Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 3rd day of May, 1999 (the "Effective Date") between INNOVATIVE SOLUTIONS AND
SUPPORT, INCORPORATED, a Pennsylvania corporation (the "Company"), and XXXXXX X.
XXX a resident of the State of Kansas ("Employee").
RECITALS
A. Employee has served in various executive capacities with other companies
over the past several years and has extensive managerial and administrative
experience and possesses skills vital to the Company's continued growth and
prosperity.
B. Company desires Employee to serve as an employee of the Company in order to
ensure the continued growth and success of the business of the Company.
C. The parties wish to set forth herein the terms and conditions on which
Employee will serve as an employee of the Company.
The parties agree as follows:
1. Agreement: Position. Subject to the terms and conditions of this
Agreement, during the term of this Agreement the Company agrees to employ
Employee, and Employee agrees to be employed by the Company and to serve the
Company as the President of the Company. Employee's title may not be changed
during the term of this Agreement without his prior written consent.
2. Duties of Employee
2.1 General Duties. As President of the Company, Employee will have
day-to-day responsibility for management of the Company as its chief operating
officer and will be responsible to the Company's CEO and Board of Directors (the
"Board"). Employee will report to the CEO. Employee agrees that Employee's
duties may be changed by the Board and that Employee will cooperate with the
Board and will serve the Company in such other capacities and with such other
duties and responsibilities as are typically accorded to the position of
President subject to the Company's Bylaws. The duties and services to be
performed by Employee under this Agreement are collectively referred to herein
as the "Services".
2.2 Other Duties and Obligations. In addition to performing the duties
and the Services described in Section 2.1, Employee further agrees with the
Company that, during the term of this Agreement:
(a) Employee will perform the Services and his duties hereunder, and
will manage and operate the business of the Company, subject to, and in
accordance with, the directions of the CEO.
(b) Employee will comply with and be bound by the operating
policies, procedures, standards, regulations and practices of the Company that
are in effect from time to time during Employee's employment with the Company.
(c) Employee will be generally available and readily accessible to
Company personnel by telephone, e-mail and facsimile at all reasonable times.
(d) Employee will not: (i) engage in any unethical, dishonest,
fraudulent or felonious criminal behavior; (ii) intentionally or deliberately
cause or attempt to cause an injury to the Company; or (iii) steal, convert,
misappropriate or wrongfully and willfully use or disclose any proprietary
information, technology or trade secret of the Company.
2.3 Working Facilities. Employee shall have a private office,
stenographic help, a personal computer and other facilities and services that
are suitable for his position and appropriate for the performance of his duties.
2.4 Representations of Employee. Employee represents and warrants to
the Company that he is free to enter into and fully perform this Agreement and
the agreements referred to herein without breach of any agreement or contract to
which Employee is a party or by which Employee is bound.
3. Exclusive Service. Employee will devote his full working time, energy,
skill and efforts exclusively to the performance of the Services for the Company
and will apply all his skill and experience to the performance of the Services
and advancing the Company's interests and will do nothing inconsistent with the
performance of the Services hereunder.
4. Compensation and Benefits
4.1 Salary and Bonus. During the term of the Agreement, the Company will
pay Employee a gross base salary at the rate of Two Hundred Twenty Five Thousand
Dollars ($225,000) per year payable bi-weekly.
4.2 Additional Benefits. Employee will be eligible to participate in the
Company's employee benefit plans of general application, including without
limitation any pension plans and any life, health, and dental insurance plans in
accordance with the rules established for individual participation in any such
plan and applicable law, including health and dental for spouse. In addition,
Employee will be entitled to three weeks vacation.
4.3 Moving Expenses. To assist Employee with relocation, Company shall
reimburse Employee for approved, reasonable moving expenses associated with
Employee's relocation to Pennsylvania. Reasonable expenses include closing
costs, moving expenses, and temporary living costs. Employee agrees that
relocation expenses are fully repayable to the Company if the Employee resigns
or is terminated for cause during the term of this Agreement.
