EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of and effective
January 1, 1999 is made by and between XXXXXXX X. XXXXXX ("Employee") and
NETWORK SIX, INC., a Rhode Island corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Employee and the Company wish to enter into this Agreement to
be effective as of the date hereof, which Agreement shall supersede any existing
employment arrangement between Employee and the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements herein contained, and intending to be legally bound,
Employee and the Company hereby agree as follows:
1. POSITION. The Company agrees to employ Employee and Employee agrees
to serve the Company during the term hereof as Chairman of the Board, President
and Chief Executive Officer of the Company, and in such other executive capacity
as the Board of Directors of the Company (the "Board") shall determine.
2. DUTIES. Employee agrees to assume such duties and responsibilities
as may be consistent with this Agreement, and as may be assigned to Employee by
the Board and in accordance with the by-laws of the Company from time to time.
Employee agrees to devote his full time and best efforts and such skill,
attention and energies as are necessary to the performance of his duties and
responsibilities under this Agreement, consistent with practices and policies
established from time to time by the Board.
3. TERM. The term of this Agreement (the "Term") shall commence as of
the date hereof and shall continue until December 31, 2001, or until terminated
by either party in accordance with the provisions of Section 5 hereof.
4. COMPENSATION.
4.1. BASE SALARY. For services rendered hereunder, Employee
shall be paid an annual base salary in the amount of One Hundred Seventy-Seven
Thousand Five Hundred Dollars ($177,500) during 1999, One Hundred Eighty-Seven
Thousand Five Hundred Dollars ($187,500) during 2000, and Two Hundred Two
Thousand Five Hundred Dollars ($202,500) during 2001. Employee's salary shall be
payable in a manner and at such times as is consistent with the payroll
practices of the Company.
4.2. FRINGE BENEFITS.
4.2.1 GENERAL FRINGE BENEFITS. Employee shall be provided
with fringe benefits, such as retirement or investment plans, vacation, sick
days, and health
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and dental insurance, that are provided to senior officers of the Company.
4.2.2 CAR. During the Term, the Company shall provide
Employee with a leased car, including maintenance, repairs, insurance, fuel
and all costs incident thereto up to an annual maximum of the annual costs
currently paid by the Company for Employee's car. Unless Employee has been
terminated by the Company pursuant to Section 5.1 hereof, Employee shall have
the option to assume the lease with the consent of the lessor, provided the
Company is released therefrom.
4.2.3 INSURANCE. During the Term, the Company shall pay
the premiums (or promptly reimburse Employee if he pays the premiums) for One
Million Five Hundred Thousand Dollars ($1,500,000) of term life insurance
with the Employee designating the beneficiary, such premiums not to exceed
Two Thousand Dollars ($2,000) per year.
4.2.4 TAX INDEMNITY. To the extent that Employee would
realize taxable income upon receipt of any of fringe benefits received
pursuant to this Section 4.2, the Company shall pay to Employee within ninety
(90) days of the close of each year an amount sufficient to pay the tax on
such income, grossed-up at Employee's aggregate state and federal marginal
tax rate.
4.3. REIMBURSEMENT OF EXPENSES. Subject to such conditions
as the Board may from time to time determine, Employee shall be reimbursed upon
presentation of vouchers or paid upon presentation of invoices for reasonable
expenses incurred by him in the performance of his duties in carrying out the
terms of this Agreement, including expenses for entertainment, travel, lodging,
business associations and service organizations.
4.4 BONUSES.
4.4.1 CALCULATION. Employee shall receive a bonus
of up to 125% of his Base Salary each year (the "Annual Bonus") based upon his
achievement of certain objectives for such year ("Annual Objectives").
Achievement of each Annual Objective will entitle Employee to receive a
percentage of the Annual Bonus. For each year, one Annual Objective will be an
increase from the prior fiscal year in both gross revenues and net income (less
any extraordinary gains and extraordinary losses) of at least 25% (the "Growth
Objective") as reported in the Company's year-end audited financial statements.
