EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the _____ day of July, 2000, by and between XXXXXXX
COMPUTER RESOURCES, INC., a Delaware corporation ("Company"), and XXXXXXX XXXXX
("Employee").
W I T N E S S E T H :
WHEREAS, the Company entered into an Asset Purchase Agreement ("Purchase
Agreement") of even date pursuant to which it purchased substantially all the
assets of DataNet, Inc. ("DataNet") used in its business of marketing and
selling a broad range of microcomputers and related products including equipment
selection procurement and configuration; and
WHEREAS, Employee, as an inducement for and in consideration of Company entering
into the Purchase Agreement, has agreed to enter into and execute this
Employment Agreement pursuant to Section 6 thereof; and
WHEREAS, Company desires to engage the services of Employee, pursuant to the
terms, conditions and provisions as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein set forth, the parties hereby covenant and agree as follows:
1. Employment. The Company agrees to employ the Employee, and the Employee
----------
agrees to be employed by the Company, upon the following terms and
conditions.
2 Term. The initial term of Employee's employment pursuant to this Agreement
----
shall begin on the ______ day of July, 2000, and shall continue for a
period of two (2) years, ending July _____, 2002 unless terminated earlier
pursuant to the provisions of Section 10, provided that Sections 8, 9 and
10(b), if applicable, shall survive the termination of such employment and
shall expire in accordance with the terms set forth therein.
3. Renewal Term. The term of Employee's employment shall automatically renew
------------
for additional consecutive renewal terms of one (1) year unless either
party gives written notice of his/its intent not to renew the terms of this
Agreement sixty (60) days prior to expiration of the then expiring term.
4. Duties. Employee shall serve as Technical Service Director for the
------
Company's Raleigh, North Carolina Division. Employee shall devote his best
efforts and substantially all his time during normal business hours to the
diligent, faithful and loyal discharge of the duties of his employment and
towards the proper, efficient and successful conduct of the Company's
affairs. Employee further agrees to refrain during the term of this
Agreement from making any sales of competing services or products or from
profiting from any transaction involving computer services or products for
his account without the express written consent of Company.
5. Compensation. For all services rendered by the Employee under this
------------
Agreement (in addition to other monetary or other benefits referred to
herein), compensation shall be paid to Employee as follows:
(a) Base Salary: During each fiscal year of the initial term of this
Agreement (unless renegotiated by the mutual agreement of the
parties), Employee shall be paid an annual base salary of One Hundred
Fifty Thousand Dollars ($150,000.00). Said base salary shall be
payable in accordance with the historical payroll practices of the
Company.
(b) Annual Cash Bonus - Raleigh, North Carolina Division: In addition to
Employee's base salary as set forth in Section 5(a) above, for the
period commencing upon the closing of the Purchase Agreement and
ending January 5, 2001, Employee shall be entitled to a cash bonus and
incentive stock option award in the event Employee satisfies certain
economic criteria pertaining to the Company's Raleigh, North Carolina
Division set forth as follows:
(i) Net profit before taxes ("NPBT") of Company's Raleigh, North
Carolina Division greater than $3,000,000.00 but less than or
equal to $3,250,000.00 equals $10,000.00 cash bonus plus 5,000
incentive stock options;
(ii) NPBT of Company's Raleigh, North Carolina Division greater than
$3,250,000.00 but less than or equal to $3,500.000.00 equals
$15,000.00 cash bonus plus 7,500 incentive stock options;
(iii)NPBT Company's Raleigh, North Carolina Division greater than
$3,500,000.00 equals $20,000.00 cash bonus plus 10,000 incentive
stock options;
(iv) For the period commencing with the Closing of the Purchase
Agreement and ending January 5, 2001, the net profit before taxes
criteria and the cash bonus and incentive stock option award set
forth above shall be pro-rated. Specifically, such items shall be
determined based on a percentage equal to the number of days from
the Closing Date to January 5, 2001, over three hundred
sixty-five (365) days. For example, if the transaction closes on
July 28, 2000, the applicable criteria, under (i) for example,
would be NPBT greater than $1,323,288.00 but less than or equal
to $1,433,575.00 equals $4,411.00 cash bonus and 2206 incentive
stock options;
(v) For purposes of this section, the term "NPBT" shall mean the net
profit before taxes of Company's Raleigh, North Carolina
Division, during the applicable period. The NPBT shall be
determined by the internally generated financial statements of
