EXHIBIT 10.9
EMPLOYMENT AGREEMENT
AGREEMENT dated as of November 26, 1996 between Infosafe Systems, Inc.,
a Delaware corporation (the "Company") and Xxxxxx X. Xxxxxx (the "Employee").
WHEREAS, the Company desires to engage the services of the Employee,
and the Employee desires to provide such services to the Company, on the terms
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs the Employee, and the Employee
accepts employment with the Company, to serve as President and Chief Executive
Officer. Employee will report to the Board of Directors and the performance of
his duties shall be subject to the direction and control of the Board of
Directors of the Company.
(b) The Employee hereby agrees to perform such duties, to
fulfill such responsibilities and to serve the Company faithfully, industriously
and to the best of his ability, subject to the direction and control of the
Company's Board of Directors, and to devote his best efforts and full working
time and attention to advancing the interests of the Company. During the period
of Employee's employment with the Company, Employee shall not directly or
indirectly own any interest in any company, business or enterprise, which
engages in business activities competitive with any business activities of the
Company, except that Employee may have a direct or indirect ownership interest
of (x) up to 2% of any class of equity securities in any business organization
which has a class of publicly traded securities, (y) debt securities of any such
business organization and (z) the Company.
(c) The Company agrees to cause Employee to be elected as a
director of the Company at the next regularly scheduled meeting of the Board of
Directors and thereafter to cause Employee to be nominated as a director and
included on the Board of Directors' slate of directors submitted to the
shareholders at
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the Company's annual meeting of shareholders. Employee agrees to
serve as director, if so elected.
2. TERM; TERMINATION.
(a) Except in the case of earlier termination as hereinafter
specifically provided in Sections 4 or 5, this Agreement shall be effective as
of the date hereof, and the term hereof shall continue until November 25, 1999
subject to extension in accordance with the next sentence (the "Term").
3. COMPENSATION; EXPENSES; BENEFITS.
(a) As compensation for his services hereunder, the Company
shall pay the Employee a base salary, payable in equal monthly or more frequent
installments and at such times during the month as is customary for the Company
with respect to its senior officers, at a rate of (i) $175,000 per year through
July 31, 1997, (ii) $200,000 per year through July 31, 1998, and (iii) $225,000
per year through November 25, 1999. Such salary shall continue to be paid,
regardless of illness or incapacity of the Employee, until this Agreement is
terminated. Such salary shall be pro rated to the extent that Employee is
employed for less than a full year ending July 31.
(b) As additional compensation, the Company shall pay to
Employee a bonus payable within 45 days after the end of the applicable period
set forth below based on the "Net Profits" (as defined below) of the Company
during the applicable period or if the Company's audited financial statements
for such period have not yet been completed by such date, within 10 days after
the completion of the Company's audited financial statements, as follows:
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PERIOD NET PROFITS BONUS
-----------------------------------------------------------------------------
12 months ended 12/31/97 greater than or equal $25,000
to $1,000,000 and less
than $2,000,000
greater than or equal $50,000
to $2,000,000 and less
than $4,000,000
greater than or equal $100,000
to $4,000,000
12 months ended 7/31/98 greater than or equal $50,000
to $2,000,000 and less
than $4,000,000
greater than or equal $100,000
to $4,000,000 and less
than $8,000,000
greater than or equal $250,000
to $8,000,000
(c) (i) As additional compensation, Employee shall also be entitled to
a long-term incentive accrual if the Net Profits for any fiscal year set forth
in the table below are met for such fiscal year, as follows:
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FISCAL YEAR NET PROFITS ACCRUAL ($) ACCRUAL
(SHARES OF
COMMON STOCK)
# OF SHARES)
------------------------------------------------------------------------------
1997 greater than $50,000
or equal to
$1,000,000 and
less than
$2,000,000
------------------------------------------------------------------------------
greater than $50,000 5000
or equal to
$2,000,000
------------------------------------------------------------------------------
1998 greater than $100,000
or equal to
$4,00,000 and
less than
$8,000,000
------------------------------------------------------------------------------
greater than $100,000 10,000
or equal to
$8,000,000
------------------------------------------------------------------------------
1999 greater than $200,000
or equal to
$8,000,000 and
less than
$16,000,000
------------------------------------------------------------------------------
greater than $200,000 20,000
or equal to
$16,000,000
------------------------------------------------------------------------------
2000 greater than $350,000
or equal to
$15,000,000
and less than
$30,000,000
------------------------------------------------------------------------------
greater than $350,000 35,000
or equal to
$30,000,000
By way of illustration, if the maximum targets for each year are met, Employee
will accrue an aggregate of $700,000 in cash and 70,000 shares.
