Exhibit 10.3
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 3rd day of December 1998 by and between XXXXX X. XXXXX, a resident of the
Commonwealth of Pennsylvania (the "Employee"), and INTELLIFRAME CORPORATION, a
Pennsylvania corporation (the "Employer").
W I T N E S S E T H:
WHEREAS, as of the date hereof Computer Network Technology Corporation,
a Minnesota corporation ("CNT"), has acquired all of the outstanding capital
stock of Employer (the "Stock Acquisition");
WHEREAS, Employee was, until the date hereof, an officer, director and
shareholder of Employer and pursuant to the Stock Acquisition has sold all of
the stock in Employer which he held to CNT;
WHEREAS, Employer desires to secure the future services of Employee and
to that end desires to enter into this Agreement with Employee, upon the terms
and conditions herein set forth;
WHEREAS, Employee desires to accept employment and enter into this
Agreement with Employer effective as of the date hereof; and
WHEREAS, in consideration the substantial personal benefit Employee has
derived from the Stock Acquisition and other considerations herein described,
Employee shall also agree not to compete with the Employer, CNT or any of their
affiliates on the terms hereinafter set forth; it being acknowledged by Employee
that CNT would not have entered into the Stock Acquisition and that Employer
would not have entered into this Agreement without such agreement by Employee.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Employer and Employee,
intending legally to be bound, hereby agree as follows
Section 1. Agreement of Employment. Employer hereby agrees to employ
Employee and Employee hereby agrees to become and remain employed by Employer
for the Employment Period (as defined below), and upon and subject to the terms
and conditions hereafter set forth. For the purposes of this Agreement, the term
"Employment Period" shall mean the period ending thirty-seven (37) months from
the date hereof, unless Employee's employment under this Agreement is sooner
terminated in accordance with the terms hereof. Notwithstanding the foregoing,
following its expiration, the Employment Period hereunder shall automatically be
renewed for successive terms of twelve (12) months unless either party hereto
provides the other with thirty (30) days prior
written notice of its intention to terminate this Agreement upon the expiration
of the then current Employment Period.
Section 2. Employee Representations. Employee represents to Employer
that Employee is not subject to an employment agreement with any other employer,
nor to any other agreements under the terms of which he may be prohibited from
accepting employment with Employer, and that Employee may accept employment with
Employer effective as of the date hereof.
Section 3. Duties of Employee.
(a) Subject to the supervision and pursuant to the orders,
advice and directions of Employer given from time to time, Employee
shall perform his assigned duties as Vice President of Marketing;
Internet Solutions Division. Such duties shall generally be consistent
with those of an executive management level employee and Employee's job
title shall at all times be maintained as a vice president or a
reasonably equivalent title. Unless Employee otherwise provides his
written consent to Employer, until January 1, 2002, (i) Employee's
duties shall include, but not necessarily be limited to, job activities
which provide significant involvement in the marketing or development
of any Re-engineering Software Products as such term is defined in
Exhibit A hereto, and (ii) Employee's duties shall not expand generally
beyond providing marketing, development and technical engineering
services.
(b) Employee agrees that he will at all times and on a
full-time basis faithfully, industriously, and to the best of his
ability, experience and talents, perform all of the duties that may be
reasonably required of and from him pursuant to the terms hereof, to
the reasonable satisfaction of the Employer. Such duties shall
initially be rendered primarily at Employee's home located anywhere in
eastern Pennsylvania; provided that, Employee shall undertake such
travel as is reasonably necessary in connection with the performance of
his duties. In addition, the Employer hereby agrees that Employee shall
not be required to transfer from Employee's Pennsylvania office for a
period of three (3) years from the date hereof without the written
consent of Employee.
(c) Employee hereby agrees to refrain from engaging in any
business ventures or business enterprises which might significantly
interfere with the performance of his duties hereunder. Employee shall
at all times conduct himself in a manner that will not substantially
prejudice or injure the reputation of Employer, its other employees or
any of its affiliates.
Section 4. Employers Right to Benefits of Work Performed. Employer
shall be entitled to all of the benefits, emoluments, and profits arising from
or incident to any and all work, services, and advice of Employee performed or
rendered in the course of Employee's employment hereunder.
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Section 5. Compensation, Expenses and Benefits.
(a) Employer shall pay to Employee, and Employee shall accept
from Employer, during the Employment Period, in consideration for all
services to be performed by Employee, a salary at the rate of One
Hundred Forty Thousand Dollars ($140,000.00) per year during the
Employment Period (the "Salary"). The payment of the Salary as well as
of any bonuses Employee may be entitled to receive shall be less
withholding and deductions required by law and Employee authorized
deductions, and the Salary shall be payable semi-monthly in arrears
during the Employment Period.
(b) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to receive a performance bonus for the 1999,
2000 and 2001 calendar years (and no other calendar years regardless of
the renewal of any Employment Period hereunder) based upon certain
revenues received by Employer as is detailed in Exhibit A attached
hereto and incorporated herein.
(c) In addition to the Salary described in Section 5(a) above,
Employee shall be eligible to participate in the executive bonus plan
of CNT to the same extent comparatively situated executives of CNT so
participate in such plan.
(d) In addition to the Salary described in Section 5(a) above,
Employer agrees to reimburse Employee promptly (in accordance with
policies and procedures adopted by Employer or CNT from time to time)
for all reasonable and necessary expenses incurred by Employee in
connection with Employer's or CNT's business, including without
limitation all reasonable and necessary expenses of travel, lodging,
entertainment, and meals away from home incurred by Employee in the
course of his employment hereunder. Employee agrees to keep and
maintain such records of such expenses as Employer or CNT may require
and to account to Employer therefor prior to any such reimbursement.