For each year, until achieved, other Annual Objectives will include a resolution
of the litigation with the State of Hawaii and related parties satisfactory to
the Board (the "Hawaii Objective") and hiring an executive officer, satisfactory
to the Board, who would be in charge of the Company's day to day operations in
Employee's absence (the "Hiring Objective"). Achievement of each of the Growth
Objective, Hawaii Objective or the Hiring Objective will entitle Employee to
receive 25% of his Annual Bonus for the year it is achieved. Prior to the end of
each year, the Company and Employee will use their best efforts to agree to one
or more other Annual Objectives and the percentage of the Annual Bonus allocable
to each Annual Objective which if
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achieved (as determined by the Board in its sole but reasonable discretion),
will entitle Employee to receive that portion of the Annual Bonus not previously
allocated to other Annual Objectives for that year. The Company and Employee
have agreed to Employee's 1999 Annual Objectives by a separate letter agreement.
4.4.2 PAYMENT. The Annual Bonus shall be paid
within ten (10) days after receipt by the Board of the signed audited year-end
financial statements for the prior fiscal year in any combination of cash,
restricted stock or incentive stock options, the combination of 50% of the
Annual Bonus to be determined by the Board and 50% by Employee. Within sixty
(60) days after the close of each year, the Board will notify Employee of the
form of payment of 50% of the Annual Bonus due and with ten (10) days thereafter
Employee will notify the Board of the form of payment of the remaining 50% of
the Annual Bonus due. The value of restricted stock granted as part of an Annual
Bonus shall be the price of the last trade on the last trading day of the fiscal
year of such class of stock as quoted on the exchange or system that such class
of stock is publicly traded, or if such class of stock is not then publicly
traded, at a price determined in the good faith judgment of the Board in its
sole discretion. The value of options granted as a part of an Annual Bonus shall
be determined by the Board using the Black-Scholes pricing model, as reasonably
adjusted if deemed necessary by the Board, and the exercise price of such
options shall be the average of the bid and ask price on the date of grant of
such class of stock underlying the options as quoted on the exchange or system
that such class of stock is publicly traded, or if such class of stock is not
then publicly traded, at a price determined in the good faith judgment of the
Board in its sole discretion.
5. TERMINATION.
5.1. COMPANY. The Company, by action of the Board, may terminate
this Agreement at any time for cause solely in the event of (i) the death or
permanent disability of Employee; (ii) the demonstrated continued failure by
Employee to perform his duties as set forth herein or as otherwise required
by the Board after written demand for performance is made by the Board, which
demand specifically identifies the manner in which the Board finds there has
been a failure to perform; provided, however, if, and only if, such failure
is capable of being cured, Employee shall be given twenty (20) days to cure
any such failure; (iii) a fraud, misappropriation, embezzlement or other
violation of the law or like nature or severity committed by Employee; (iv) a
material breach of this Agreement by Employee; or (v) the willful misconduct
of Employee having a material adverse effect on the business or prospects of
the Company; all as may be reasonably determined by the Board. For purposes
of this Agreement, "permanent disability" shall mean absence from work at the
Company's offices due to illness for sixty-five (65) business days, whether
or not consecutive, in a twelve (12) month period. Upon thirty (30) days
advance written notice, the Company may terminate this Agreement at any time
without cause.
5.2. EMPLOYEE.
(a) Upon thirty (30) days advance written notice,
Employee may terminate this Agreement at any time for cause solely in the
event of (i) the assignment to him of any duties materially inconsistent with
his position, duties and responsibilities as of the date of
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this Agreement; (ii) non-payment of his Base Salary for at least thirty (30)
days to which Employee did not consent; (iii) a transfer of Employee to an
office more than sixty (60) miles from Providence, Rhode Island; or (iv) one or
more transactions that are not approved by the Board prior thereto that in the
aggregate result in a change of ownership of 51% or more of the voting stock of
the Company or a sale or transfer of substantially all of the assets of the
Company. Anything in this Agreement notwithstanding, neither the filing of a
voluntary or involuntary petition in bankruptcy or for a receivership nor a
change in ownership resulting from a bankruptcy or receivership shall give
grounds for Employee to terminate this Agreement. The right of Employee to
terminate this Agreement shall not become effective if the breach by the Company
is cured within twenty (20) days after receipt of written notification of such
breach from Employee.
