DM DRAFT OF 10/18/01
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT effective as of Oct 23, 2001 between Q-Net
Technologies, Inc. (the "Employer"), a Delaware corporation, and Xxxxxxx X.
Xxxx, XX (the "Employee").
Recital:
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The parties hereto desire to enter into this Agreement to provide for the
employment of the Employee by the Employer and for certain other matters in
connection with such employment, all as set forth more fully in this Agreement.
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein, and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. Duties. The Employer agrees that the Employee shall be employed by
the Employer to serve as President and Chief Executive Officer of the Employer
and serving in temporary capacity as Chief Financial Officer and General Counsel
until such positions are filled by the Board of Directors. The Employee agrees
to be so employed by the Employer and to devote his best efforts and
substantially all of his business time energies and attention to advance the
interests of the Employer and to perform such executive, managerial,
administrative and other duties as are from time to time assigned to him by the
Board of Directors (the "Board") of the Employer and are consistent with his
position as President and Chief Executive Officer, Chief Financial Officer and
General Counsel; provided, however, that the Employee may engage in reasonable
investment and other personal activities that do not interfere with his duties
in and obligations of the respective positions noted above. Employee will also
be appointed a director of the Employer for as long as he is employed under this
Agreement.
2. Term. Subject to Sections 5 and 6 hereof, the initial term of the
Employee's employment hereunder shall commence on the effective date hereof and
shall continue for a term of three years. This Agreement shall be automatically
renewed for successive terms of one year each, unless either party gives the
other party at least [90] days' prior written notice of termination.
3. Compensation.
(a) Salary. During the term of his employment under this
Agreement, the Employee shall be paid an monthly salary at the rate of not less
than $25,000 (the "Base Salary"). The Base Salary may be increased from time to
time by the Board. The Board shall review the Base Salary at least annually at
the end of each calendar year. The Base Salary shall be paid in accordance with
the Employer's regular payroll practices.
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(b) Bonuses. The Employee shall be paid a bonus within 60 days
after the end of each calendar year, commencing with the calendar year ending
December 3 1, 2001, in an amount based on the Employee's performance and merit
and the amount of bonuses awarded to other directors and officers of the
Employer, as determined by the Board, but in no event less than $60,000 for any
calendar year. The minimum amount of the bonus will be payable monthly in
advance in the amount of $5,000 per month during each month of the calendar year
for which the bonus is payable. In addition, if the Employer obtains financing
as a result of the Employee's efforts, the Employer will pay the Employee an
additional bonus equal to 5% of the amount so raised, payable in cash and/or
registered shares of the Employer's common stock (the "Common Stock") at
Employee's option. Such cash bonus shall be paid to Employee at the closing of
any transaction so concluded. Any stock bonus shall be issued within 30 days of
closing. If the additional bonus is paid in shares of Common Stock, the number
of shares will be calculated based on the average trading price of the Common
Stock for a period of five trading days prior to the closing date of the
financing.
(c) Fringe Benefits. The Employee shall be entitled to participate in
all insurance, vacation and other fringe benefit programs of the Employer to the
extent and on the same terms and conditions as are accorded to other officers
and key employees of the Employer.
(d) Reimbursement of Expenses. The Employee shall be reimbursed for
all normal items of travel, entertainment and miscellaneous business expenses
reasonably incurred by him on behalf of the Employer, provided that such
expenses are documented and submitted in accordance with the reimbursement
policies of the Employer as in effect from time to time.
(e) Stock Options. Employee will be granted stock options to purchase
100,000 shares of the Company's common stock in each year of the term of this
Agreement or as long as Employee is employed by or serves as a Director of the
Company, recognizing that the existing options granted to purchase 100,000
shares of the Company were granted as of October 1, 2000 at an exercise price of
$5.00 per share. Subsequent annual option grants shall be effective on October
1st of each year following or a defined number of options at $5.00 per share
pro-rata for any portion of each subsequent year thereafter as long as Employee
is employed by or serves as Director of the Company. The exercise price of all
stock options would be the fair market value of the Corporation's shares at the
time of the grant. All stock options would be subject to the terms and
conditions of the Corporation's Stock Option Plan and any shares issued upon
exercise of any stock options would be subject to any restrictions or resale
imposed by applicable securities law.
(f) Other Compensation. Other compensation not provided for in this
Agreement for the services to be rendered by the Employee to the Employer
hereunder shall be made at the pleasure of the Board of Directors.
4. Right of First Refusal. It is understood that Employee currently
holds all right, title and interest to 720,000 shares of common stock of the
Company representing 5% of the shares of the Corporation issued and outstanding.