Employee shall comply with all reasonable and lawful policies and
procedures applied by Employer or CNT from time to time to its
employees generally and relating to or regulating, the nature and
extent of reimbursable expenses, and the manner of accounting and
reimbursement therefor.
(e) Employer hereby agrees to make available to Employee,
during the Employment Period, all benefits which are generally
available to similarly-situated employees of Employer or CNT, subject
to and on a basis consistent with the terms and conditions of such
benefits. Such benefits shall include benefits provided to similarly
situated employees of CNT, such as: health and dental insurance,
disability insurance, the right to participate in a 401(k) plan,
flexible spending accounts and eligibility to receive stock option
grants for shares of stock in CNT.
(f) In accordance with Employer's stated policy regarding
vacation time for employees, as the same may be amended from time to
time by Employer in its sole discretion, the number of days of
available vacation for each year shall increase over time based upon
the length of time Employee has been employed by Employer. For the
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purposes of this Agreement Employee shall as of the date hereof be
considered a fifth year employee under such vacation policy, which
level of seniority shall initially entitle Employee to twenty (20) days
of paid vacation each year.
(g) In accordance with the terms and conditions of any
applicable stock option plan of CNT and any related agreements,
Employee shall be granted as of the date hereof options to purchase up
to 50,000 shares of CNT's capital stock. Such options shall vest
beginning on December 3, 1999 and each December 3 thereafter until
December 3, 2002 in increments of 12,500 shares.
(h) Employee shall be eligible to participate in CNT's
Executive Deferred Compensation Plan in accordance with the terms and
conditions of such plan.; it being acknowledged and agreed that any
payments made pursuant to Section 5(b) hereof shall be treated as if
they were non-existent when determining Employee's rights to benefits
under such plans.
Section 6. Noncompetition. Employee recognizes and agrees that the
nature of the CNT's and the Employer's business in which he shall be providing
services extends throughout the planet Earth, the continents of North America,
South America, Africa, Asia, Europe and Antarctica, and the United States of
America and Canada (the "Territory"). Employee further recognizes and
acknowledges that CNT and the Employer currently are engaged in the businesses
of creating, developing, marketing and/or providing consultation, repair,
maintenance and training services for (i) software products and solutions
commonly known within the Employer's and CNT's industry as "legacy extension"
that allow for the continued use and integration of business critical software
applications, including all terminal based applications (3270, 5250, VT100 and
VT220, etc.) which run on IBM S/390 and plug compatible (e.g. Hitachi, Xxxxxx,
etc.) mainframes, IBM Systems/3X, IBM AS/400, Unisys systems, Burroughs,
Honeywell, ICL, Bull, Siemens, including, but not limited to software programs
that provide such legacy extension capabilities utilizing the techniques known
as "screen scraping", "message based interfacing" and "database interfacing";
(ii) software development tools and solutions that facilitate a developer's
integration of multiple data and/or transactional sources typically found in the
business environments (such applications commonly known in the Employer's and
CNT's industry as Middleware or Enterprise Application Integration solutions
from vendors such as Active Software, Neon, Tibco Vitria and Crossworlds); (iii)
software products and solutions which provide the software development
functionality commonly known within CNT's and Employer's industry as "workflow"
or "process flow"; and (iv) software products and solutions which assist in the
automation of business processes for entities engaged in reinsurance business
(the "Employer Activities"). Specifically excluded from Employer Activities at
all times after the termination of Employee's employment shall be the Employee's
right to work for systems integrators (e.g. Cambridge Technology Partners, CSC,
KPMG, Price Waterhouse, etc.) and value added resellers, those companies who
produce an integrated solution which solves a specific business purpose but
whose product is not generally considered a development tool (e.g. SAP, BAAN,
Peoplesoft, etc.). In consideration of the foregoing, the substantial personal
benefit Employee has derived from the Stock Acquisition and will derive from
being employed by
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Employer and the payments described in Section 5(b) above, the Employee
covenants and agrees as follows:
(a) Period of Covenant. The term of the noncompetition
covenant shall be for the period beginning as of the date hereof and
ending the later of either (i) four (4) years from the date hereof, or
(ii) the date Employee's employment with Employer is terminated (the
"Noncompetition Period").
(b) Nature and Scope of Covenant. The Employee covenants and
agrees not to carry on or engage in, directly or indirectly, on its own
behalf or by or through any other person or entity, any business or
other activity in competition with the Employer Activities of the
Employer, CNT or any affiliates of the Employer or CNT during the
Noncompetition Period throughout the Territory. Without limiting the
generality of the foregoing, the Employee covenants and agrees that
during the Noncompetition Period it will not, directly or indirectly,
throughout the Territory.
(A) own any interest in, manage or serve as an
employee of or consultant, business advisor or independent
contractor for any individual, corporation, partnership,
association, joint venture or other entity which is engaged in
a business in competition with the Employer Activities as they
are conducted during the Employment Period.
(B) solicit business similar to the Employer
Activities from any customer that has done business with, or
potential customers that have been in contact with, the
Employer, CNT or any affiliates of the Employer or CNT during
the Employment Period;
(C) make a loan to or guarantee the obligations of,
any individual or entity engaged in the Employer Activities or
make a loan to, or guarantee the obligations of, any owner,
officer, director, partner or shareholder thereof;
(D) request, induce or attempt to influence any
supplier of goods or services to the Employer, CNT or any
affiliates of the Employer or CNT to curtail or cancel any
business it transacts with the Employer, CNT or any such
affiliate with respect to the Employer Activities; or
(E) request, induce or attempt to influence any
employee of the Employer, CNT or any affiliates of the
Employer or CNT to terminate his or her employment with the
Employer, CNT or any such affiliate, or attempt to dissuade
any then current employee of the Employer, CNT or any
affiliates of the Employer or CNT from continuing employment
with the Employer, CNT or any such affiliate.
