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EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), entered into as of
February 16, 2001, is made by and between High Speed Net Solutions ("HSNS" or
the "Company"), a Florida corporation with offices in Raleigh, North Carolina,
and Xxxxx Xxxxxxx ("Jawerth") of Raleigh, North Carolina.
WHEREAS, pursuant to that certain Asset Purchase Agreement dated
October 30, 2000, as amended, by and among HSNS, Summus, Ltd., a Delaware
corporation ("Summus"), and Summus' stockholders identified therein (the "Asset
Purchase Agreement"), HSNS is acquiring certain assets of Summus; and
WHEREAS, this Agreement is being entered into by the parties in
connection with the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises set forth below and other good and valuable consideration, the receipt
and sufficiency of which the parties acknowledge, the Company and Jawerth agree
as follows:
1. EMPLOYMENT. The Company employs Jawerth and Jawerth accepts employment
on the terms and conditions set forth in this Agreement. Jawerth's
employment shall commence on the Closing Date under the Asset Purchase
Agreement. In the event that the Closing under the
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Asset Purchase Agreement does not occur, this Agreement shall be
considered terminated and neither party shall have any obligation to
the other under this Agreement.
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2. NATURE OF EMPLOYMENT. Jawerth shall serve as co-Chief Executive Officer
(`co-CEO') and Chief Scientist of HSNS. Jawerth's management
responsibilities will be to head Summus Laboratories, develop
technologies to support the HSNS business plan and short and long term
goals as documented and approved by the Board of Directors, serve as a
member of the HSNS Proposal Review Committee and as a member of its
Board of Directors ("Board"). Jawerth's appointment as co-CEO is
intended to be temporary while the Board conducts a search for a new
CEO. When and if the Board finds a new CEO, Jawerth shall relinquish
his position as co-CEO, and, at his request, the Company agrees that he
shall be elected Chairman of the Board. If there is a new CEO, Jawerth
shall report directly to the CEO. Jawerth will be responsible for
carrying out, from a research standpoint, the Company's strategy as
approved by the Board of Directors. Jawerth will prepare an annual
research plan to carry out the Company's business plan, for approval by
the Board of Directors. A total of 75% of the research budget shall be
devoted to projects assigned by the Board and 25% shall be research
projects that Jawerth, in his reasonable judgment, believes are
necessary to support and extend the Company's competitive advantage.
The research budget percentages may be adjusted from time to time by
mutual agreement of Jawerth and the Board of Directors. The Board shall
have the right to hire a new CEO of its choice, subject to the right of
Jawerth to terminate this Agreement for Good Reason as described below.
3. COMPENSATION.
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(A) BASE SALARY. Jawerth shall receive an initial base annual
salary of Three Hundred Fifty Thousand Dollars ($350,000),
plus such performance bonuses and options as are generally
available to other senior management and Board members of the
Company, as per review of the Board after recommendation of
the Board's Compensation Committee. On each anniversary of
this Agreement, Jawerth's annual salary shall be increased a
minimum of ten percent (10%).
(B) BENEFITS. Jawerth shall be entitled to participate in the
Company's Executive Benefits Plan, which shall include not
less than four (4) weeks of vacation, health insurance
benefits, retirement package, car allowance and such other
benefits, at a minimum, as listed below or mutually agreed,
although the Board may increase such benefits:
(I) Car Allowance = $750 /month.
(II) Corporate Apartment and apartment expenses
for a period of 6 months from Closing under the Asset Purchase
Agreement, up to $2500 /month.
(III) Stock Options package to be no less than
that of any new CEO of the Company at anytime and protected
from dilution to the extent that other officers and directors
are protected from dilution. The Stock Options package will be
performance-based, with performance determined by the Board
based by successful execution of the research plan approved by
the Board. The Board of Directors will provide criteria to
detail the meaning of "successful execution" at the beginning
of each performance period.
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(I) Participation in Employee benefits programs
as listed below, or equivalent plans:
1. Health Insurance - BlueCross
BlueShield of North Carolina
2. Dental Insurance - BlueCross
BlueShield of North Carolina
3. Life Insurance - Medical Life
Insurance Company, Cleveland, OH
4. Vision Insurance - Vision Service
Plan
5. Section 125 (Flexible Spending
Accounts) - Xxxxxx & Associates
6. Short-term Disability -
Northwestern Mutual Life Insurance
Company
7. Long-term Disability - Northwestern
Mutual Life Insurance Company Xxxx
Xxxxx.
8. Summus Ltd. 401(k) Plan
4. ADDITIONAL COMPENSATION.
(a) Jawerth will be paid $500,000 in cash by HSNS as compensation
for his non-competition covenants set forth in Section 8 of
this Agreement. A payment of $100,000 will be made upon
Closing under the Asset Purchase Agreement. The remaining
$400,000 will be paid within three months after Closing, paid
in monthly installments of no less than $100,000.