(b) Upon one hundred twenty (120) days advance
written notice (ninety (90) days, if the Hiring Objective has been achieved and
the person hired has been performing to the satisfaction of the Board for at
least six (6) months), Employee may terminate this Agreement at any time without
cause.
5.3. CONSEQUENCES.
(a) In the event that the Company terminates
this Agreement for any cause set forth in Section 5.1 hereof, or in the event
Employee terminates this Agreement without cause, all rights of Employee under
this Agreement shall terminate as of the date of the termination of this
Agreement, but Employee shall continue to be bound by the terms of Sections 7
through 10 hereof. In addition to forfeiting all his rights under this
Agreement, if Employee terminates this Agreement without cause giving less
notice than required in Section 5.2 hereof, Employee shall forfeit all stock
options vested (on a daily pro-rata basis) between six (6) months prior to the
effective date of termination and the date of receipt by the Company of
Employee's notice of termination.
(b) In the event that: (i) the Company
terminates this Agreement without cause; (ii) Employee terminates this Agreement
for any cause as set forth in Section 5.2 hereof; or (iii) the Company refuses
to enter into a new employment agreement with Employee with financial terms as
favorable as those afforded to Employee during the last year of this Agreement
after Employee's continuous employment with the Company through December 31,
2001, then: (1) Employee shall receive his Base Salary as provided in this
Agreement, until the later of December 31, 2001 or twelve (12) months from the
effective date of such termination (the "Severance Period"), net of all
applicable taxes that are required to be withheld; (2) the Board will issue
substantially equivalent non-qualified stock options or warrants in exchange for
incentive stock options held by Employee; (3) the Company will exchange
restricted shares of stock of the Company held by Employee for shares bearing
only such restrictions and legends as are required by law; and (4) Employee
shall receive, at the time payable pursuant to 4.4 hereof, the maximum Annual
Bonus payable with respect to such year during which the termination occurred,
but no subsequent years. In such event, Employee shall be treated as an employee
for the period during which he is receiving payments under this Section 5.3(b)
and shall be entitled to participate in the fringe benefit programs under
Section 4.2.1 (but not Sections 4.2.2, 4.2.3 or 4.2.4) for the duration of such
period, notwithstanding that any of such benefits were provided on
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a group basis prior to such termination.
(c) The compensation payable to Employee or his
estate or legal representative under this Section 5.3 shall be in addition to
any benefits payable in accordance with Section 4.2 hereof, but shall be in lieu
of other compensation ordinarily paid by the Company upon the termination, death
or disability of a senior officer of the Company. Employee agrees that in
consideration of the performance by the Company of its obligations under Section
5.3 hereof: (i) he will assert no claims arising out of his employment
relationship, or the non-renewal or termination thereof, against the Company or
its officers, directors, stockholders, employees, agents and representatives;
and (ii) he will cooperate with and assist his successor and other management of
the Company for the duration of the Severance Period at such times and amounts
of time as are reasonable for Employee and the Company given the Company's need
for such assistance and Employee's prior commitments and availability.