4.4 Stock Options. Employee shall be granted stock options for 300,000
shares of the Company's common stock at an option price of $3.60 per share under
the 1998 Incentive Stock Option Plan. These options shall vest at the rate of
100,000 at the end of each 12 months
2
throughout the term of this agreement. Employee expressly acknowledges and
agrees that, to the extent of any inconsistency between the terms of this
Agreement and the 1998 Incentive Stock Option Plan, the terms of the 1998
Incentive Stock Option Plan shall govern and control; provided, however, that to
the extent that the terms of the stock option agreement issued to Employee on
account of the foregoing options contains terms and conditions which, by the
terms of the 1998 Incentive Stock Option Plan, may be included therein, the
terms set forth in such stock option agreement shall govern and control.
4.5 Expenses. All reasonable and necessary expenses incurred by Employee
in connection with Employee's performance of the Services shall be reimbursed
provided that such expenses are; (a) in accordance with the Company's policies,
as determined from time to time by the Board; and (b) properly documented and
accounted for.
5. Term and Termination.
5.1 Term of Agreement. Unless this Agreement is earlier terminated in
accordance with the provision of this Section 5, the term of this Agreement will
commence on the Effective Date, and will continue until the date that is three
(3) years after the Effective Date (the "Initial Term".) Thereafter, this
Agreement shall be renewed yearly for one-year periods(each, a "Renewal Term")
unless either party provides the other party with written notice of termination
of this Agreement not later than ninety (90) days from the end of the then
current term of the Agreement. The expiration of this Agreement at the end of
the Initial Term or the then current Renewal term is hereinafter called the
"Expiration Date".
5.2 Events of Termination. Employee's employment with the Company will
terminate immediately upon any one of the following occurrences:
(a) the giving of a written notice by the Company to Employee other
than pursuant to Section 5.1 stating that Employee's employment with the Company
is being terminated without Cause, which notice may be given by the Company at
any time at the sole discretion of the Company ("Termination Without Cause");
(b) the Company's termination of Employee's employment hereunder due
to Employee's death or Employee's becoming "Disabled" as defined in Section 5.4
below ("Termination for Death or Disability");
(c) any resignation by Employee of his employment with the Company
or any other voluntary termination or abandonment by Employee of his employment
with the Company other than as provided in Section 5.1 ("Voluntary
Termination"); or
(d) the Company's termination of Employee's employment hereunder for
"Cause" as defined in Section 5.3 below ("Termination for Cause").
5.3 "Cause" Defined. For purposes of this Agreement, the term
"Cause" means (i) the conviction of Employee of any misdemeanor (other than
traffic or similar offenses) or felony, (ii) any material breach by Employee of
this Agreement, or (iii) gross negligence or malfeasance by Employee in the
performance of his duties hereunder.
3
5.4 "Disabled" Defined. For purposes of this Agreement, Employee
will be deemed to be "Disabled" if Employee is unable to perform the Services
hereunder for more than 90 days during any consecutive 120 day period because of
Employee's illness or physical or mental disability, or incapacity, as
determined by the Board, in consultation with a licensed physician mutually
agreeable to the Board and Employee.
5.5 Date of Termination. the effective date of Employee's
termination pursuance to Section 5.2 (a), (b), (c) or (d), is referred to herein
as the "Termination Date."
6. Effect of Termination.
6.1 Termination Without Cause. In the event of the termination of
Employee's employment pursuant to Section 5.2(a) prior to the end of the then
current term of this Agreement , Company will pay Employee the compensation and
benefits otherwise payable to Employee under Section 4 until the Expiration
Date. To the extent Employee receives compensation from any source for services
rendered during the period following the Termination Date during which Company
is obligated to continue payments to Employee hereunder, whether for full-time
or part-time employment or for consulting or similar services, such compensation
shall be offset against payments otherwise due Employee under this Section 6.1.
6.2 Termination for Death or Disability. In the event of any termination
of Employee's employment pursuant to Sections 5.2(b), the Company will pay
Employee the compensation and benefits otherwise payable to Employee under
Section 4 through the Termination Date. Employee's rights under the Company's
benefit plans for general application in which Employee then participates, will
be determined under the provision of such plans. All options vested as of the
Termination Date shall be exercisable to the extent set forth in the option
agreement. Employee will be entitled to no other payment or compensation upon
any such termination.
6.3 Voluntary Termination. In the event of the termination of Employee's
employment pursuant to Section 5.2(c), company will pay Employee no additional
compensation or benefits and Employee shall forfeit all unexercised stock
options.