Notwithstanding the foregoing, the parties hereby recognize that
Employee may (1) upon the approval or instruction of Employer work with
a company affiliated with Employer, (2) hold up to two percent (2%)
shares of stock or other securities in a company in
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competition with the Employer Activities whose securities are traded on
a public exchange and (3) invest through mutual funds, investment
trusts or other diversified investment vehicles which Employee does not
directly or indirectly manage, control or otherwise participate in
investment decisions without violating the terms of this Section 6.
It is further agreed that if any portion of such restrictive covenant
is held to be unreasonable, arbitrary or against public policy, then
such covenant shall be considered divisible both as to time and
geographic area, with each year being deemed a separate period of time
and each geographic area described above being deemed a separate
geographic area, it being the intention of the parties that a lesser
period of time or geographic area shall be enforced so long as the same
is not unreasonable, arbitrary or against public policy. The parties
agree that, in the event any court of competent jurisdiction determines
that a specified time period or a specified geographic area is
unreasonable, arbitrary or against public policy, a lesser time period
or geographic area which is determined to be reasonable, nonarbitrary
and not against public policy may be enforced against the Employee.
Section 7. Nondisclosure of Confidential Information.
(a) For the Employment Period and all times after the
termination of this Agreement, Employee covenants and agrees to treat
as confidential and not to disclose and to use only for the advancement
of the interests of Employer all information, plans, records, trade
secrets, business secrets, and confidential or other data of Employer
or any affiliate of Employer, submitted to Employee or compiled,
received, or otherwise discovered by Employee from time to time in the
course of his employment by Employer for use in Employer's business or
that of any affiliate of Employer. Information shall not be considered
confidential or proprietary if it generally is available in the public
domain through no direct or indirect action of Employee.
Notwithstanding the foregoing, the existence of a trade secret or the
confidential nature of proprietary information will not be negated
merely because a person has acquired a trade secret or proprietary
information without express or specific notice that it is a trade
secret or proprietary information if, under all the circumstances, such
person knows or has reason to know that the party who owns the
information or has disclosed it intends or expects the secrecy of the
type of information comprising the trade secret or proprietary
information to be maintained.
(b) Employee agrees that upon termination of his employment
with Employer, for any reason, voluntary or involuntary, with or
without cause, he will immediately return to the Employer any property,
customer lists, written information, forms, formulae, plans, documents
or other written or computer material or data, software or firmware, or
copies of the same, belonging to Employer or any of its affiliates, or
any of their customers, within his possession, and will not at any time
thereafter copy, reproduce or otherwise facilitate the future
disclosure of the same. Employee agrees that, following such
termination of employment, he shall not disclose or use any
proprietary, secret or confidential information, relating to the
products, equipment, methods of manufacture, inventions, discoveries or
trade secrets, price lists, computer programs, customer lists, business
plans or other proprietary information related to the business of the
Employer which he acquires,
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develops, designs or produces while employed by Employer and that all
embodiments of such information shall belong to Employer. Employee
further agrees that he will not retain or use for his account at any
time any trade names, trade xxxx, service xxxx, or other proprietary
business designation used or owned in connection with the business of
Employer or its affiliates.
Section 8. Enforcement; Remedies; Construction.
(a) Employee covenants, agrees, and recognizes that because
the breach or threatened breach of the covenants, or any of them,
contained in Sections 6 and 7 will result in immediate and irreparable
injury to the Employer and CNT, the Employer and/or CNT shall be
entitled to an injunction restraining the Employee or any of his
affiliates or future employers or entities he serves as a contractor
from any violation of Sections 6 and 7 to the fullest extent allowed by
law. The Employee further covenants and agrees that in the event of a
violation of any of its respective covenants and agreements contained
in Sections 6 and 7 hereof, the Employer and/or CNT shall be entitled
to an accounting of all profits, compensation, commissions,
remunerations or benefits which the Employee directly or indirectly has
realized and/or may realize as a result of, growing out of or in
connection with any such violation. Employer and/or CNT shall further
be entitled to pursue any and all legal or equitable remedies which may
be available to them for any such breach or threatened breach.
(b) Employee agrees that in the event he breaches the
covenants, or any of them, contained in Section 6, then the
Noncompetition Period shall be automatically extended by the length of
time any such breach remains continuing; provided, however, this
provision shall be of no effect if Employer fails to claim a breach by
Employee of any such covenant by the later of four (4) years from the
date hereof or one (1) year following the termination of Employee's
employment.
(c) The Employee hereby expressly acknowledges and agrees as
follows:
(i) that the covenants set forth in Sections 6 and 7
above are reasonable in all respects and are necessary to
protect the legitimate business and competitive interests of
the Employer, CNT and their affiliates; and
(ii) that each of the covenants set forth in Sections
6 and 7 and the subdivisions thereof is separately and
independently given, and each such covenant is intended to be
enforceable separately and independently of the other such
covenants, including, without limitation, enforcement by
injunction;
provided, however, that the invalidity or unenforceability of this
Agreement in any respect shall not affect the validity or
enforceability of this Agreement in any other respect. In the event
that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof or for any other
reason, such invalidity or unenforceability shall attach only to the
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particular aspect of such provision found invalid or unenforceable as
applied and shall not affect or render invalid or unenforceable any
other provision of this Agreement or the enforcement of such provision
in other circumstances, and, to the fullest extent permitted by law,
this Agreement shall be construed as if the geographic or business
scope or the duration of such provision or other basis on which such
provision has been challenged had been more narrowly drafted so as not
to be invalid or unenforceable.
