increased, each fiscal
quarter, by an amount equal to at least one percent of the Company's earnings
before interest, taxes, depreciation and amortization ("EBITDA") in the most
recent fiscal year.
B. Incentive Earnings Bonus. In addition to any bonus to be
determined by the Board of Directors, Employee is eligible for certain incentive
bonuses contingent upon certain corporate earnings milestones. Employee is
hereby granted five year options to purchase 500,000 shares of the Company's
common stock, par value $.001 per share. These options will vest upon the
achievement of certain corporate earnings milestones as set forth herein.
Options to purchase 125,000 shares at $1.375 per share shall vest following the
first fiscal year end in which the Company's EBITDA exceeds $500,000; additional
options to purchase 125,000 additional shares at $1.375 per share shall vest
following the first fiscal year end in which the Company's EBITDA exceeds
$1,000,000; additional options to purchase 125,000 additional shares at $1.375
per share shall vest following the first fiscal year end in which the Company's
EBITDA exceeds $1,500,000; and additional options to purchase 125,000 additional
shares at $1.375 per share shall vest following the first fiscal year end in
which the Company's EBITDA exceeds $2,000,000. These options are cumulative and
are subject to anti-dilution rights.
C. Bonus. Employee shall, during the term of this Agreement, be
entitled to an annual performance bonus equal to up to fifty percent (50%) of
Employee's base salary, as defined in Section 3.A, or such other amount as the
Board of Directors may determine. Additionally, Employee shall be entitled to
such other bonuses as the Board of Directors shall determine from time to time.
D. Other Benefits. Employee shall be entitled to the following
fringe benefits, perquisites, and other benefits of employment during the Term
of Employment: (i) medical and dental insurance under such group medical and
dental insurance policies as Employer may provide to its employees; (ii) sick
days in accordance with Employer's policy regarding officers; (iii) up to six
(6) weeks vacation in each year fully worked; (iv) participation in Employer's
401(k) plan or such other plan as Employer may adopt; (v) participation in
Employer's employee stock option plan when and if established; and (vi) Employer
shall also during the term hereof and for one year thereafter provide and pay
for a fifteen year (15-year) term life insurance policy on the life of Employee,
subject to Employee's reasonable insurability, with a face amount of benefit of
$1,000,000 with the beneficiary thereof to be Employee's estate, or as otherwise
directed by Employee. Employee shall have the option to maintain such insurance
at his own expense one year after the end of the term hereof, if such term is
not renewed. In addition to the foregoing, Employee shall also be entitled to
any benefits, perquisites and other benefits to the extent that the Board of
Directors determines such benefits are to be made available to Employer's
employees in general.
E. Payment Upon Early Termination. In the event of early termination
of employment for any reason specified in Section 10 hereof, Employer shall no
longer be obligated to make any payments of compensation to Employee or
Employee's estate under this Agreement except as provided for herein. However,
any salary or bonus earned and/or vested for prior periods, but not yet paid,
shall be paid by Employer to Employee or Employee's estate.
4. COVENANT NOT TO COMPETE; INTELLECTUAL PROPERTY; CONFIDENTIALITY.
A. Covenant Not to Compete and Solicit. During the Term of
Employment, Employee will not, within any jurisdiction in which Employer or any
affiliate conducts its business operations, or in any way materially competing
with Employer, directly or indirectly, own, manage, operate, control, be
employed by or participate in the ownership, management, operation or control
of, or be connected in any manner with, any business of the type or character
engaged in or competitive with that conducted by Employer. The decision of
Employer's Board of Directors as to what constitutes a competing business shall
be final and binding upon Employee, and such decision shall be made in good
faith. For these purposes, ownership by Employee or any affiliate of Employee of
securities of a public company not in excess of 1% of any class of such
securities shall not be considered to be competition with Employer.
For a period of three (3) years after termination of
Employee's employment with Employer, Employee further agrees to refrain from
interfering with the employment relationship between Employer and its other
employees by soliciting any of such individuals to participate in independent
business ventures and agrees to refrain from soliciting business from any client
or prospective client (as disclosed in a list to be provided to Employee by
Employer at the time he ceases to be employed, which list shall be binding upon
Employee) of Employer's for Employee's benefit or for any other entity.