6. INDEMNIFICATION.
(a) The Company shall indemnify Employee and shall
save and hold Employee harmless from, against, for, and, in respect of
damages, losses, obligations, deficiencies, costs and expenses, including,
reasonable attorneys' fees and other costs and expenses, incident to, or
arising out of a threatened, pending or contemplated suit, action, claim or
proceeding, whether civil, criminal, administrative or investigative,
suffered, incurred or required to be paid by Employee by reason of being a
director, officer, employee or agent of the Company or by reason of service
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(whether or not Employee continues to be a director, officer, employee or
agent of the Company or such corporation, partnership, joint venture, trust
or other enterprise at the time such action, suit or proceeding is brought or
threatened) if Employee's act or omission was taken or made in good faith and
in a manner reasonably believed to be in or not inconsistent with the best
interests of the Company; provided, that such act or omission did not
constitute gross negligence, willful misconduct or fraud. The foregoing right
of indemnification shall be in addition to any rights to which Employee may
otherwise be entitled under the Company's bylaws, certificate of
incorporation or applicable law and shall inure to the benefit of Employee's
heirs, executors or administrators. The Company shall pay the expenses
incurred by Employee in defending any action, suit or proceeding, upon
receipt of an undertaking by Employee to repay such payment if there shall be
a final adjudication or determination that it is not entitled to
indemnification as provided herein.
(b) During the term of this Agreement, the Company
shall use reasonably commercial efforts to maintain at least at current
levels, Directors and Officers liability and Errors and Omissions insurance.
7. COMPANY PROPERTY. All materials, information and data of any kind
furnished by the Company to Employee or developed by Employee on behalf of the
Company or at the Company's direction or for the Company's use or otherwise in
connection with Employee's employment hereunder, are and shall remain the sole
and confidential property of the Company. In the event that the Company requests
the return of such materials at any time during the term of
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this Agreement or at or after the termination of this Agreement, Employee
shall as soon as possible deliver such material to the Company.
8. CONFIDENTIALITY. During the term of this Agreement and at all times
thereafter, Employee shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person or entity other than the Company, any material referred to in Section 7
above or any information regarding the business methods or policies, procedures,
techniques, projects, trade secrets or other confidential knowledge relating to
the Company, its business or activities.
9. NON-COMPETE. During the term of this Agreement and for one (1) year
thereafter (or during the Severance Period in the case of Employee's termination
by the Company without cause or by Employee for any cause set forth in Section
5.2), Employee agrees that he shall not (a) engage or be interested in or
receive any compensation from any business that competes with or is in the same
business as the Company or its affiliates (affiliates for purposes hereof being
defined as any company that owns at least 10% of the voting stock of the
Company, or any company in which the Company owns 10% of the voting stock) as
then conducted or contemplated pursuant to any plan of management issued or
drafted at the request of or on behalf of the Board or (b) induce or attempt to
induce any employee, agent or customer of the Company or any of its affiliates
to terminate or reduce the scope of his, her or its relationship with the
Company or any of its affiliates. For the purposes of this Agreement, Employee
shall be deemed to be interested in a business if he is engaged or interested in
that business as a stockholder, director, officer, employee, salesman, sales
representative, agent, broker, partner, individual proprietor, lender,
consultant or otherwise, but not if that interest is limited solely to the
ownership of five percent (5%) or less of any class of the equity or debt
securities of a corporation whose shares are listed for trading on a national
securities exchange or traded in the over-the-counter market. Employee shall
not, directly or indirectly, engage in any other business enterprise, or have an
interest, financial or otherwise, in any other business enterprise which
interferes or is likely to interfere with Employee's employment hereunder.
10. EQUITABLE RELIEF. Employee acknowledges and agrees that the Company
may seek to enforce the covenants and restrictions pertaining to his obligations
in Sections 7, 8 and 9 hereof at law or in equity. The covenants and
restrictions pertaining to Employee's obligations in Sections 7, 8 and 9 hereof
shall remain in full force and effect, notwithstanding the fact that this
Agreement has been terminated. If a court determines that the restrictions in
Section 9 are too broad or otherwise unreasonable under applicable law,
including with respect to time or geographical scope, the court is hereby
requested and authorized by the parties hereto to revise the foregoing
restrictions to include the maximum restriction allowable under the applicable
law. If Employee violates any of the restrictions contained in Section 9, the
restrictive period shall not run in favor of Employee from the time of the
commencement of any such violation until such time as such violation shall be
cured by Employee to the satisfaction of the Company.