Section 9. Termination. If the term of Employee's employment under this
Agreement has not sooner expired by lapse of an applicable notice period or
otherwise under the terms hereof, the term of Employee's employment hereunder
shall terminate upon the occurrence of any of the following:
(a) The death, incapacity or any disability which would
trigger Employee's rights to receive benefits under any then existing
long term disability insurance program maintained by Employer (it being
assumed Employee is a participant in such program) of Employee;
(b) Without cause at the election of Employer upon at least
thirty (30) days prior written notice delivered to Employee;
(c) Without cause at the election of Employee upon at least
thirty (30) days prior written notice delivered to Employer;
(d) For Cause at the election of the Employer by providing
Employee with written notice which outlines the "Cause" reason for the
Employer's action. "Cause" shall mean: (i) dishonesty, alcoholism which
impairs Employee's ability to perform his duties hereunder, addiction
to drugs or convictions of a felony or a misdemeanor (other than
traffic violations), (ii) the material breach of any covenant contained
in this Agreement, including, without limitation, failure to devote
substantially all of his business time to the business of Employer, or
(iii) any (A) acts of material insubordination by Employee or (B) the
repeated or material failure of Employee to perform his duties
hereunder as an employee of Employer after Employee has received notice
of such failure and has been given a reasonable opportunity to cure the
same; or
(e) For Cause at the election of Employee by providing
Employer which outlines the "Cause" reason for the Employee's action.
"Cause" shall mean: (i) the failure to pay when due any amounts owing
to Employee hereunder and (ii) any material breach of any covenant
contained hereunder by Employer, in each case which is not corrected
within a reasonable time after Employee notifies Employer of such
failure or breach.
Upon the termination of Employee's employment pursuant to this Section
9 for any reason, Employee's right to further compensation and benefits under
this Agreement shall cease; provided, however, that Employee shall remain
entitled to (i) any unpaid compensation, bonuses and benefits accrued prior to
such termination, (ii) any expense reimbursements to which he was entitled at
the date of such termination, and (iii) any payments of bonus which Section 5(b)
and Exhibit A
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attached hereto specifically state Employee remains entitled or eligible to
receive. In addition, subject to the terms and conditions of CNT's stock option
plan and any related agreements between Employee and CNT, Employee shall remain
entitled to any stock options in which he is vested at the date of termination.
Subject to the provisions of Section 5(b) and Exhibit A, any unpaid
compensation, bonuses and benefits accrued prior to the termination of
Employee's employment hereunder to which Employee is entitled shall be paid
within thirty (30) days of such termination.
Notwithstanding the foregoing, in the event Employer terminates the
employment of Employee without cause at any time during the Employment Period,
then Employer shall continue to pay Employee an amount equal to the Salary (less
applicable withholdings or deductions required by law) in a manner which
generally mirrors Employer's standard payroll practices for a period of six (6)
months. Regardless of the prior sentence, Employer, in its sole discretion, may
accelerate the payments referenced above at any time and in any amount from time
to time.
Notwithstanding any other provision herein to the contrary, the
obligations of Employee under Sections 6 or 7 hereof shall survive the
termination (for any reason) of Employee's employment under this Agreement.
Section 10. Enforcement of Employee-Restrictions. Employee acknowledges
that he has carefully read and considered the provisions of this Agreement and,
having done so, agrees that the restrictions set forth in this Agreement in
Sections 6 and 7 are fair and reasonable and are necessarily required for the
protection of the interests of Employer, CNT and their affiliates. Employee
covenants and agrees with Employer that if he shall violate any of the covenants
or agreements contained in Sections 6 or 7 of this Agreement, then Employer
shall be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations or benefits which Employee directly or indirectly has
realized as a result, growing out of or in connection with any such violations;
such remedy to be in addition to and not in limitation of any injunctive relief
or other rights or remedies to which Employer, CNT or their affiliates is or may
be entitled to at law or in equity.
Further, should Employee breach the provisions of Section 6 or 7
hereof, Employee shall forfeit his right to receive any and all bonuses whether
or not accrued and whether payable pursuant to Section 5(b) or otherwise;
provided, however, that if Employee breaches Section 7 hereof other than through
any act of gross negligence, recklessness or malintent, he shall remain entitled
to receive any such bonuses to the extent such bonuses exceed the recoverable
damages of Employer, CNT and their affiliates caused by such breach. The
provisions of this Section 10 shall survive the termination of this Agreement.
Section 11. Assignment of Developments.
(a) Works Made for Hire. Employee understands that as part of
his job duties he may be asked to create, or contribute to the creation
of, computer programs, documentation and other copyrightable works.
Employee agrees that any and all computer programs, documentation and
other copyrightable materials that he is asked to prepare or work on as
part of his employment with Employer shall be "works made for
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hire" and that Employer shall own all the copyright rights in such
works. IF AND TO THE EXTENT ANY SUCH MATERIAL DOES NOT SATISFY THE
LEGAL REQUIREMENTS TO CONSTITUTE A WORK MADE FOR HIRE, EMPLOYEE HEREBY
ASSIGNS ALL HIS COPYRIGHT RIGHTS IN THE WORK TO EMPLOYER.