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The number of shares set forth in the table above shall be adjusted for
any stock split, stock dividend, combination, subdivision, reclassification,
recapitalization or similar event.
(ii) The Company shall pay to the Employee the long-term incentive
accrual and issue any Common Stock earned pursuant to the long-term incentive
accrual on July 31, 2000, except that with respect to the year ended July 31,
2000, the long-term incentive accrual for such year shall be payable, and the
shares shall be distributed, within 10 days after the completion of the
Company's audited financial statements for such year. The Employee's right to
receive the long-term incentive compensation earned prior to the date of
termination of the Employment Agreement shall not be affected by the termination
of this Employment Agreement prior to the date such payment is due.
(d) On the date hereof, the Company shall grant to Employee an option
pursuant to the Company's stock option plan to purchase 350,000 shares of Common
Stock at an exercise price of $4.062 per share, representing the fair market
value of the Common Stock on the close of business on the day preceding the date
hereof, one-third of which shall be immediately vested, one-third of which shall
vest at the end of any fiscal year in which the Company's Net Profits shall
equal $1,000,000 for the fiscal year and one-third of which shall vest at the
end of any fiscal year in which the Company's Net Profits exceed $1,000,000,
provided, in each case, that Employee is employed by the Company on the last day
of the applicable fiscal year. The option shall be exercisable for a ten-year
term and shall only be exercisable during Employee's employment with the Company
or for such period after termination of Employee's employment hereunder as is
set forth in the Company's stock option plan. In addition, the Company shall
issue to Employee effective on the date hereof, 70,000 shares of Class B Common
Stock, 135,000 share of Class E-1 Common Stock and 135,000 shares of Class E-2
Common Stock. The Class B and Class E Common Stock shall not be transferable by
Employee and shall be cancelled if Employee's employment with the Company
terminates for any reason prior to August 1, 1999.
(e) "Net Profits" shall mean net income of the Company, on a
consolidated basis, determined in accordance with Generally Accepted Accounting
Principles ("GAAP"), as reflected in the Company's audited financial statements,
subject to the following adjustments: (i)there shall be excluded any expense
relating to the release from escrow or the release of any restrictions relating
to the Series B, E-1 or E-2 Common Stock; (ii) there shall be excluded any
expense relating to the shares of Common Stock issuable on exercise of options
granted pursuant to Section 3(d) hereof; and (iii) there shall be included as an
expense in
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any fiscal year any accrual for payment of bonus and/or long-term incentive
compensation of Employee for the such fiscal year.
(f) In the event that the Company shall issue equity securities in a
public or private placement or shall acquire or dispose of a business outside of
the ordinary course of business, and, in the reasonable judgment of the Board of
Directors, such transaction would have a material effect on the likelihood of
the Company's achievement of the Net Profits targets set forth in Sections 3(b),
(c) or (d), the Board of Directors, after consultation with Employee, shall
adjust the Net Profits targets to the extent deemed necessary, in the judgment
of the Board of Directors, to take into account the anticipated impact of such
transaction on the Company's Net Profits.
(g) The parties acknowledge that the Company is considering a possible
move of its corporate offices to Virginia. For a one year period following the
date hereof, the Company agrees to reimburse Employee for travel expenses,
including meals, transportation and lodging, in connection with his travel to
the Company's office in New York while the Company's offices are located in New
York and he resides in Virginia, up to a maximum of $40,000. Employee's claims
therefor shall be supported by the documentation required by the Company in
accordance with its usual practice.
(h) The Employee shall be entitled to participate in all retirement,
life insurance, medical insurance, disability insurance, savings, and other
employee benefit plans which are generally made available by the Company to
executive employees, to the extent Employee qualifies under the eligibility
provisions of such plan or plans. Anything herein to the contrary
notwithstanding, except as set forth in Section 3(d), the grant of stock options
to Employee shall be in the sole discretion of the Company's Board of Directors
or a committee thereof and nothing herein shall be deemed to obligate the
Company to grant any stock options to the Employee.
(i) The Employee shall be entitled to reimbursement for his ordinary
and necessary business expenses incurred in the performance of his duties
hereunder provided that his claims therefor are supported by the documentation
required by the Company in accordance with its usual practice.
4. PERMANENT DISABILITY. For purposes of this Agreement, "Permanent
Disability" shall mean that Employee is not able to perform substantially all of
his duties and responsibilities to the Company by reason of a physical or mental
disability or infirmity (i) for a continuous period of four (4) months or (ii)
for a period of at least 180 days in any 12-month period.
