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EXHIBIT 10.2
EMPLOYMENT AND NON-COMPETITION AGREEMENT
THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT ("Agreement") made as
of March 31, 1999, by and between Fastcomm Communications Corporation, a
Virginia corporation (the "Company"), and Xxxxxxx Xxxxx ("Executive").
WITNESSETH THAT:
WHEREAS, Executive is willing to render services to the Company as
set forth herein, and assume certain non-competition obligations on the terms
hereinafter set forth; and
WHEREAS, Executive acknowledges that the services to be performed by
him under this Agreement are of a special and unique character; the business of
the Company is currently international in scope; and the Company competes with
other persons that are or could be located in any part of the world; and in
order to assure the Company that the Company will retain its value and the
Company's business as a going concern, it is necessary that Executive undertake
not to utilize his special knowledge of the Company, its business and its
relationships with customers and suppliers to compete with the Company if
Executive were to leave the Company; and
WHEREAS, Executive further acknowledges that during his employment
hereunder, he will occupy a position of trust and confidence with the Company
and during such employment, the Company will be compensated, among other
purposes, to develop and preserve customer relationships and other goodwill
exclusively for the benefit of the Company and that as a result, he will develop
customer relationships and goodwill that are valuable and important to the
Company, and has become familiar with the Company's trade secrets, including
without limitation the Company's profit margins, customer preferences and
requirements, and with other proprietary and confidential information concerning
the Company generally and its business; and
WHEREAS, Executive further acknowledges that throughout his
employment under this Agreement, he is expected to occupy a position of trust
and confidence with the Company, the Company will compensate him, among other
purposes, to develop and preserve customer relationships and goodwill
exclusively for the Company's benefit, which will be valuable and important to
the Company, and he will likely be familiar with the Company's trade secrets,
including without limitation its profit margins, customer preferences and
requirements, and with other confidential and proprietary information concerning
the Company and its business; and
WHEREAS, Executive further acknowledges that the use by Executive
for his own benefit or that of others of such goodwill, trade secrets or
proprietary and confidential information or the solicitation of and/or doing
business in substantially the same capacity
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with any of the Company's customers and potential customers would have a
material adverse effect on the Company and its business and would place the
Company at a substantial competitive disadvantage; and
WHEREAS, Executive further acknowledges that the agreements and
covenants contained in this Agreement, and in particular Section 6 (Confidential
Information) and Section 7 (Non-Competition Agreement), are reasonable in light
of the particular business of the Company, his knowledge thereof and the
services he has previously performed and will perform under this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, it is covenanted and agreed as
follows:
(i) Employment. Executive is hereby employed by the Company for an
employment period commencing on the date of execution of this Agreement by both
parties hereto and delivery by the Company of a fully executed copy of the
Agreement to Executive ("Date of Execution") and ending on the third anniversary
of the Date of Execution (the "Employment Period"). If for any reason the
Company's purchase of certain assets of KG Data Systems, Inc. acquisition is not
consummated, this Agreement shall be without effect and neither party shall have
any liability to the other hereunder.
(ii) Employment Services. Executive shall be employed in a senior
management capacity with the Company and will devote all of his business time
and attention, his best efforts, and all of his ability and skill thereto. His
title shall initially be Vice President Main-Frame Networking and he will
initially report to the President of the Company. During the term hereof
Executive shall not be required to relocate without his written consent.
(iii)Compensation. During the Employment Period, in full
consideration for said services and subject to the due performance thereof:
(a) The Company will pay, or cause to be paid, to Executive,
and Executive agrees to accept, a salary at a rate of not less than $3,846.15
biweekly, subject to review on an annual basis. Such salary shall be payable in
accordance with the Company's usual paying practices, but not less frequently
than monthly; and
(b) Executive shall receive such customary employee "fringe"
welfare benefits afforded generally by the Company to its senior management;
provided Executive is otherwise eligible to receive the same and in each case in
accordance with the terms and conditions of the plans and programs from time to
time in effect (including any required employee contributions).
(c) The Company shall reimburse Executive for all
pre-approved reasonable, direct, out-of-pocket ordinary and necessary business
expenses incurred by
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Executive in the performance of his services hereunder and for which Executive
properly accounts in accordance with the Company's regulations and procedures,
including but not limited to, travel expenses between Sterling VA and Norwalk,
CT.