the Company in accordance with generally accepted accounting
principles, consistently applied, provided that no effect shall
be given to any gain or loss attributable to sale of assets by
said Company's Raleigh, North Carolina Division not in the
ordinary course of business, and provided that no effect shall be
given to any increase in the amounts of depreciation,
amortization or other expense or deduction taken on tangible or
intangible assets of Company's Raleigh, North Carolina Division
if such increase is attributable to the revaluation of such
assets incident to their acquisition pursuant to the terms of the
Purchase Agreement. Commencing upon the installation of the Astea
(MAS and accounting) System at the Company's Raleigh, North
Carolina Division, a 1.5% MAS royalty on gross sales by the
Company's Raleigh, North Carolina Division shall be made incident
to said NPBT determination. For each subsequent year described
above that this Agreement is in effect, the parties shall, in
good faith, agree upon the MAS royalty to be charged hereunder
based on the level of services and support being provided by
Company to its Raleigh, North Carolina Division. Provided,
however, such MAS royalty fees shall be 1.5% if the parties are
unable to come to agreement for each subsequent year. For
purposes of this section, the term "Company's Raleigh, North
Carolina Division" shall be defined as the businesses acquired
from DataNet, by Company and its affiliate, Xxxxxxx Select
Integration Solutions, Inc., pursuant to the Purchase Agreement,
provided, however, commencing upon the Astea (MAS and accounting)
System conversion, the term "Company's Raleigh, North Carolina
Division" shall include the Company's existing Research Triangle,
North Carolina branch. Said determination of NPBT shall be
subject to verification as set forth below. Any cash amount
determined under section 5(b) shall be payable to Employee within
thirty (30) days after the issuance of the Company's financial
statements for such period.
-3-
(vi) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares
of the Company and fifty percent (50%) in the shares of the
Company's subsidiary (Xxxxxxx Select Integration Solutions, Inc.)
if it is a publicly traded entity at such time, as of January 5,
2001 or any other applicable date, which shall mean with respect
to such shares, the average between the high and low bid and
asked prices for such shares on the over-the-counter market on
the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred
if there were no sales on such date). In the event the stock of
Xxxxxxx Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2001, Company shall have the right to award 100%
in the shares of the Company (in lieu of 50%) or shall have the
right to pay to Employee, in cash, the fair market value of such
50% of the stock options of the Company determined under the
Black Scholes method of valuation of stock options. Any stock
options awarded shall be fully vested over a three (3) year
period, vesting thirty-three and one-third percent (33 1/3%) per
year of employment from the effective date of this Agreement.
(vii)The parties agree that in January, 2001, January, 2002, January,
2003 and January, 2004, they will negotiate in good faith, the
level of NPBT of Company's Raleigh, North Carolina Division for
the aforementioned cash bonus and incentive stock option award to
be earned for such years, which NPBT criteria shall be predicated
upon Company's Raleigh, North Carolina Division's goals,
projections and budgets established at the outset of such fiscal
year.
(c) In addition to Employee's base salary as set forth in Section 5(a) and
any annual cash bonus/incentive stock option award that Employee may
be entitled to under Section 5(b) based on Company's Raleigh, North
Carolina Division's performance, Employee shall be entitled to a cash
bonus and incentive deferred compensation and an incentive stock
option award for the year 2000 in the event Employee satisfies certain
economic criteria pertaining to Company's performance during the
fiscal year 2000, as follows:
(i) Gross sales of Company greater than $915,000,000.00 but less than
or equal to $950,000,000.00 with NPBT greater than 6.0% of gross
sales equals $10,000.00 cash plus 5,000 incentive stock options;
-4-
(ii) Gross sales of Company greater than $950,000,000.00 but less than
or equal to $1,000,000,000.00 with NPBT greater than 6.0% of
gross sales equals $15,000.00 cash plus 7,500 incentive stock
options;
(iii)Gross sales of Company greater than $1,000,000,000.00 with NPBT
greater than 6.0% of gross sales equals $20,000.00 cash plus
10,000 incentive stock options.
(iv) The cash bonus and incentive stock option awards hereunder shall
be pro-rated for the period commencing with the Closing of the
Purchase Agreement and ending January 5, 2001, based on a formula
based on the number of days from the Closing of the Purchase
Agreement to January 5, 2001, over three hundred sixty-five (365)
days.