It is the desire and intent of the parties that if any
provisions of this Section 4(A) shall be adjudicated to be invalid or
unenforceable, this Section 4(A) shall be deemed amended to delete therefrom
such provisions or portion adjudicated to be invalid or unenforceable, such
amendment to apply only with respect to the operation of this paragraph in the
particular jurisdiction in which such adjudication is made.
B. Intellectual Property. During the Term of Employment, Employee
will disclose to Employer all ideas, inventions and business plans developed by
Employee during such period which relates directly or indirectly to the business
of Employer or affiliates, including without limitation any process, operation,
product or improvement which may be patentable or copyrightable. Employee agrees
that such will be the property of Employer and that Employee will, at Employer's
request and cost, do whatever is necessary to secure the rights thereto by
patent, copyright or otherwise to Employer.
C. Confidentiality. Employee agrees to not divulge to anyone (other
than Employer or any other persons employed or designated by Employer) any
knowledge or information of any type whatsoever of a confidential nature
relating to the business of Employer or any of its subsidiaries or affiliates,
including without limitation all types of trade secrets (unless readily
ascertainable from public or published information or trade sources). Employee
further agrees not to disclose, publish or make use of any such knowledge or
information of a confidential nature without prior written consent of Employer.
5. CHANGE OF CONTROL. Employee shall have the right to terminate the
employment agreement in the event of a "change in control" of Employer. "Change
of control" is defined to be any of the following: (i) a change in the ownership
or management of Employer that would be required to be reported in response to
certain provisions of the Securities Exchange Act of 1934; (ii) an acquisition
(other than directly from Employer) by a person or entity (excluding Employer)
of 25% or more of the Employer's common stock or the Employer's then outstanding
voting securities; (iii) a change in a majority of the current Board of
Directors (the "Incumbent Board") (excluding any persons approved by a vote of
at least a majority of the Incumbent Board other than in connection with an
actual or threatened proxy contest); (iv) consummation of a reorganization,
merger, consolidation or sale of all or substantially all of the Company's
assets (collectively, a "Transaction") other than a Transaction in which all or
substantially all of the shareholders of Employer prior to such transaction own,
in the same proportion, more than 50% of the voting power of the entity
resulting from the Transaction, at least a majority of the board of directors of
the resulting entity were members of the Incumbent Board, and after which no
person (other than the resulting entity and certain affiliates) beneficially
owns 25% or more of the voting power of the resulting entity, except to the
extent such ownership existed prior to the Transaction; or (v) the approval by
the Employer's stockholders of a complete liquidation or dissolution of
Employer. Upon a change in control, Employee shall be entitled to a lump sum
payment, payable within one month of termination, equal to two hundred and
ninety percent (290%) of Employee's "base amount", as defined in Section 280G(3)
of the Code.
6. REIMBURSEMENT OF EXPENSES. Employee shall be entitled to be reimbursed
for reasonable travel and other expenses incurred in connection with Employee's
services to Employer pursuant to and during the Term of Employment upon a basis
consistent with the policies established or announced by Employer.
7. AUTOMOBILE. Employer presently provides Employee with an automobile,
including related maintenance, repairs, insurance, and other costs, for the
exclusive use of Employee, under a lease, cosigned by Employee, due to expire in
December 2000. Employer agrees to continue to said lease, make all necessary
payments and related expenses to said automobile, and prior to the expiration of
the lease, Employer shall exercise the option to purchase said automobile and
sell such automobile to Employee for the sum of $1,000. In the event that
Employee's employment with Employer shall be terminated for whatsoever reason,
Employer shall immediately exercise the option to purchase, such automobile and
shall sell the automobile to Employee for the sum of $1,000.
Employer recognizes Employee's need for an automobile for business
purposes. Employer, therefore, upon the expiration of the aforementioned
automobile lease, shall provide Employee with an automobile, including related
maintenance, repairs, insurance, and other costs. The automobile will be
selected by Employee, and the automobile and related costs shall be comparable
to those which Employer presently provides Employee.
8. DEATH BENEFITS. If Employee dies during the Term of Employment,
Employer shall pay to Employee's estate the compensation that would otherwise be
payable to Employee for twelve months following the month in which his death
occurs. In addition, Employer shall pay $100,000, in a lump sum, to the
Employee's widow, or, if he is not then survived by his widow, to the Employee's
surviving children in equal shares, or, if there are no surviving children, to
the Employee's estate.