6.4 Termination for Cause. In the event of termination of Employee's
employment pursuance to Section 5.2(d), the Company will pay the Employee
compensation and benefits otherwise payable to Employee through the date of
termination and Employee shall forfeit all unexercised stock options.
7. Noncompetition, Trade Secrets, Etc. Employee hereby acknowledges that
during his employment by the Company, Employee will have access to confidential
information and business and professional contacts. In consideration of
Employee's employment and the special and unique opportunities afforded by
Company to Employee as a result of Employee's employment, the Employee hereby
agrees as follows:
7.1 Non-Competition. For so long as Employee remains an employee of the
Company and for the Restricted Period (as defined in subsection 7.3 below) after
the termination of employment with Company, as such period may be extended as
hereinafter set forth,
4
Employee shall not directly or indirectly engage in (as a principal,
shareholder, partner, director, officer, agent, employee, consultant or
otherwise) or be financially interested in any business which is involved in
business activities which are the same as or in direct competition with business
activities carried on by Company, or being definitively planned by Company at
the time of the termination of Employee's employment.) Nothing contained in this
Subsection 7.1 shall prevent Employee from holding for investment up to three
percent (3%) of any class of equity securities of a company whose securities are
publicly traded on a national securities exchange or in a national market
system.
7.2 Non-Solicitation. For so long as Employee remains an employee of the
Company and for a period of twelve months after the termination of employment
with Company for any reason, Employee shall not directly or indirectly (as a
principal, shareholder, partner, director, officer, agent, employee, consultant
or otherwise) induce or attempt to influence any employee, customer, independent
contractor or supplier of Company to terminate employment or any other
relationship with Company.
7.3 Restricted Period Defined; Extension of Restricted Period. For
purposes of this Agreement, the term "Restricted Period" shall mean: (A) the
period during which the Company continues to pay Employee upon termination of
employment pursuant to Section 5.2(a); (B) three (3) months following
termination of Employee's employment pursuant to Section 5.2(b); or (C) six (6)
months following termination of Employee's employment pursuant to Section 5.2(c)
or Section 5.2(d). In addition to the foregoing, Company shall have the option,
by delivering written notice to Employee within sixty (60) days from the
Termination Date, to extend the Restricted Period to a total of twelve (12)
months under clauses (A), (B) and (C) above, or to extend the Restricted Period
to a total of six (6) months following the Expiration Date upon termination of
this Agreement at the end of the then current Initial Term or Renewal Term
pursuant to Section 5.1 of this Agreement, in each case by paying Employee an
amount equal to the monthly portion of Employee's annual salary as of the
Termination Date or Expiration Date, as the case may be, for the additional
months by which the Restricted Period is extended, which payments shall be made
bi-weekly during the extended period.
7.4 Non-Disclosure. Employee shall not use for Employee's personal
benefit, or disclose, communicate or divulge to, or use for the direct or
indirect benefit of any person, firm, association or company other than company,
any "Confidential Information," which term shall mean any information regarding
the business methods, business policies, policies, procedures, techniques,
research or development projects or results, historical or projected financial
information, budgets, trade secrets, or other knowledge or processes of, or
developed by, Company or any other confidential information relating to or
dealing with the business operations or activities of Company, made known to
Employee or learned or acquired by Employee while in the employ of Company, but
Confidential Information shall not include information otherwise lawfully known
generally by or readily accessible to the trade or the general public. The
foregoing provisions of this Subsection (b) shall apply during and after the
period when Employee is an employee of the Company and shall be in addition to
(and not a limitation of) any legally applicable protections of Company's
interest in confidential information, trade secrets, and the like. At
5
the termination of Employee's employment with Company, Employee shall return to
the Company all copies of Confidential Information in any medium, including
computer tapes and other forms of data storage.
7.5 Remedies.
(a) Employee acknowledges that the restrictions contained in the
foregoing Subsections 7.1 through 7.4, are reasonable and necessary to protect
the legitimate interests of the Company, that their enforcement will not impose
a hardship on Employee or significantly impair Employee's ability to earn a
livelihood, and that any violation thereof would result in irreparable injuries
to Company. Employee therefore acknowledges that, in the event of Employee's
violation of any of these restrictions, Company shall be entitled to obtain from
any court of competent jurisdiction preliminary and permanent injunctive relief,
as well as damages and an equitable accounting of all earnings, profits and
other benefits arising from such violation, which rights shall be cumulative and
in addition to any other rights or remedies to which Company may be entitled.