11. PRIOR AGREEMENTS. Employee represents and warrants to the Company
that there are no restrictions, agreements or understandings of any kind
whatsoever to which Employee is a party, or by which he is bound, which would
inhibit, prevent or make unlawful his execution or performance of this
Agreement, and that his execution and performance of this Agreement shall
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not constitute a breach of any contract, agreement or understanding, whether
oral or written, to which he is a party or by which he is bound.
12. ACKNOWLEDGMENT. Employee hereby acknowledges and certifies that he
has read the terms of this Agreement, that he has been informed by the Company
that he should discuss it with an attorney of his choice, and that he
understands it terms and effects. Employee further acknowledges that based on
his training and experience, he has the capacity to earn a livelihood by
performing services as an employee or otherwise in a business that does not
violate the provisions of Section 9. Neither the Company, Employee nor their
respective agents, representatives or attorneys have made any representations to
the other concerning the terms or effects of this Agreement other than those
contained herein.
13. ASSIGNMENT. Without the prior written consent of the Company,
Employee shall have no right to exchange, convert, encumber or dispose of his
rights to receive benefits and payments under this Agreement, which payments,
benefits and rights thereto are non-assignable and non-transferable. In the
event of any attempted assignment or transfer, Employee shall forfeit his rights
to receive any payments or benefits, and the Company shall have no further
liability under this Agreement.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter contained
herein and supersedes any prior understandings and agreements between them
respecting such subject matter. This Agreement shall supersede any existing
employment agreement or arrangement between Employee and the Company, including,
without limitation, an Employment Agreement between the parties dated effective
January 1, 1997, and the parties' execution hereof shall serve to terminate any
such agreement or arrangement and the parties' respective rights and obligations
thereunder.
15. HEADINGS. The headings describing the provisions of this Agreement
are for convenience of reference only, and shall not affect its interpretation.
16. SEVERABILITY. If any provision of this Agreement is held illegal,
invalid or unenforceable, such illegality, invalidity, or unenforceability shall
not affect any other provision hereof. Such provision and the remainder of this
Agreement shall, in such circumstances, be modified to the extent necessary to
render enforceable the remaining provisions hereof.
17. NOTICES. All notices shall be in writing and shall be deemed to
have been given if presented personally, sent by recognized national overnight
carrier, or sent by certified or registered mail, postage prepaid, return
receipt requested, to the following addressees:
If to the Company:
NETWORK SIX, INC.
000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Compensation Committee
Xxxxxxxx Xxxxxx
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With a copy to:
Xxxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
and
Xxxxxxxx Xxxxxx
00 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
If to Employee:
Xxxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
With a copy to:
E. Xxxxx Xxxxxxx, Esq,
Cameron & Xxxxxxxxx, LLP
00 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Notice to the parties to be copied shall be required for such notice to be
effective. Notice of any change in such addresses shall also be given in the
manner set forth above. Whenever the giving of notice is required, the giving of
such notice may be waived by the party entitled to receive such notice.
18. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which taken together shall constitute one and the same instrument.
19. WAIVER. The failure of either party to insist upon strict
performance of any of the terms or conditions of this Agreement shall not
constitute a waiver of any of its rights hereunder.
20. SUCCESSORS AND ASSIGNS. This Agreement binds, inures to the benefit
of, and is enforceable by Employee and his heirs and personal representatives,
and the Company and its successors and permitted assigns, and does not confer
any rights on any other persons or entities. The duties, obligations, rights and
responsibilities of Employee under this Agreement are personal and shall not be
assigned by Employee without the prior written consent of the Company, as set
forth in Section 7 hereof.
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21. SURVIVAL. The provisions of Sections 7 through 12 hereof shall
survive the termination of this Agreement for any reason whatsoever.
22. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Rhode Island.
23. AMENDMENTS. This Agreement may be amended and supplemented only by
a written instrument duly executed by both parties.
24. JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement
participated in the drafting of this Agreement. As such, the language used
herein shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and date first above written.
/s/ Xxxxxxx X. Xxxxxx
--------------------------------
XXXXXXX X. XXXXXX
NETWORK SIX, INC.
BY: /s/ Xxxxxxx X. Xxxxxxx, Secretary
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