(b) Disclosure of Developments: While Employee is employed by
Employer, Employee will promptly inform Employer of the full details of
his inventions, discoveries, improvements, innovations and ideas
(collectively called "Developments") whether or not patentable,
copyrightable or otherwise predictable that he conceives, completes or
reduces to practice (whether jointly or with others) and which:
(i) relate to Employer's present or prospective
business, or actual or demonstrably anticipated research and
development; or
(ii) result from any work Employee does using any
equipment, facilities (exclusive of personal activities of
Employee conducted outside the course of his employment in his
home), materials, trade secrets or personnel of Employer in
the course of their service to Employer; or
(iii) results from or are suggested by any work that
Employee may reasonably be expected to do for Employer in the
course of his employment.
(c) Assignment of Developments. Employee hereby assigns to
Employer or Employer's designee, his entire right, title and interest
in all of the following, that Employee conceives or makes (whether
alone or with others) while employed by Employer:
(i) all Developments;
(ii) all copyrights, trade secrets, trademarks and
mask work rights in Developments; and
(iii) all patent applications filed and patents
granted on any Developments, including those in foreign
countries.
(d) Notice Pursuant to State Law. Employee acknowledges and
understands that this Agreement does not apply to any invention that
qualifies fully under the provisions of Minnesota Statutes Annotated
Sections 181.78(1) and (2), the text of which is attached as Exhibit B.
Employee acknowledges this section shall serve as written notice to
Employee as required by Minnesota Statutes Annotated Section 181.78(3).
(e) Further Assurances. Employee hereby agrees that he shall
execute any and all such documents, instruments, agreements or
certificates and take such other
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actions as Employer may reasonably request to further secure Employer's
rights in and title to any Developments.
Section 12. Notices. All notices required or permitted hereunder shall
be deemed to be duly given if in writing and delivered personally or sent by
United States registered or certified mail, return receipt requested, postage
pre-paid, addressed as follows:
Employee: Xxxxx X. Xxxxx
000 Xxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: 000-000-0000
Employer: IntelliFrame Corporation
c/o Computer Network Technology Corporation
000 Xxxxx Xxxxxxx 000
Xxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx
Facsimile: 000-000-0000
or at such changed addresses as the parties may designate in writing.
Section 13. Miscellaneous.
(a) Headings. Headings, titles and captions contained in this
Agreement are inserted only as a matter of convenience and reference
and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provisions hereof.
(b) Entire Agreement. This writing constitutes the entire
agreement between the parties hereto and supersedes any prior
understanding or agreements between them respecting the subject matter
herein contained. There are no extraneous representations,
arrangements, understandings, or agreements, oral or written, in
respect of the subject matter of this Agreement, between the parties
hereto, except those fully expressed herein.
(c) Amendments. No amendments, changes, alterations,
modifications, additions and qualifications to the terms of this
Agreement shall be made or binding unless made in writing and signed by
all the parties hereto; provided any such amendment to Section 14 shall
not be made or binding unless made in writing and signed by Employer
and Employee.
(d) Waiver. The failure of either party to enforce at any time
any of the provisions of this Agreement shall not be construed as a
waiver of such provisions or of the right of such party thereafter to
enforce any such provisions.
(e) Invalidity and Severability. The invalidity or
unenforceability of any particular provision of this Agreement shall
not affect the enforceability of other provisions
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hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions were omitted.
(f) Governing Law. This Agreement shall be construed and
governed in accordance with the laws of the State of Minnesota.
Employee hereby consents to the jurisdiction of any local, state or
Federal court located in the State of Minnesota, and consents to
service of process by certified or registered mail, return receipt
requested, directed to Employee at Employees address stated in Section
12 of this Agreement. Employee waives the right to trial by jury in
connection with the resolution of any disputes that may arise under
this Agreement.
(g) Burden and Benefit. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs,
successors and permitted assigns. This Agreement is not assignable by
Employee. Employer may assign this Agreement to any successor owner of
the business of Employer or to any company affiliated with Employer, at
any time, provided that prior to making any such assignment Employer
shall give Employee notice thereof.
(h) Affiliates. As used herein the term "affiliates" when used
with respect to the Employer or CNT shall include, but not necessarily
be limited to, any and all legal entities controlled by or under common
control with Employer or CNT.
(i) Life Insurance. Each of the parties hereto stipulates and
agrees that the Employer shall have an insurable interest in the life
of the Employee as a key employee of the Employer. The Employer shall
have the right to apply and pay premiums for policies of insurance on
the life of Employee whenever, in the opinion of Employer, such
insurance may be necessary or desirable. The Employer shall be the sole
owner of such policies and may apply to the payments of any premiums
any dividends declared or paid on such policies. Employee agrees to
cooperate in the application process for any such policies including
submitting to physical examinations or tests and providing all
information required to obtain such policies.
Section 14. EXPECTATIONS REGARDING EMPLOYMENT, SERVICE AS OFFICER OF
EMPLOYER. EMPLOYER AND EMPLOYEE AGREE THAT THIS AGREEMENT EXPRESSES ALL OF THE
EXPECTATIONS BETWEEN EMPLOYEE AND EMPLOYER, WHETHER UNDER SECTION 302A.751 OF
THE MINNESOTA BUSINESS CORPORATION ACT OR OTHERWISE, REGARDING THE TERM OF
EMPLOYEE'S EMPLOYMENT AND EMPLOYEE'S AND EMPLOYER'S RIGHT TO TERMINATE THAT
EMPLOYMENT. THE EMPLOYEE SHALL HAVE NO GREATER RIGHTS AS AN EMPLOYEE OR, ONLY IF
APPLICABLE, AN OFFICER, DIRECTOR AND/OR SHAREHOLDER OF EMPLOYER (OR OF ANY
DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF EMPLOYER) THAN ANY OTHER
PERSON WHO IS NOT RELATED TO EMPLOYER OR SUCH AFFILIATE IN ANY SUCH CAPACITY.