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The date of such Permanent Disability shall be the last day of such four month
period or the 180th day in such 12-month period. In the event of the Permanent
Disability of Employee during the Term of Employment, the Company shall, upon
written notice to the Employee, have the right to terminate the Employee's
employment hereunder. Upon such termination, the Company shall have no further
obligations hereunder, except for payment in full of the Employee's salary
through the date of termination and payment of any bonus which has accrued for
any fiscal year ended prior to the date of termination.
5. DEATH. In the event of the death of the Employee during the Term,
this Agreement shall automatically terminate, and the Company shall have no
further obligations hereunder, except for payment in full of Employee's salary
through the date of death and payment of any bonus which has accrued for any
fiscal year ended prior to the date of termination.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EMPLOYEE. The Employee
represents, warrants and covenants to and with the Company that he is not and
will not become a party to any agreement, contract or understanding, whether
employment or otherwise, and that he is not subject to any order, judgment or
decree of any court or governmental agency, which would, in any way, restrict or
prohibit him from undertaking or performing his employment in accordance with
the terms and conditions of this Agreement.
7. INTELLECTUAL PROPERTY.
(a) The Employee hereby assigns to the Company all of his
right, title and interest in and to all inventions, discoveries, improvements,
ideas, formulas, systems and related documentation and other works of authorship
(hereinafter referred to as "Intellectual Property"), whether or not patentable,
copyrightable or entitled to or eligible for other forms of protection, which
during the term of the Employee's employment by the Company the Employee may
create, develop, write or conceive, whether during or outside of regular working
hours on the Company's premises, either alone or together with others (including
others not employed by the Company or any subsidiary or affiliate of the
Company), in whole or in part, either (i) in the course of such employment, (ii)
relating to the business or research and development efforts of the Company or
any of its subsidiaries or (iii) with the use of the time, materials, private or
proprietary information or facilities of the Company or any of its subsidiaries.
(b) The Employee further agrees, without charge to the
Company, but at the Company's expense, (i) to disclose promptly to the Company
all such Intellectual Property, (2) at the Company's request, to execute and
deliver promptly a specific
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assignment to the Company of any right, title and interest to such Intellectual
Property, including proprietary rights arising from patent applications, and
(iii) to take promptly any other action that may be reasonably necessary on the
part of the Employee to enable the Company to obtain patents, copyrights or
other forms of protection for such Intellectual Property in the United States
and other countries.
8. COVENANTS.
(a) (i) "Business" shall mean (A) the design, development and
marketing of systems for securing, controlling, metering and auditing electronic
products, documents and programs, for use in stand-alone applications, corporate
networks and open networks such as the Internet and (B) any other line of
business then engaged in by the Company.
(ii) "Competing Enterprise" shall mean any person,
firm or corporation that is engaged, directly or indirectly, in the Business or
any business which directly or indirectly competes with the Business.
(iii) "Territory" shall mean any state or foreign
country in which (i) a facility of the Company is located, (ii) the Company is
engaged in business, including marketing or selling services or products, at the
time of termination of employment, or (iii) where Employee knows the Company
intends to carry on business in such area by expansion of its activities within
one year following termination.
(b) The Employee shall not, during the term of his employment
or at any time thereafter, directly or indirectly, publish or disclose to any
person, firm or corporation or other entity, whether or not a competitor of the
Company, any Protected Information. As used in this Agreement, the term
"Protected Information" shall mean trade secrets, confidential or proprietary
information, and all other knowledge, know-how, information, documents or
materials, owned, developed or possessed by the Company, whether in tangible or
intangible form, pertaining to the business of the Company, the confidentiality
of which the Company takes reasonable measures to protect, including, but not
limited to, identities and habits of customers and prospective customers,
suppliers, business relationships, products and services (including prices,
costs, sales or content), processes, techniques, contracts, financial
information or measures, business methods, future business plans, data bases,
computer programs, designs, models, operating procedures, knowledge of the
organization, and other information owned, developed or possessed by the
Company; PROVIDED, HOWEVER, that Protected Information shall not include
information that is or that shall become generally known to the public or the
trade without violation of this Section 8.
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(c) Employee agrees that during the Term and for a period of
two years thereafter, he will not, on behalf of himself or others, directly or
indirectly, solicit, divert or induce customers of the Company to which the
Company currently or hereafter provides services or sells products, to terminate
their arrangements with the Company or a successor, or obtain similar services
or products, from any other person, or do business with such customers in any
manner which directly or indirectly competes with the Company.