(v) For purposes of this Section, the term "Gross Sales" shall mean
the gross sales of equipment, software and services by Company
during the applicable period, determined on a consolidated basis.
In making said gross sales determination, all gains and losses
realized on the sale or other disposition of Company's assets not
in the ordinary course shall be excluded. All refunds or returns
which are made during such period shall be subtracted along with
all accounts receivable derived from such sales that are written
off during such period in accordance with Company's accounting
system. Such Gross Sales and net pre-tax margin of Company shall
be determined by the Chief Financial Officer of the Company in
accordance with generally accepted accounting principles and such
determination shall be final, binding and conclusive upon all
parties hereto. All amounts due Employee under Section 5(c)
(other than the award of any incentive stock options) will
constitute incentive deferred compensation which shall be payable
to Employee according to the terms and conditions of the
Incentive Deferred Compensation Agreement attached hereto and
incorporated herein as Exhibit A. Any incentive deferred
compensation shall be fully vested over a five-year period,
vesting 20% per year of employment from the effective date of
this Agreement.
-5-
(vi) Any award of the incentive stock options to acquire the common
stock of Company shall be made fifty percent (50%) in the shares
of the Company and fifty percent (50%) in the shares of the
Company's subsidiary (Xxxxxxx Select Integration Solutions, Inc.)
if it is a publicly traded entity at such time, as of January 5,
2001 or any other applicable date, which shall mean with respect
to such shares, the average between the high and low bid and
asked prices for such shares on the over-the-counter market on
the last business day prior to the date on which the value is to
be determined (or the next preceding date on which sales occurred
if there were no sales on such date). In the event the stock of
Xxxxxxx Select Integration Solutions, Inc. is not publicly traded
as of January 5, 2001, Company shall have the right to award 100%
in the shares of the Company (in lieu of 50%) or shall have the
right to pay to Employee, in cash, the fair market value of such
50% of the stock options of the Company determined under the
Black Scholes method of valuation for stock options. Any
incentive stock options awarded shall be fully vested over the
three (3) year period, vesting thirty-three and one-third percent
(33 1/3%) per year of employment from the effective date of this
Agreement.
(vii)The parties agree that in January, 2001, January, 2002, January,
2003 and January, 2004, they will negotiate in good faith the
implementation of economic criteria for the earning of incentive
deferred compensation and incentive stock option award for
Employee for each of the remaining fiscal years of this Agreement
which will be predicated upon the attainment of Company's goals,
projections and budgets established at the outset for such fiscal
year which shall be consistent with the goals set forth for
senior management of Company for such year(s). The incentive
deferred compensation and incentive stock option awards shall be
predicated on the structure (as to amounts) used for the
incentive deferred compensation/incentive stock option award of
Company for the year 2000.
(viii) Company will deliver to Employee copies of the reports of any
determination made hereunder by Company for the subject period,
along with any documentation reasonably requested by Employee.
Within fifteen (15) days following delivery to Employee of such
report, Employee shall have the right to object in writing to the
results contained in such determination. If timely objection is
not made by Employee to such determination, such determination
shall become final and binding for purposes of this Agreement. If
a timely objection is made by Employee, and the Company and
Employee are able to resolve their differences in writing within
fifteen (15) days following the expiration of the initial 15-day
period, then such determination shall become final and binding as
it pertains to this Agreement. If timely objection is made by
Employee to Company, and Employee and Company are unable to
resolve their differences in writing within fifteen (15) days
-6-
following the expiration of the initial 15-day period, then all
disputed matters pertaining to the report shall be submitted and
reviewed by the Arbitrator ("Arbitrator"), which shall be an
independent accounting firm selected by Company and Employee. If
Employee and Company are unable to promptly agree on the
accounting firm to serve as the Arbitrator, each shall select, by
not later than fifteen (15) days following the expiration of the
initial fifteen (15) day period, one accounting firm and the two
selected accounting firms shall then be instructed to select
promptly a third accounting firm, such third accounting firm to
serve as the Arbitrator. The Arbitrator shall consider only the
disputed matters pertaining to the determination and shall act
promptly to resolve all disputed matters. A decision with respect
to all disputed matters shall be final and binding upon Company
and Employee. The expenses of Arbitration shall be borne one-half
by Employee and one-half by Company. Each party shall be
responsible for his/its own attorney and accounting fees.