EMPLOYER HEREBY ADVISES EMPLOYEE THAT EMPLOYER WOULD NOT ENTER INTO THIS
AGREEMENT (OR, ONLY IF APPLICABLE, ELECT EMPLOYEE AS AN OFFICER
12
AND/OR DIRECTOR OR ISSUE ANY EQUITY RIGHTS TO EMPLOYEE) IF THE EMPLOYEE HAD ANY
EXPECTATION THAT THE EMPLOYEE'S SERVICE AS AN EMPLOYEE (OR, ONLY IF APPLICABLE,
SERVICE AS AN OFFICER AND/OR DIRECTOR OR POSITION AS A SHAREHOLDER) WOULD
ENTITLE EMPLOYEE TO CONTINUED EMPLOYMENT WITH (OR, ONLY IF APPLICABLE, CONTINUED
STATUS AS AN OFFICER, DIRECTOR OR SHAREHOLDER) OF EMPLOYER OR ANY AFFILIATE OF
EMPLOYER OTHER THAN AS SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE
FOREGOING SENTENCES, EMPLOYEE ACKNOWLEDGES THAT EMPLOYER IN ITS SOLE DISCRETION
MAY DECLINE IN THE FUTURE TO RENEW HIS EMPLOYMENT BEYOND THE TERMS OF THIS
AGREEMENT FOR ANY REASON. EMPLOYEE CONFIRMS THAT EMPLOYEE HAS CAREFULLY REVIEWED
THIS AGREEMENT AND UNDERSTANDS IT. EMPLOYEE FURTHER CONFIRMS THAT EMPLOYEE HAS
CONSULTED WITH LEGAL COUNSEL REPRESENTING EMPLOYEE CONCERNING THIS AGREEMENT AND
ANY OTHER AGREEMENTS BETWEEN OR AMONG EMPLOYEE, EMPLOYER AND ANY OF ITS PRESENT
OR PROSPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS AND/OR OTHER AFFILIATES.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
EMPLOYER:
---------
INTELLIFRAME CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
EMPLOYEE:
---------
-------------------------------
Name: Xxxxx X. Xxxxx
For and in consideration of Employee's agreement to be bound by Section
6 and 7 of this Agreement for the benefit of CNT, CNT hereby unconditionally and
irrevocably guarantees the full and punctual performance of all Employer's
obligations and payment of all amounts due under this Agreement, including but
not limited to all amounts due pursuant to Section 5(b) and Exhibit A. CNT also
agrees to comply with providing such information under Paragraph 1(a)(ii) of
such Exhibit A as is reasonably necessary to allow for any bonus payments owing
under 5(b) and Exhibit A to be appropriately calculated, and will cooperate in
providing to Employee all information reasonably requested in connection with
any audit conducted under Paragraph 6 of such Exhibit A.
14
This Guarantee is a guarantee of payment and not collection; guarantor
shall be deemed a primary obligor and Employee may assert a claim directly
against CNT without first seeking recovery against Employer. CNT hereby waives
all surityship defenses and defenses in the nature thereof.
COMPUTER NETWORK TECHNOLOGY
CORPORATION
By: ____________________________
Name/Title: ___________________
15
EXHIBIT A
---------
1. Definitions. As used in this Exhibit A the following terms shall have the
following meanings:
(a) (i) "Re-engineering Product Revenues" shall mean all revenue
recognized by Employer, CNT and other subsidiaries of CNT as provided
in clause (ii), from (1) selling, leasing or licensing Re-engineering
Software Products (including primary license charges, annual license
charges and monthly license charges), or (2) the Sale of a Principal
Re-engineering Product. Re-engineering Product Revenue does not include
revenue from (A) providing standard customer support and maintenance of
such Re-engineering Software Products, or (B) providing implementation,
management, industrial or other consulting services of any nature to
customers or clients.
(ii) Employer, CNT and other subsidiaries of CNT shall measure
Re-engineering Product Revenue in the same manner that CNT and its
other subsidiaries recognized revenue for financial statement purposes.
Employer shall maintain procedures to measure Re-engineering Product
Revenue in accordance with such revenue recognition practices.
(b) "Re-engineering Software Products" shall mean (i) the products
developed and/or marketed by Employer, CNT or other subsidiaries of CNT
commonly known as "Enterprise/Access", "Web/Integrator", "MapMaker",
"Process Dynamics", "ReSolution" and "Star Framework" as well as all
Enhancements and Derivative Works of such products, as well as (ii) any
similar additional products acquired, developed and/or marketed by
Employer, CNT or other subsidiaries of CNT which provide software
development and deployment tools that provide applications with an
abstraction from their underlying environment (hardware, operating
systems, networks) and provide interoperability between applications
and/or components of applications as well as all Enhancements and
Derivative works of such additional products. Except as set forth above
no other products of either Employer, CNT or other subsidiaries of CNT
shall constitute or be considered a Re-engineering Software Product.
(c ) "Derivative Works" shall mean a work which is based upon one or
more preexisting works, such as a revision, Enhancement, modification,
translation, abridgment, condensation, expansion or any other form in
which such preexisting works may be recast, transformed or adapted and
which, if prepared without authorization of the owner of the copyright
in such preexisting work, would constitute a copyright infringement.
(d) "Enhancement" shall mean any Derivative Work that improves
functions, adds new functions, features, text or other materials,
improves performance, adds new value or utility, supports new
input/output devices or provides other updates.