(b) In connection with Closing, HSNS will allow Jawerth to make a
private sale of his HSNS stock totaling $2.5 million net
proceeds to him by selling 1,666,667 shares of his stock at
$1.50 per share, to persons at his own discretion. (c) For the
sale of each share of stock referred to in Section 4(b) above,
HSNS shall issue to Jawerth a number of HSNS options equal to
three times the number of shares he sold pursuant to Section
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4(b), each option having a strike price of $1.50, and
exercisable at any time during the second through fifth years
after the options are issued.
(d) Jawerth shall be entitled to inventions awards pursuant to an
inventions awards plan adopted by HSNS in connection with the
Closing.
5. TERM OF EMPLOYMENT. The term of employment pursuant to this Agreement
shall be for a period of three (3) years from the Closing Date under
the Asset Purchase Agreement, subject to the following provisions:
(A) WITHOUT CAUSE. Either the Company or Jawerth may terminate the
employment relationship without Cause at any time upon giving
the other party thirty (30) days' written notice.
(B) BY JAWERTH FOR GOOD REASON. Jawerth may terminate his
employment with the Company at any time for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:
(I) a change in Jawerth's status, title, position or
responsibilities which represents an adverse change
from his status, title, position or responsibilities
in effect immediately prior thereto; the assignment
to Jawerth of any duties or responsibilities that are
inconsistent with his status, title, position or
responsibilities; or any removal of Jawerth from or
failure to reappoint or reelect him to any such
position, status or title, except in connection with
the termination of his employment for Cause or by
Jawerth other than for Good Reason. Any
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disagreement under this paragraph, if it cannot be
resolved by Jawerth and the Board of Directors, shall
be subject to binding arbitration under the rules of
the American Arbitration Association.
(II) A net reduction in the number of research scientists
of his research laboratories as of the date of this
Agreement by more than fifteen percent (15%) in any
year except for resignations which are not prompted
by management or which are approved or instructed by
Jawerth, and for which positions the Company is
rehiring;
(III) A net reduction in the fully funded budget of his
laboratories for the core research team, which
comprise 20 people who are Summus employees under
contract in the Asset Purchase Agreement in any six
month period by more than ten percent (10%), by more
than five percent (5%) in any one year period and by
more than two and one-half percent (2 1/2%) over any
two year period;
(IV) The invention awards program of HSNS is changed
without approval of Jawerth.
(V) The Board hires a CEO who has not been approved by
Jawerth.
(VI) HSNS ceases to be a Going Concern, meaning that HSNS
or its successor has not actively conducted business
for three consecutive months.
(VII) A Change in Control of HSNS. For purposes of this
Agreement, "Change in Control" is defined as:
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(1) An acquisition of any voting
securities of the Company by any "Person" (as such
term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the
"Act")), after which such Person becomes the
"beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of more at least
forty percent (40%) of the total voting power of the
Company's then outstanding voting securities, but
excluding any such acquisition by the Company, any
Person of which a majority of its voting power or its
voting equity securities or equity interests is
owned, directly or indirectly, by the Company (for
purposes hereof, a "Subsidiary"), any employee
benefit plan of the Company or any of its
Subsidiaries (including any Person acting as trustee
or other fiduciary for any such plan);
(2) The shareholders of the Company
approve a merger, share exchange, consolidation or
reorganization involving the Company and any other
corporation or other entity that is not controlled by
the Company, as a result of which less than fifty
percent (50%) of the total voting power of the
outstanding voting securities of the Company or of
the successor corporation or entity after such
transaction is held in the aggregate by the holders
of the Company's voting securities immediately prior
to such transaction;
(3) The shareholders of the Company
approve a liquidation or dissolution of the Company,
or approve the sale or other disposition by the
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Company of all or substantially all of the Company's
assets to any Person (other than a transfer to a
Subsidiary of the Company);
(4) During any period of twenty-four
(24) consecutive months, the individuals who
constitute the Board of Directors of the Company at
the beginning of such period (the "Incumbent
Directors") cease for any reason to constitute at
least two-thirds (2/3) of the Board of Directors;
provided, however, that a director who is not a
director at the beginning of such period shall be
deemed to be an Incumbent Director if such director
is elected or recommended for election by at least
two-thirds (2/3) of the directors who are then
Incumbent Directors, or if Jawerth votes for election
of such director.
(C) BY THE COMPANY FOR CAUSE. The Company may terminate Jawerth's
employment at any time for Cause. For purposes of this
Agreement, "Cause" shall be defined as Jawerth's material
breach of this Agreement. Prior to any termination for Cause
arising out of his alleged breach of this Agreement, Jawerth
shall be given written notice by the Board, following a
majority vote of the Board, specifying the nature of the
alleged breach and shall have twenty (20) business days in
which to cure, or commence to cure, such breach. If Jawerth
effects such a cure or commences such a cure within the twenty
(20) business day period, his employment, salary and benefits
shall continue in full force and effect. If the Company
materially breaches this agreement, it shall have the same
right to have the breach described in writing by Jawerth and
the same twenty (20) business day cure period.