(d) FastComm agrees to register all securities to be issued
to Stockholder pursuant to this Agreement with the United States Securities and
Exchange Commission. The Company can make no guarantee as to when such
registration will become effective but will file a Registration Statement
covering the shares on or before October 15, 1999 if no other registration
statement is filed giving rise to piggy-back rights or is pending at time of
filing. Executive shall have "piggy-back" registration rights with respect to
his shares, subject to underwriter approval, if the registration as to which
these piggy-back rights apply, is an underwritten offering.
(e) Fastcomm shall grant to Executive options to purchase
120,000 shares of its Common Stock. The exercise price of the options shall be
the closing market price of Fastcomm Common Stock on the Date of Execution. The
options will vest at a rate of 33.33% per year commencing the first anniversary
from date of issuance. The options become exercisable in equal one third
installments on each of the first, second and third anniversaries of the date of
this Grant and expire five years from date of Grant of if Executive ceases to be
an employee of FastComm. These options will be subject to the terms and
conditions of the Fastcomm 1992 Employee Stock Option Plan.
(f) Executive will be eligible to participate in employee
stock option program, employee bonus programs and 401(k) plan.
4. Bonus Shares. FastComm will pay Executive an additional $100,000
in the form of shares of unregistered common stock in FastComm in the event that
KGD Sales as hereafter defined, exceeds $2,500,000 during the period June 1,
1999 through May 31, 2000 ("1999 Sales"); and an additional $200,000 in the form
of unregistered shares of common stock in FastComm in the event that KGD Sales
exceeds $5,000,000 during the period June 1, 2000 through May 31, 2001 ("2000
Sales").
"KGD Sales" are defined as revenues from products designed by or in
process of design by (and disclosed to FastComm by KGD on the date hereof, or
any channel-attached device, revenue from maintenance agreements and revenue
from installation services less sales returns, credits issued and any other
adjustment to gross revenue).
Bonus items are subject to recapture. That is, if the 1999 Sales
target is not achieved, the related bonus may be recaptured (will be paid) if
the cumulative 1999 Sales and 2000 Sales target is achieved. The shares of
common stock will be valued at the date the bonus is earned.
In addition, FastComm will pay Executive in unregistered stock or
cash, at FastComm's option, a non cumulative override of 3% on all "KGD Sales"
above $2,500,000
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per FastComm fiscal year for up to four years from date of Closing provided
Executive is still employed by the Company.
In addition, collected revenue from accounts listed on Attachments A
and B hereto will earn for Executive a 5% override on KGD Sales (as defined in
Section 4) as follows:
(a) those accounts listed on Attachment A (as existing
customers) will qualify for override if such customers execute contracts with
the Company on or before April 8, 2000, and InRange will qualify for override if
it executes a contract on or before April 8, 2000; (b) those accounts listed on
Attachment B as "prospects", will qualify for override only if they execute a
contract in excess of $5,000 on or before August 6, 1999.
Such override shall be payable in cash for the life of the contract and
any extensions, up to four years after the Closing so long as Executive remains
employed by the Company. To the extent that such 5% override applies, the 3%
override provided for above shall not apply.
IF THIS AGREEMENT IS TERMINATED UNDER SECTION 13(c) ONLY EXECUTIVE'S
RIGHTS TO EARN BONUSES OR RECEIVE AN OVERRIDE SHALL CEASE ON THE DATE OF SUCH
TERMINATION.
5. Vacation. During the Employment Period, Executive shall be
entitled to three weeks of vacation per calendar year. In addition, Executive
shall be entitled to the normal holidays afforded all senior executives of the
Company.