(e) "Base Revenue" for Re-engineering Product Revenue, in millions of
dollars, are as follows:
1999 calendar year $9.1;
2000 calendar year $11.4; and
2001 calendar year $14.2.
(f) "Sale of a Principal Re-engineering Product" shall mean the sale to
any third party in a transaction which does not constitute a Change of
Control, of all or substantially all of Employer's, CNT's, and CNT's
other subsidiaries' interests in any of their products commonly known
as "Process Dynamics", "ReSolution" or "Star Framework" as well as any
Derivative Works or Enhancements of such products.
(g) "Change of Control" shall mean any transaction pursuant to which
(i) voting control of more than fifty percent (50%) of the outstanding
capital stock of Employer or CNT shall be transferred to a third party
which is not controlled by or under common control with CNT (an
"Unaffiliated Third Party"), (ii) a transfer of substantially all of
the assets of Employer or CNT to an Unaffiliated Third Party, or (iii)
any merger or consolidation of Employer or CNT with any Unaffiliated
Third Party pursuant to which Employer or CNT is not the surviving
entity and in which shareholders of CNT or Employer do not own more
than fifty percent (50%) of the outstanding voting securities of the
surviving entity.
2. Calculation of Bonus Payments. Subject to the adjustments and limitations set
forth in Paragraphs 3 and 4 below, for each of the 1999, 2000 and 2001 calendar
years the Employer shall pay to the Employee ten percent (10%) of the amount, if
any, by which the Re-engineering Product Revenues exceed the Base Revenue for
such year. Any such payment shall be made by wire transfer to an account in the
United States of America of certified funds or by delivery of a cashiers or
certified check to the address set forth in the "Notice" section of the
Agreement. Any such payment shall be made within sixty (60) days of the end of
the calendar year to which the payment pertains. When payment is made, Employer
shall provide Employee with a reasonably detailed summary of how the amount of
the payment was calculated.
3. Certain Adjustments to Bonus Payments.
(a) In the event that Employee terminates his employment with Employer
prior to January 1, 2000, then no bonus payments whatsoever shall be
owing to Employee pursuant to Section 5(b) and this Exhibit A of the
Agreement for any calendar year.
(b) In the event that Employee terminates his employment with Employer
after January 1, 2000 and prior to July 1, 2000, then the bonus payment
calculated pursuant to Section 5(b) and this Exhibit A of the
Agreement:
(i) for the calendar year 2000, shall be calculated by (A)
dividing the Base Revenue which pertains to such year by
twelve (12) (the "Monthly Base Revenue"), then (B) multiplying
the Monthly Base Revenue by the number of
2
complete calendar months the Employee was employed by Employer
during the year 2000 (the "Termination Year Employment Time")
to arrive at an adjusted base revenue amount (the "Adjusted
Base Revenue"), and then (C) subtracting the Adjusted Base
Revenue from the Re-engineering Product Revenues recognized
during the Termination Year Employment Time and multiplying
such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten;
and
(ii) for all periods of time from and after July 1, 2000,
shall not be due and payable to Employee.
(c) In the event that Employee terminates his employment with the
Employer on or after July 1, 2000, then Employee shall remain entitled
to the bonus payments as calculated in Section 5(b) of the Agreement
and this Exhibit A.
(d) Notwithstanding the provisions of Sections 3 (a-c) above, in the
event that Employee's employment with Employer is terminated because of
(i) a material breach by Employer under the Agreement which is not
cured within a reasonable period of time, (ii) Employee's death,
incapacity or disability (as described in Section 9 of the Agreement),
or (iii) a without cause termination by Employer; then the bonus
payments owing pursuant to Section 5(b) and this Exhibit A of the
Agreement shall still be due and payable to Employee.
(e) In the event that the employment of Xxxxxxxxx X. Xxxxx is
terminated with the Employer prior to July 1, 2000 other than because
of (i) a material breach of Employer under his employment agreement
with Employer which is not cured within a reasonable period of time,
(ii) his death, incapacity or disability (as set forth in Section 9 of
his employment agreement with Employer) or (iii) a without cause
termination by Employer; then the Employee shall be entitled to twenty
percent (20%) of the amount, if any, by which the Re-engineering
Product Revenues exceed the then applicable Base Revenue (1) for each
calendar month following such termination in the calendar year in which
such termination occurs, and (2) for each calendar year following such
termination. For further clarification, the bonus payable to the
Employee with respect to the calendar year in which such a termination
occurs shall be in an amount equal to: (i) the bonus which would have
otherwise been payable to Employee had the termination of Xxxxxxxxx X.
Xxxxx'x employment not occurred (the "Standard Bonus"), plus (ii) the
Standard Bonus multiplied by a fraction, the numerator of which is the
number of calendar months in such calendar year which follow the month
in which the termination occurred and the denominator of which is
twelve (12). Notwithstanding any of the foregoing, in order for
Employee to be eligible to receive the additional amounts of bonus
above the Standard Bonus payable under this subparagraph (c) he must be
employed by Employer on December 31st of the year in which the
employment of Xxxxxxxxx X. Xxxxx terminates with Employer.