9. BREACH BY EMPLOYEE. Both parties recognize that the services to be
rendered under this Agreement by Employee are special, unique and extraordinary
in character, and that in the event of a breach by Employee of the terms and
conditions of this Agreement to be performed by Employee, or in the event
Employee performs services during the Term of Employment for any person, firm,
corporation or other entity engaged in a competing line of business with
Employer, or otherwise breaches this Agreement, Employer shall be entitled, if
it so elects, to institute proceedings and to prosecute them in any court of
competent jurisdiction, either in law or in equity, to obtain damages for any
breach of this Agreement, or to enforce the specific performance thereof by
Employee, or to enjoin Employee from performing services for any such other
person, firm, corporation or other entity.
10. TERMINATION FOR CAUSE. Employer may terminate Employee for cause upon
thirty days' prior written notice to Employee. For purposes of this Agreement,
an event or occurrence constituting "cause" shall mean:
A. Employee's willful failure or refusal after notice thereof, to
perform specific directives of Employer's Board of Directors, when such
directives are consistent with the scope and nature of Employee's duties and
responsibilities as set forth in Section 1 and elsewhere herein and such failure
or refusal is: (i) not corrected within a reasonable time after receipt of
written notice is sent by Employer's Board of Directors after resolution
authorizing such notice; (ii) the direct material cause of material damages to
the Employer; and (iii) within the ability and power of Employee to materially
perform such directive as to render such failure or refusal willful;
B. Employee's conviction of a felony or of any crime involving moral
turpitude, fraud or misrepresentation and final resolution of all appeals
therefrom;
C. Any final court determination of gross or wilful conduct of
Employee resulting in substantial loss to Employer, substantial damage to
Employer's reputation or any material theft from Employer;
D. Other than by reason of physical injury or illness, a final court
determination of Employee's material failure to perform the duties and
responsibilities under this Agreement causing material damage to Employer; or
E. Any final court determination of any material breach (not covered
by any of the clauses (A) through (D)) of any of the provisions of this
Agreement, causing material damage to Employer, and such breach was not cured
within ten days after written notice thereof to Employee by Employer.
11. FISCAL YEAR. For purpose of this Agreement, the Company's fiscal year
end is assumed to be June 30.
12. ASSIGNMENT. This Agreement is a personal contract and, except as
specifically set forth herein, the rights and interests of Employee herein may
not be sold, transferred, assigned, pledged or hypothecated by Employee. The
rights and obligations of Employer hereunder shall be binding upon and run in
favor of the successors and assigns of Employer. In the event of any attempted
assignment or transfer of rights hereunder contrary to the provisions hereof,
Employer shall have no further liability for payments hereunder. Employee
specifically consents to assignment of this Agreement by Employer pursuant to
any reorganization or business combination that Employer may effect hereafter.
13. GOVERNING LAW; CAPTIONS. This Agreement contains the entire agreement
between the parties and shall be governed by the laws of the State of New York.
It may not be changed orally, but only by agreement in writing signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought, and consented to in writing by the Board of Directors of Employer.
Section headings are for convenience or reference only and shall not be
considered a part of this Agreement.
14. PRIOR AGREEMENTS. This Agreement supersedes and terminates all prior
agreements between Employer and Employee relating to the subject matter herein
addressed.
15. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person to Employer by
delivery to its Chairman of the Board of Directors or sent by telex, telecopy or
by registered or certified mail, postage prepaid, addressed as follows:
if to Employee, to:
Xxxxxxx X. Xxxxx
0 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
if to Employer, to:
Cadapult Graphic System, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
IN WITNESS WHEREOF, Employer has by its appropriate officer signed this
Agreement and Employee has signed this Agreement, on and as of the date and year
first above written.
CADAPULT GRAPHIC SYSTEMS INC.
By: /s/ Xxxxxxx Xxxxxx
--------------------------
Xxxxxxx Xxxxxx
Vice President and Director
EMPLOYEE
/s/ Xxxxxxx X. Xxxxx
-----------------------------
Xxxxxxx X. Xxxxx