6. Confidential Information; Discoveries. Executive, during the
Employment Period and at all times thereafter, will not, directly or indirectly
(without the Company's prior written consent), use for himself or use for, or
disclose to, any party other than the Company or any affiliate of the Company,
any secret or confidential information or data regarding the business of the
Company or its affiliates or any secret or confidential information or data
regarding the costs, uses, methods, applications, customers, trade accounts,
marketing or strategic plans or suppliers (and pertinent information respecting
transactions and prospective transactions therewith) of products made, produced
or sold by the Company or any affiliate, or regarding any secret or confidential
apparatus, process, system or other method at any time used, developed or
investigated by or for the Company or any affiliate, whether or not invented,
developed, acquired, discovered or investigated by Executive unless and to the
extent that the aforementioned secrets, data or information become generally
known to and available for use by the public other than as a result of
Executive's acts or omissions. All documents and tangible items (including all
customer lists, memoranda, books, papers and other data) provided to Executive
by the Company, created by Executive or otherwise coming into Executive's
possession for use in connection with his employment with the Company (whether
provided or created during the term of this Agreement or prior thereto) are the
property of the Company and shall be promptly returned to the Company on demand
at any time or on termination of employment together with all copies,
recordings, abstracts, notes or reproductions of any kind made from or about the
documents and tangible items or the information they contain. Executive
acknowledges and agrees that all of Executive's duties and obligations under
this
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Section 6 shall survive the expiration or termination of Executive's employment
with the Company, regardless of the cause therefor.
Any and all inventions, discoveries, processes, methods and designs,
whether or not patentable or copyrightable, which Executive may conceive or
make, either alone or in conjunction with others, during Executive's term of
employment with the Company or any affiliate (or heretofore shall have conceived
or made, either alone or in conjunction with others, during Executive's prior
employment by Seller) relating to, or in any way pertaining to or connected with
the business of the Company or any affiliate, shall be the sole and exclusive
property of the Company; and Executive, whenever requested to do so by the
Company or any affiliate thereof, and at the Company's expense but without
further compensation or consideration, shall promptly execute any and all
applications, assignments and other instruments which the Company or its counsel
shall reasonably deem necessary or desirable in order to apply for and obtain
letters patent of the United States and of foreign countries for said inventions
and discoveries and in order to assign and convey to the Company the sole and
exclusive right, title and interest in and to said inventions, discoveries,
processes, methods and designs, or any applications or patents thereon.
Executive hereby confirms that he neither holds nor has any interest in any
patent, patent right, patent application, trademark, trademark application or
license agreement.
7. Non-Competition Agreement. Commencing upon execution of this
Agreement, Executive agrees that until the date two years after any termination
of his employment with the Company or any affiliate of the Company for "cause";
as hereinafter defined, Executive will not, directly or indirectly, assist in,
engage in, have any financial interest in, or participate in any way in, as an
owner, partner, employee, agent, board member or shareholder, any business that
involves, in whole or in part, activities similar to, related to or competitive
with (a) the business heretofore or now carried on by KG Data Systems Inc., (b)
the business of the Company or any subsidiary as carried on during the term of
Executive's employment hereunder or (c) the business of any affiliate of the
Company as carried on during the term of Executive's employment hereunder, but
only to the extent Executive renders services to such affiliate or significantly
participates in its business or operations in the course of his duties
hereunder. Nothing contained herein shall restrict Executive from owning one
percent (1%) or less of the corporate securities of any competitor of the
Company which securities are listed on any national securities exchange or
actively traded over-the-counter, if Executive has no other connection or
relationship, direct or indirect, with the issuer of such securities. Executive
acknowledges and agrees that the purchase by the Company of all the assets of
Seller, as well as the consideration and benefits to be provided to Executive
under this Agreement have been bargained and negotiated in exchange for, and in
consideration of, Executive's agreement to abide by the terms and provisions of
Section 6 and Section 7 hereof. Executive acknowledges and agrees that all of
Executive's duties and obligations under this Section 7 shall survive the
expiration or termination of Executive's employment with the Company, regardless
of the cause therefor.
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8. Remedies for Breach. In the event of a breach or threatened
breach of any of Executive's duties and obligations under Section 6 and Section
7 hereof, the Company shall, in addition to other remedies available to it, be
entitled, in addition to any other legal or equitable remedies the Company may
have in that connection (including any right to damages that the Company may
suffer), to a temporary, preliminary and/or permanent injunction restraining
such breach or threatened breach. Executive hereby expressly acknowledges that
the harm that might result to the Company's goodwill or its relationships with
customers, or as a result of the disclosure or use of the confidential
information, could be largely irreparable.