6. Fringe Benefits. During the term of this Agreement, Employee shall be
----------------
entitled to the following benefits:
(a) Health Insurance - Employee shall be provided with the standard family
medical health and insurance coverage maintained by Company on its
employees. Company and Employee shall each pay fifty percent (50%) of
the cost of such coverage.
(b) Vacation - Employee shall be entitled each year to a vacation of three
weeks during which time his compensation will be paid in full.
Provided, however, such weeks may not be taken consecutively without
the written consent of Company.
(c) Retirement Plan - Employee shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or
welfare plans maintained by the Company during the term of this
Agreement.
(d) Other Company Programs - Employee shall be eligible to participate in
any other plans or programs implemented by the Company for all of its
employees with duties and responsibilities similar to Employee.
-7-
(e) Employee shall be responsible for any and all taxes owed, if any, on
the fringe benefits provided to him pursuant to this Section 6.
7. Expenses. During the term of this Agreement, Employee shall be entitled to
--------
receive prompt reimbursement for all reasonable and customary travel and
entertainment expenses or other out-of-pocket business expenses incurred by
Employee in fulfilling the Employee's duties and responsibilities
hereunder, including all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the
Company, provided that such expenses are incurred and accounted for in
accordance with the reasonable policies and procedures established by the
Company.
8. Non-Competition. Employee expressly acknowledges the provisions of Section
---------------
7 of the Purchase Agreement relating to Employee's Covenant Not to Compete
with Company and also Employee's Covenant Not to Compete with Company's
wholly-owned subsidiary, Xxxxxxx Select Integration Solutions, Inc.
Accordingly, such provisions of Section 7 are incorporated herein by
reference to the extent as if restated in full herein. In addition to the
consideration received under this Agreement, Employee acknowledges that as
one of the owners of the common stock of DataNet, he has received
substantial consideration pursuant to such Purchase Agreement and that as
an inducement for, and in consideration of, Company entering into the
Purchase Agreement and Company entering into this Agreement, Employee has
agreed to be bound by such provisions of Section 7 of the Purchase
Agreement. Accordingly, such provisions of Section 7 and Exhibits I-6 and
I-7 and the restrictions on Employee thereby imposed shall apply as stated
therein.
9. Non-Disclosure and Assignment of Confidential Information. The Employee
------------------------------------------------------------
acknowledges that the Company's trade secrets and confidential and
proprietary information, including without limitation:
(a) unpublished information concerning the Company's:
(i) research activities and plans,
(ii) marketing or sales plans,
(iii) pricing or pricing strategies,
(iv) operational techniques,
(v) customer and supplier lists, and
(vi) strategic plans;
(b) unpublished financial information, including unpublished information
concerning revenues, profits and profit margins;
-8-
(c) internal confidential manuals; and
(d) any "material inside information" as such phrase is used for purposes
of the Securities Exchange Act of 1934, as amended;
all constitute valuable, special and unique proprietary and trade secret
information of the Company. In recognition of this fact, the Employee agrees
that the Employee will not disclose any such trade secrets or confidential or
proprietary information (except (i) information which becomes publicly available
without violation of this Agreement, (ii) information of which the Employee did
not know and should not have known was disclosed to the Employee in violation of
any other person's confidentiality obligation, and (iii) disclosure required in
connection with any legal process), nor shall the Employee make use of any such
information for the benefit of any person, firm, operation or other entity
except the Company and its subsidiaries or affiliates. The Employee's
obligation to keep all of such information confidential shall be in effect
during and for a period of five (5) years after the termination of his
employment; provided, however, that the Employee will keep confidential and will
not disclose any trade secret or similar information protected under law as
intangible property (subject to the same exceptions set forth in the
parenthetical clause above) for so long as such protection under law is
extended.
10. Termination.
-----------
(a) The Employee's employment with the Company may be terminated at any
time only for the following reasons:
(i) By Employee's death;
(ii) By Employee's physical or mental disability which renders
Employee unable to perform his duties hereunder;
(iii)By the Company, for cause upon three (3) day's written notice to
Employee. For purposes of this Agreement, the term "cause" shall
mean termination upon: (i) the engaging by Employee in conduct
which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to any
material misrepresentation related to the performance of his
duties; (ii) the conviction of Employee of a felony or other
crime involving theft or fraud, (iii) Employee's gross neglect,
gross misconduct or gross insubordination in carrying out his
duties hereunder resulting, in either case, in material harm to
the Company; or (iv) any material breach by Employee of this
Agreement.