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(D) BY THE COMPANY FOR DISABILITY. The Company may terminate
Jawerth's employment in accordance with any applicable law in
the event of his "Disability," defined as his physical or
mental inability to perform the essential functions of his
duties satisfactorily for a period of one hundred eighty (180)
consecutive days. The company may wish to purchase key man
insurance on Jawerth.
(E) BY DEATH. This Agreement shall terminate in the event of
Jawerth's death.
6. COMPENSATION AND BENEFITS UPON TERMINATION.
(A) If the Company terminates Jawerth's employment without Cause
or for Disability, he shall be entitled to a severance payment
equal to two years his then current base annual salary, to be
paid in a lump sum at the time of termination. All options
that Jawerth has shall immediately vest. He shall also be
entitled to receive for one year following termination the
health benefits he is then currently receiving from the
Company at no greater cost to him than the cost he paid for
such benefits immediately prior to his termination.
(B) In the event Jawerth terminates his employment for Good
Reason, he shall receive severance pay and benefits as if such
termination had been by the Company without Cause.
(C) In the event Jawerth terminates his employment without Good
Reason, he shall be entitled to receive an amount equal to two
(2) weeks of his then current salary for each year of service
under this Agreement. He shall also be entitled to a
continuation of his
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health benefits for three (3) months at no greater cost to him
than the cost he paid for such benefits immediately prior to
his termination. In addition, if Jawerth terminates his
employment without Good Reason or he is terminated for cause
within one year of the Closing Date under the Asset Purchase
Agreement Jawerth shall return to the Company all options
granted under this Agreement.
(D) If the Company terminates Jawerth's employment for Cause, he
shall be entitled to receive two (2) weeks of his then current
salary as severance pay.
(E) If this Agreement is terminated due to Jawerth's death, the
termination shall be treated as a termination by Jawerth for
Good Reason, and any monies and other benefits due, so far as
such benefits can be monetized, shall be paid to Jawerth's
estate.
7. HSNS PROPERTY.
(A) All intellectual property developed by Jawerth in connection
with his employment by the Company shall be the exclusive
property of HSNS. During the term of this Agreement and
thereafter, Jawerth shall cooperate with the Company to obtain
or confirm rights in the intellectual property developed by
Jawerth for HSNS, at the Company's expense. Such rights shall
include, but not be limited to, filing and prosecuting
applications for obtaining or registering patents, trademarks
and copyrights.
(B) All intellectual property developed by Jawerth entirely on his
own time without using any of the Company's equipment,
supplies, facilities, Confidential Information, or other
assets, and not related to the Business of the Company, shall
not be the property of the Company.
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(C) HSNS hereby grants to Xxxxx Xxxxxxx, personally, a
non-exclusive, non-transferable, world-wide license, without
right to sublicense, to make and use New Technology, as such
term is defined in the HSNS Inventions Awards Plan, that is
developed during the twelve months following Closing under the
Asset Purchase Agreement. Any rights of Jawerth under this
license are subject to his fiduciary obligations as a director
and/or officer of the Company, and to his obligations under
Section 8 of this Agreement. Jawerth acknowledges that the
Company would not grant such license but for the obligations
of Jawerth set forth in Section 8. This license shall
terminate on the later of the date twelve months from the
Closing or such later date as may be set by the Board,
excluding Jawerth (either, the "License Termination Date"). If
HSNS ceases to be a Going Concern prior to the License
Termination Date, the license shall be perpetual and shall
include the rights to sell and offer to sell products and
services using the licensed New Technology, and the right to
sublicense.
8. NON-COMPETITION.
(A) Jawerth agrees that, for the period of eighteen (18) months
immediately following termination of this Agreement for any
reason, he will not, without the prior written consent of
HSNS, for his own account or jointly with another, directly or
indirectly, for or on behalf of any person or entity, as
principal, agent or otherwise:
(i) participate in the control or management of or assist
a business that develops, markets, licenses out or
sells digital media compression products or services
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within the Territory (the "Business"), or assist such
a business in the development of digital media
compression products or services, or accept
employment as a consultant, director, officer or
manager by a business engaged in the Business, except
HSNS; or
(ii) solicit or induce, or in any manner attempt to
solicit or induce, any person employed or engaged by
HSNS in any capacity (including, without limitation,
as an employee, distributor, independent contractor
or agent), to leave such employment or engagement,
whether or not such employment or engagement is
pursuant to a contract or is at will.