(b) If any of the restrictions specified in Subsections 7.1 or 7.2
above should be adjudged unreasonable in any proceeding, then such restrictions
shall be modified so that they may be enforced for such time and in such area as
is adjudged to be reasonable.
(c) If Employee violates any of the restrictions contained in
Subsection 7.1, the Restricted Period shall be extended by a period equal to the
length of time from the commencement of any such violation until such time as
such violation shall be cured by Employee to the satisfaction of Company.
8. Miscellaneous.
8.1 Arbitration. Employee and the Company will submit to mandatory
binding arbitration any controversy or claim arising out of, or relating to,
this Agreement or any breach hereof as well as all claims under any federal,
state or local anti-discrimination laws, provided, however, that each party will
retain its right to, and will not be prohibited, limited or in any other way
restricted form, seeking or obtaining equitable relief (such as injunctive
relief) from a court having jurisdiction over the parties. Such arbitration will
be conducted in accordance with the commercial arbitration rules of the American
Arbitration Association in effect at that time, and judgment upon the
determination or award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
8.2 Severability. If any provision of this Agreement is found by any
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision t the extent that it is found to be
invalid or unenforceable. Such provision will, to the extent allowable by law
and the preceding sentence, not be voided or canceled but will instead be
modified by such arbitrator or court so that it becomes enforceable and, as
modified, will be enforced as any other provision hereof, all the other
provision continuing in full force and effect.
8.3 No Waiver. The failure by either party at any time to require
performance or compliance by the other of any of its obligation or agreements
will in no way affect the right to require such performance or compliance at any
time thereafter. the waiver of either party of a
6
breach of any provision hereof will not be taken or held to be a waiver of any
preceding or succeeding breach of such provision or as a waiver of the provision
itself. No waiver of any kind will be effective or binding, unless it is in
writing and is signed by the party against whom such waiver is sought to be
enforced.
8.4 Assignment. This Agreement and all rights hereunder are personal to
Employee and may not be transferred or assigned by Employee at any time.
8.5 Entire Agreement. This Agreement constitutes the entire and only
agreement between the parties relating to employment of Employee with the
Company, and this Agreement supersedes and cancels any and all previous
contracts, arrangements or understandings with respect thereto.
8.6 Amendment; Waiver. No provision of this Agreement may be modified,
waived, terminated or amended except by a written instrument executed by the
parties hereto. No waiver of a breach of any provision of this Agreement shall
constitute a waiver of any subsequent breach of the same or other provisions
hereof.
8.7 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and hand delivered, sent by telecopier,
sent by certified first class mail, postage prepaid, or sent by nationally
recognized express courier service. Such notices and other communications will
be effective upon receipt of hand delivered five (5) days after mailing--if sent
by mail, or by express courier, to the following addresses, or such other
addresses as any party may notify the other parties in accordance with this
Section:
Employee: Company:
Xxxxxx X. Xxx Chairman
12917 Xxxxxxxx Innovative Solutions
Xxxxxxxx Xxxx, XX 00000 and Support, Inc.
000 Xxxx Xxxx
Xxxxxxx, XX 00000
8.8 Successors and Assigns. This Agreement will be binding upon, and
inure to the benefit of, the successors and personal representatives of the
respective parties hereto.
8.9 Headings. The headings contained in this Agreement are for reference
purposes only and will in no way affect the meaning or interpretation of this
Agreement. In this Agreement, the singular includes the plural, the plural
includes the singular, the masculine gender includes both male and female
referents, and the word "or" is used in the inclusive sense.
8.10 Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original but all of which, taken together, constitute
one and the same agreement.
8.11 Survival. The provision of Sections 4, 5 and 6 will survive the
termination or expiration of this Agreement as a continuing agreement of the
Company and Employee.
7
8.12 Governing Law. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
as of the date first above written.
XXXXXX X. XXX INNOVATIVE SOLUTIONS AND
SUPPORT, INC.
/s/ Xxxxxx X. Xxx /s/ Xxxxxxxx X. X. Xxxxxxx
----------------- --------------------------
8