3
4. Limitations on Amount of Bonus Payable. Notwithstanding anything herein to
the contrary, the aggregate amount of bonus payable to Employee pursuant to
Section 5(b) of the Agreement and this Exhibit A shall be limited as follows:
(a) if the amount of bonus payments due and payable to Employee with
respect to calendar year 1999 reaches Six Million Dollars
($6,000,000.00), then no further bonus payments beyond such amount
whatsoever shall become due and payable to Employee hereunder;
provided, however, that if there shall be a Sale of a Principal
Re-engineering Product in such 1999 calendar year, then such limitation
shall be increased to Eight Million Dollars ($8,000,000.00);
(b) if the applicable threshold of subparagraph (a) has not been
obtained and the aggregate amount of bonus payments due and payable to
Employee with respect to calendar years 1999 and 2000 reaches Five
Million Dollars ($5,000,000.00), then no further bonus payments beyond
such amount whatsoever shall become due and payable to Employee
hereunder; provided, however, that if there shall be a Sale of a
Principal Re-Engineering Product in either such 1999 or 2000 calendar
year; then such limitation shall be increased to Six Million Dollars
($6,000,000.00); and
(c) if none of the applicable thresholds set forth in subparagraphs (a)
or (b) have been obtained, then the aggregate bonus payments payable to
Employee hereunder shall not exceed Four Million Dollars
($4,000,000.00).
5. Agreement to Market/ Discontinuance of Re-Engineering Software Product by
Employer / Change of Control. Subject to the other provisions of this Exhibit A,
should Employer or CNT (i) exclusive of any failure caused by a Change of
Control, completely fail to market the product line of Re-Engineering Software
Products for a continuous period of three (3) months prior to December 31, 2001,
(ii) undergo any Change of Control which later results in a complete failure to
market the product line of Re-engineering Software Products for a continuous
period of three (3) months both prior to December 31, 2001 and subsequent to the
final consummation of the Change of Control, or (iii) otherwise materially fail
during any continuous period of three (3) months prior to December 31, 2001
(taking into account all of the circumstances of CNT's and Employer's business
as well as the totality of all their actions during such three (3) month period)
to use commercially reasonable efforts, consistent with reasonable business
judgment, to market the product line of Re-engineering Software Products (in
each instance such failure occurring for reasons other than such Re-Engineering
Software Products becoming obsolete due to the development of superior
technologies by third parties), then Employee shall be entitled to receive
within sixty (60) days of January 1, 2002 an amount (if a positive number) equal
to Four Million Dollars ($4,000,000.00) less the aggregate of all payments of
bonus previously made to Employee pursuant to Section 5(b) and this Exhibit A of
the Agreement. Upon the occurrence of such an event causing Employee to become
entitled to receive such a payment, the obligations to make any other payments
of bonus to Employee hereunder shall cease.
In the event a Change of Control is finally consummated the parties
hereby agree that notwithstanding any other provision herein to the contrary:
4
(a) the references to the date "July 1, 2000" contained in Paragraphs
3(b), 3(c) and 3(e) shall be read to read the earlier of July 1, 2000
or the date which is the one (1) year anniversary of the final
consummation of the Change of Control;
(b) the definition of Re-Engineering Software Products shall only be
inclusive of those Re-Engineering Software Products in existence
immediately prior to the consummation of the Change of Control and any
Derivative Works and Enhancements thereof which are subsequently
developed; and
(c) the aggregate amount of bonuses payable to Employee hereunder shall
be limited to Four Million Dollars ($4,000,000.00); provided, however,
that notwithstanding such limitation, but still subject to the
limitations of Section 4 hereof, the parties hereby agree that Employee
shall remain entitled to any and all payments of bonus which have
accrued through the date of the consummation of the Change of Control.
For the calendar year in which such Change of Control is consummated,
such accrued bonus shall be calculated by (A) multiplying the Monthly
Base Revenue for such calendar year by the number of complete calendar
months in such calendar year prior to the date the Change of Control is
finally consummated (the "Pre-Change of Control Period") to arrive at
an Adjusted Base Revenue for such calendar year, and then (B)
subtracting such Adjusted Base Revenue from the Re-engineering Product
Revenues recognized during the Pre-Change of Control Period and
multiplying such sum amount (if it greater than zero) by a fraction the
numerator of which is one and the denominator of which is ten.
6. Right of Audit. Employer hereby agrees that no more than once with respect to
each of the calendar years 1999, 2000 and 2001 the Employee shall be entitled to
conduct an audit of the data used to calculate any bonus payments due and
payable to Employee for such calendar year. Such audit shall be conducted by an
independent certified public accountant selected by Employee and reasonably
acceptable to Employer and CNT. Such audit shall be completed at the sole cost
and expense of Employee; provided that should such audit reveal a discrepancy
favorable to Employee of more than three (3%) percent between the bonus payment
as calculated by Employer vis a vis that determined by the audit, then the costs
and expense of such audit shall be borne solely by Employer.
7. Arbitration. Any dispute over the right of Employee to receive any payment of
bonus pursuant to Section 5(b) of the Agreement and this Exhibit A shall be
resolved by arbitration in accordance with the same procedures and terms as are
set forth in Section 12.1 of the Purchase Agreement.
5
EXHIBIT B
Minnesota Statutes Annotated Section 181.78 provides as follows:
Subdivision 1. Any provision in an employment agreement that provides
that an employee shall assign or offer to assign any of the employee's rights in
an invention to the employer shall not apply to an invention for which no
equipment, supplies, facility or trade secret information of the employer was
used and that was developed entirely on the employee's own time, and
(1) that does not relate (a) directly to the business of the employer
or (b) to the actual or demonstrably anticipated research or development, or
(2) that does not result from any work performed by the employee for
the employer. Any provision that purports to apply to such an invention is to
that extent against the public policy of this state and is to that extent
unenforceable.
Subdivision 2. No employer shall require a provision made void and
unenforceable by subdivision 1 as a condition of employment or continuing
employment.