9. Definitions. The term "affiliate" as used herein shall mean any
person or entity which, directly or indirectly, through one or more
intermediates is controlled by, controls, or is under common control with the
person or entity specified. The term "subsidiary," as used herein, shall mean
any corporation owned or controlled, directly or indirectly, through stock
ownership. All other capitalized terms used herein which are defined in the
Purchase Agreement shall have the meanings herein as are ascribed to such terms
in the Purchase Agreement unless otherwise expressly provided for herein.
10. Non-Waiver of Rights. The failure to enforce at any time any of
the provisions of this Agreement or to require at any time performance by the
other party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
11. Invalidity of Provisions. If any provision of this Agreement
shall be determined to be contrary to law and unenforceable by any court of law,
the remaining provisions shall be severable and enforceable in accordance with
their terms. To the extent that any provision of this Agreement is adjudicated
to be contrary to law or unenforceable because it is overbroad, that provision
shall not be void but rather shall be limited only to the extent required by
applicable law and enforced as so limited.
12. The Company agrees to indemnify and hold Executive harmless from
and against any personal liability associated with claims made against him in
his capacity as an officer of the Company and directly relating to the SEC
investigation. Except as disclosed in FastComm's Annual Report on Form 10-K for
the fiscal year ended April 30, 1998 and all subsequent quarterly reports on
Form 10-Q through the quarter ending January 30, 1999, there is no claim, legal
action, suit, arbitration, investigation or proceeding before any court or
governmental or other regulatory agency pending or, to the best knowledge of
FastComm, threatened against or affecting FastComm or its properties, assets or
business (or in which FastComm is a plaintiff or otherwise party hereto).
Executive acknowledges that he is aware that the Company has since June 2, 1998
been operating under the protection of Chapter 11 of the U.S. Bankruptcy Code
(FastComm Communications Corp. Case No. 98-80044-SSM) E.D. of VA., and is
emerging from such Bankruptcy and is presently operating under a Plan of
Reorganization, a copy of which has been provided to Executive. FastComm makes
no representation as to the short or long-term effect that such Bankruptcy,
Reorganization and any
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other disclosed legal matters may have on its business, business prospects or
financial condition in the future. Executive is fully aware of these factors,
has had access to all public filings via internet and acknowledges that he has
had an opportunity to discuss these matters fully with FastComm and his personal
professional advisors.
13. Termination. Executive's employment hereunder may be
terminated prior to the third anniversary of the Closing Date as follows:
(a) By Executive's death;
(b) By the Company, in the event Executive becomes unable to
perform the services required of Executive hereunder for 120 or more days within
any period of 365 consecutive days by reason of physical or mental disability
(said disability to be determined by a disinterested licensed physician chosen
by the Company in the event of a dispute between the parties as to the existence
of said disability ("Disability")). Executive represents and warrants to the
Company that he has no Disability on the date hereof; or
(c) By the Company for "cause" if any of the following
events shall occur during the term hereof:
(i) NEGLIGENCE. Executive has been grossly negligent in carrying
out, or willfully failed or refused to serve and carry out his
duties and responsibilities as required by Section 2 hereof; or
(ii) BREACH OF AGREEMENT. Executive breaches any material term of
the Acquisition Agreement or this Agreement and fails to cure such
breach (where capable of cure) within 30 days after the receipt of
written notice from the Company to Executive of such breach, which
notice shall state in reasonable detail the facts and circumstances
claimed to be a breach and of the intent of the Company to terminate
the Executive's employment upon the failure of the Executive to
timely cure; or
(iii) MISCONDUCT. Executive has willfully and knowingly committed an
act of fraud, misappropriation, embezzlement, theft, dishonesty,
breach of fiduciary duty involving personal profit or has willfully
and knowingly violated any law, rule, or regulation (other than
traffic violations or similar minor offenses); or
(iv) CRIMINAL OFFENSE. The indictment of Executive for any
criminal felony offense.