(B) Although the parties have, in good faith, used their best
efforts to make the provisions of part (a) above reasonable in
the scope of activities, geographic area and in duration, and
it is not anticipated, nor is it intended, by any of the
parties hereto that a Court of competent jurisdiction would
find it necessary to reform the provisions hereof to make it
reasonable in respect to the scope of activities, geographic
area and in duration, or otherwise, the parties understand and
agree that if a court of competent jurisdiction determines it
necessary to reform the scope of part (a) above in order to
make it reasonable in respect to the scope of activities,
geographic area or duration, or otherwise, damages, if any,
for a breach hereof, as so reformed, would be deemed to accrue
to HSNS as of and from the date of such a breach only insofar
as the damages for such breach relate to an action which
occurred within the scope of activities, geographic area and
duration as so reformed.
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(C) For purposes of the foregoing, the "Territory" shall mean the
United States of America, Canada, Mexico, the countries of the
European Union, East Asia, and India. "Digital media
compression products or services" shall include, but not be
limited to, products and services involving digital media
compression, where media can be audio, video, still images, or
animation files.
(D) Jawerth acknowledges that the business of the Company in rich
media products and services based on digital media compression
is international in scope, that eighteen (18) months of
restriction is appropriate given the importance of Jawerth's
position with the Company, and that Jawerth has received
substantial and adequate consideration for his covenants in
part (a) above.
9. CONFIDENTIAL INFORMATION.
(A) During the term of this Agreement and for eighteen (18) months
following its termination, unless he has the Company's express
prior approval with respect to specific information, Jawerth
will keep confidential all Confidential Information he
receives from the Company, or which he generates during the
course of his employment, including technologies owned by the
Company. Confidential Information is defined as information
not publicly available or which Jawerth did not obtain from
non-Company sources that were obligated to keep such
information confidential, and information received from third
parties that the Company is obligated to keep confidential.
Jawerth may disclose Confidential Information, however, if
such
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information becomes public through no act or omission of
Jawerth, or if Jawerth is ordered to disclose such information
by a court of competent jurisdiction.
(B) Jawerth agrees that Confidential Information is the sole and
exclusive property of the Company or the third parties that
provided the Confidential Information to the Company. Should
Jawerth leave the Company, he will return to the Company, upon
request, all Confidential Information in his possession.
10. [RESERVED]
11. WAIVER OF BREACH. A waiver by either party of a breach of any provision
of this Agreement does not constitute a waiver of any other provision
of this Agreement; nor does it constitute a continuing waiver of the
same provision waived.
12. ASSIGNMENT. Because of the professional services involved, the
obligations or benefits of Jawerth cannot be assigned without the
express prior written permission of HSNS, which shall not be
unreasonably withheld. This Agreement cannot be assigned by HSNS
without the express prior written approval of Jawerth, which may not be
unreasonably withheld. This Agreement shall be binding on all
successors and permitted assigns of HSNS.
13. INDEMNIFICATION AND INSURANCE. Jawerth shall be entitled to the full
corporate indemnity and defense protections otherwise provided by the
Company to its senior officers, through bylaw
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provisions, corporate policy, applicable law, or otherwise. The
indemnification shall also extend to HSNS liabilities before closing
for actions in which Jawerth had no involvement. HSNS shall carry
standard directors and officers insurance.
14. GOVERNING LAW. This Agreement shall be governed by the laws of North
Carolina. The venue for any dispute relating to or arising under this
Agreement shall be Raleigh, North Carolina, unless the parties agree
otherwise in advance. Before any litigation is instituted, the parties
to any such dispute shall first pursue mediation, and if such mediation
does not resolve the dispute, then binding Arbitration, under the rules
of the American Arbitration Association. The parties hereby consent to
jurisdiction in North Carolina for the purpose of any litigation
relating to this Agreement and agree that any litigation by or
involving them relating to this Agreement shall be conducted in the
courts of Wake County, North Carolina or the federal courts of the
United States for the Eastern District of North Carolina.
15. PERFORMANCE. Jawerth agrees that he will perform his duties and conduct
himself in accordance with applicable laws.
16. THIRD PARTY BENEFICIARIES. Other than permitted successors and assigns,
this Agreement does not create, grant or establish any rights in any
third parties, including without limitation the members of any
inventing team. There are no third party beneficiaries of this
Agreement.
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17. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties. This Agreement supersedes any previous agreements,
written or oral, all of which are deemed to be merged into this
Agreement. Any modifications to this Agreement must be in writing and
signed by both parties to be effective. This Agreement, to be
effective, must be approved by the majority of the current directors of
HSNS.
IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date written below.
HIGH SPEED NET SOLUTIONS:
By: /s/ Xxxxxx Xxx
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Title: President and CEO
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XXXXX XXXXXXX:
/s/ Xxxxx Xxxxxxx 2/16/01
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Date
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