(d) The Employee agrees that during the Term and for a period
of two years thereafter, he shall not, on behalf of himself or others, directly
or indirectly, solicit, encourage or induce any person who at any time within
one year prior to the Employee's termination of employment shall have been an
employee or independent contractor of the Company to become employed by or
associated with any person, firm or corporation other than the Company or employ
any such person, and the Employee shall not approach any such employee or
independent contractor for such purpose or authorize or knowingly approve the
taking of such actions by any other person, firm or corporation or assist any
such person, firm or corporation in taking such action.
(e) The Employee agrees that during the Term of Employment and
for a period of two years thereafter, the Employee shall not, directly or
indirectly, within the Territory, engage or participate in, or become employed
by, or act as an agent or principal of, or render advisory or other services to
or for, any Competing Enterprise.
(f) The Employee acknowledges that the provisions of this
Section 8 are reasonable and necessary for the protection of the Company and
that the Company will be irrevocably damaged if such covenants are not
specifically enforced. Accordingly, the Employee agrees that, in addition to any
other relief to which the Company may be entitled in the form of actual or
punitive damages, the Company shall be entitled to seek and obtain injunctive
relief from a court of competent jurisdiction for the purposes of restraining
the Employee from any actual or threatened breach of such covenants.
9. TERMINATION.
(a) Employee's employment hereunder may be terminated
without Cause (as defined below) on 30 days written notice.
(b) If Employee's employment is terminated by the Company
without Cause or by Employee for Justifiable Cause (as defined below) during the
Term, the Company shall continue to pay to Employee the Employee's salary for a
one year period following the date of termination.
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(c) The Company shall have the right to terminate the
Employee's employment under this Agreement for Cause prior to the expiration of
the Term by written notice to the Employee.
(d) For purposes of this Agreement, "Cause" shall
mean:
(i) if an Employee is convicted of a crime
(A) which is predicated on either fraud or embezzlement,
(B) involving moral turpitude or (C) which constitutes a
felony; or
(ii) an act of fraud or material dishonesty
against, or in connection with, the services rendered for,
the Company; or
(iii) willful failure by Employee to perform his
duties and fulfill his obligations to the Company; or
(iv) willful misconduct or gross negligence in
the performance of Employee's duties and fulfillment of his
obligations to the Company; or
(v) a material breach by Employee of any
material provisions of this Agreement; or
(vi) breach by the Employee in any material
respect of any of the provisions of Section 8.
Notwithstanding the foregoing, if the ground of the Company's
termination of the Employee's employment for Cause is as described in
subparagraphs (ii), (iii), (iv) or (v) above and can be effectively cured by the
Employee, the termination shall not be effective unless Company gives Employee
30 days prior written notice specifying the ground for termination and Employee
fails to cure such ground for termination within such time period.
(e) "Justifiable Cause" shall mean any of the
following:
(i) a meaningful and detrimental change in
Employee's position as President and Chief Executive Officer of
the Company; or
(ii) a reduction in the Employee's annual base
salary as set forth in Section 3(a) hereof; or
(iii) a termination of Employee's employment
hereunder which is not affected pursuant to the terms of this
Agreement; or
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(iv) a material breach by the Company of any of
material provision of this Agreement which is not cured within 30 days after
written notice thereof specifying the grounds for termination.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed in that
state.
(b) NOTICES. Any notice or other communication under this
Agreement shall be in writing and shall be considered given when delivered
personally or three business days after mailing by U.S. registered mail, return
receipt requested, to the parties at the following addresses or at such other
address as a party may specify by notice to the other.
If to the Employee:
00000 Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxx 00000
with a copy to:
If to the Company:
Infosafe Systems, Inc.
000 Xxxxxxx Xxxxxx - 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Bachner, Tally, Xxxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(c) ENTIRE AGREEMENT; AMENDMENT. This Agreement, when
it becomes effective, shall supersede all existing agreements
between the Employee and the Company relating to the terms of his
employment. It may not be amended except by a written agreement
signed by both parties.
(d) WAIVER. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
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(e) ASSIGNMENT. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns. This Agreement shall not be assignable
by the Employee, and shall be assignable by the Company to any corporation
resulting from the reorganization, merger or consolidation of the Company with
any other corporation or any corporation to which the Company may sell all or
substantially all of its assets.
INFOSAFE SYSTEMS, INC.
By: /S/ XXXXXX X. XXXXXXXX
----------------------
/S/ XXXXXX X. XXXXXX
----------------------------
Xxxxxx X. Xxxxxx
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