Upon termination pursuant to Section 13(a), (b) or (c), the Company
shall promptly pay to Executive the full amount of his salary and benefits
accrued through the date of termination and shall have no further obligations to
Executive under this Agreement; provided that in the event of termination
pursuant to Section 13(a) or (b) the foregoing provision shall in
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no way be deemed a waiver of any of Executive's rights under life or disability
insurance policies provided pursuant to Section 3 hereof or bonuses earned at
the date of termination under Section 4 hereof. The Company may also direct
Executive to discontinue providing employment services hereunder for any reason
including reasons other than those set forth in Section 13(c); provided that,
after such direction by the Company, the Company shall continue to pay Executive
his salary and benefits under Section 3(a) and (b) for a period of six months
after such notice.
If any termination by the Company pursuant to Section 13(c) hereof
is ever ultimately determined by any court, agency or other tribunal to have
been for a cause other than described under Section 13(c) hereof, then the
Company's sole liability under this Agreement or otherwise at law or in equity
shall be to pay Executive those amounts that would have otherwise been paid to
Executive under Section 3(a) and (b) hereof until the expiration of the
Employment Period.
(d) By Executive anytime after the one year anniversary date
hereof for any reason. Upon termination pursuant to Section 13(d), the Company
shall promptly pay to Executive the full amount of his salary and benefits
accrued through the date of termination and shall have no further obligations to
Executive under this Agreement.
14. Assignments. This Agreement shall be freely assignable by the
Company to, and shall inure to the benefit of, and be binding upon any other
corporate entity which shall succeed to the business presently being operated by
the Company, but, being a contract for personal services, neither this Agreement
nor any rights hereunder shall be assigned by Executive. If any successor
company to the Company refuses to honor this Agreement, then Executive's rights
to compensation hereunder shall immediately accelerate and be payable.
Notwithstanding the foregoing, any assignment of this Agreement will not relieve
the Company of its obligations hereunder and the Company will remain primarily
liable hereunder. Executive's options issued in accordance with this Agreement
shall vest in full upon any such assignment or in connection with a sale of the
Company.
15. Governing Law. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of New York without regard to the
conflict of laws rules of such state.
16. Amendments. This Agreement constitutes the entire agreement
between the parties. No modification, amendment or waiver of any of the
provisions of this Agreement or such letter shall be effective unless in writing
specifically referring hereto, and signed by the parties hereto.
17. Right to Recover Costs. Executive undertakes and agrees that if
Executive breaches any provision of this Agreement, Executive shall be liable
for any attorneys' fees and costs incurred by the Company in enforcing its
rights under this Agreement. The Company undertakes and agrees that if the
Company breaches any provision of this Agreement,
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the Company shall be liable for any attorneys' fees and costs incurred by
Executive in enforcing his rights under this Agreement.
18. Rule of Construction. The Company and Executive have
participated substantially in the negotiation and drafting of this Agreement and
each party hereby disclaims any defense or assertion in any litigation or
arbitration that any ambiguity herein should be construed against the draftsman.
19. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered (i) personally, (ii) by registered or certified
mail, postage prepaid, (iii) by facsimile transmission or (iv) by overnight
delivery service and addressed as set forth below:
If to the Company:
Fastcomm Communications Corporation
00000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Att: Xxxx X. Xxxxxxxx
Copy to:
Xxxxxx X. Xxxx & Associates
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx
If to Executive:
Xxxxxxx Xxxxx - President
KG DATA SYSTEMS, INC.
00 Xxxxxx Xxxxxx
Xxxxxxx Conn. 06857
Copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
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Any such notice shall be effective upon receipt. Any party may change the
address to which notices are to be addressed by giving the other parties notice
in the manner herein set forth.
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY
CERTIFYING THAT EXECUTIVE (A) RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND
STUDY BEFORE EXECUTING IT; (B) READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT;
(C) HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THIS AGREEMENT TO ASK ANY
QUESTIONS EXECUTIVE HAD ABOUT THIS AGREEMENT AND RECEIVED SATISFACTORY ANSWERS
TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS
UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be executed the day and year first above written.
FASTCOMM COMMUNICATIONS CORPORATION
("FASTCOMM")
By: /s/ Xxxxx X. Xxxxxx
---------------------
Name: Xxxxx X. Xxxxxx
Title: President & CEO
EXECUTIVE:
/s/ Xxxxxxx Xxxxx
------------------
Xxxxxxx Xxxxx
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