-9-
(b) Compensation upon Termination: In the event of termination of
employment, the Employee or his estate, in the event of death, shall
be entitled to his annual base salary and other benefits provided
hereunder to the date of his termination. In addition, Employee shall
be entitled to receive any bonus accrued to the date of his
termination of employment as provided in Sections 5(b) and 5(c), which
shall be payable (if applicable) pursuant to the terms thereof.
11. Severability. In case any one (1) or more of the provisions or part of a
------------
provision contained in this Agreement shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a
provision of this Agreement. In such a situation, this Agreement shall be
reformed and construed as if such invalid, illegal or unenforceable
provision, or part of a provision, had never been contained herein, and
such provision or part shall be reformed so that it will be valid, legal
and enforceable to the maximum extent possible.
12. Governing Law. This Agreement shall be governed and construed under the
--------------
laws of the State of North Carolina and shall not be modified or
discharged, in whole or in part, except by an agreement in writing signed
by the parties.
13. Notices. All notices, requests, demands and other communications relating
-------
to this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed by certified or registered mail,
return receipt requested, postage prepaid to the following addresses (or to
such other address for a party as shall be specified by notice pursuant
hereto):
If to Company, to: Pomeroy Computer Resources, Inc.
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to: Xxxxx X. Xxxxx III, Esq.
Xxxxxxxxx & Dreidame Co., L.P.A.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
If to Employee, to: the Employee's residential address, as
set forth in the Company's records
With a copy to: Xxxxxxxx Xxxxx, Esq.
Xxxxxx & Xxxxx, LLP
X.X. Xxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
-10-
14. Enforcement of Rights. The parties expressly recognize that any breach of
---------------------
this Agreement by either party is likely to result in irrevocable injury to
the other party and agree that such other party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction in Wake County, North Carolina, either at law or in equity, to
obtain damages for any breach of this Agreement, or to enforce the specific
performance of this Agreement by each party or to enjoin any party from
activities in violation of this Agreement. Should either party engage in
any activities prohibited by this Agreement, such party agrees to pay over
to the other party all compensation, remuneration, monies or property of
any sort received in connection with such activities. Such payment shall
not impair any rights or remedies of any non-breaching party or obligations
or liabilities of any breaching party pursuant to this Agreement or any
applicable law.
15. Entire Agreement. This Agreement and the Purchase Agreement referred to
-----------------
herein contain the entire understanding of the parties with respect to the
subject matter contained herein and may be altered, amended or superseded
only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
16. Parties in Interest.
---------------------
(a) This Agreement is personal to each of the parties hereto. No party may
assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto; provided,
however, that nothing in this Section 16 shall preclude (i) Employee
from designating a beneficiary to receive any benefit payable
hereunder upon his death, or (ii) executors, administrators, or legal
representatives of Employee or his estate from assigning any rights
hereunder to person or persons entitled thereto. Notwithstanding the
foregoing, this Agreement shall be binding upon and inure to the
benefit of any successor corporation of Company
(b) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the assets of the Company or the business with respect to which
the duties and responsibilities of Employee are principally related,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that Company would have been required to
perform it if no such succession had taken place. As used in this
Agreement "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which
executes and delivers the assumption agreement provided for in this
Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
-11-
17. Representations of Employee. Employee represents and warrants that he is
----------------------------
not party to or bound by any agreement or contract or subject to any
restrictions including without limitation any restriction imposed in
connection with previous employment which prevents Employee from entering
into and performing his obligations under this Agreement.
18. Counterparts. This Agreement may be executed simultaneously in several
------------
counterparts, each of which shall be deemed an original part, which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed effective as of the day and
year first above written.
WITNESSES: COMPANY:
XXXXXXX COMPUTER RESOURCES, INC.
---------------------------
By:
--------------------------- ----------------------------------
XXXXXXX X. XXXXXXX
Chief Financial Officer
EMPLOYEE:
---------------------------
--------------------------- -------------------------------------
XXXXXXX XXXXX