In order to avoid dilution of Employees equity position in the Company upon
subsequent funding events, employee shall be extended the following:
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(a) Offer to Employee; Notice of Acceptance. The Employer agrees
to give to the Employee at least 120 days' prior written notice of any proposed
sale by the Company of its Common Stock or any right, option or warrant to
acquire its Common Stock or any securities convertible into or exchangeable for
its Common Stock. Such notice will identify the number of shares or amount of
securities to be issued, the proposed date of issuance, the name and address of
the person or entity to whom the shares or other securities will be issued and
the price and other terms of the issuance. Such notice will also include an
offer (the "Offer") to sell to the Employee up to 5% of such shares or other
securities (the "Offered Securities") at the same price and on the same other
terms as are proposed for such sale or issuance, which Offer by its terms shall
remain open for a period of 120 days from the date of receipt of the Employer's
notice. To accept the Offer, the Employee must give written notice (the "Notice
of Acceptance") to the Employer prior to the end of the 120-day period of such
Offer of the Employee's intention to accept the Offer, which Notice of
Acceptance shall state the portion of the Offered Securities that the Employee
elects to purchase. Upon the closing of the sale of the shares or other
securities as to which the Employer has given notice, the Employee shall
purchase from the Employer, and the Employer shall sell to the Employee, upon
the terms specified in the Offer, the Offered Securities subscribed for by the
Employee pursuant to the Notice of Acceptance.
(b) Right of Employer to Sell Offered Securities Not Subscribed
for by Employee. If the Employee does not subscribe for all the Offered
Securities pursuant to Section 4(a) hereof, the Employer shall have 60 days from
the end of the foregoing 120-day period to sell to any other persons or entities
all or any part of such Offered Securities as to which the Employee has not
accepted the Offer, such sales in all material respects to be on terms and
conditions that are no more favorable to such other persons or entities or less
favorable to the Employer than those set forth in the Offer. Any Offered
Securities not purchased by the Employee or other persons or entities during
such 60-day period may not be sold or otherwise disposed of until they are again
offered to the Employee under the procedures specified in this Agreement.
5. Death or Total Disability of the Employee.
(a) Death. In the event of the death of the Employee during the
term of this Agreement, this Agreement shall terminate effective as of the date
of the Employee's death, and the Employer shall not have any further obligation
or liability under this Agreement except that the Employer shall pay to the
Employee's estate: (i) any portion of the Employee's Base Salary and bonus for
the period up to the Employee's date of death that has been earned but remains
unpaid; (ii) any benefits that have accrued to the Employee under the terms of
the employee benefit plans of the Employer, which benefits shall be paid in
accordance with the terms of those plans; and the Employee's estate shall be
fully vested in any shares, bonus or equity ownership subscribed to by Employee
as may be effective as of the date of the Employee's death.
(b) Total Disability. In the event of the Total Disability (as
that term is hereinafter defined) of the Employee, for (i) a period of 180
consecutive days or (ii) for any 180 days within a period of 360 consecutive
days, at any time during the term of this Agreement, the Employer shall have the
right to terminate the Employee's employment hereunder by giving the
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Employee 90 days' written notice thereof, and, upon expiration of such 90-day
period, the Employer shall not have any further obligation or liability under
this Agreement except that the Employer shall pay to the Employee: (i) any
portion of the Employee's Base Salary and bonus for the period up to the date of
termination that has been earned but remains unpaid; and (ii) any benefits that
have accrued to the Employee under the terms of the employee benefit plans of
the Employer, which benefits shall be paid in accordance with the terms of those
plans. The term "Total Disability," when used herein, shall mean a mental or
physical condition that in the reasonable opinion of the Board of Directors of
the Employer renders the Employee unable or incompetent to carry out the job
responsibilities he held or the tasks that he was assigned at the time the
disability was incurred.
6. Termination.
(a) Termination by the Employer for Cause. The Employer may
discharge the Employee and thereby terminate his employment hereunder upon
written notice to the Employee for any of the following reasons: (i) habitual
intoxication; (ii) abuse of a controlled substance; (iii) conviction of a felony
involving moral turpitude; (iv) adjudication as an incompetent; (v) a breach by
the Employee of any material term of this Agreement that is not cured within 30
days after written notice from the Employer; or (vi) misappropriation of any
funds or property of the Employer, theft, embezzlement or fraud. In the event
that the Employer shall discharge the Employee pursuant to this Section 6(a),
the Employer shall not have any further obligation or liability under this
Agreement, except that the Employer shall pay to the Employee: (i) any portion
of the Employee's Base Salary and bonus, if any, for the period up to the date
of termination that has been earned but remains unpaid; and (ii) any benefits
that have accrued to the Employee under the terms of the employee benefit plans
of the Employer, which benefits shall be paid in accordance with the terms of
those plans.
(b) Other Termination by the Employer. The Employer may discharge
the Employee and thereby terminate his employment hereunder on 30 days' prior
written notice and the payment of $360,000 representing 12 months base salary
and bonus in the event that Employer terminates this Agreement. If the Employer
shall terminate the employment of the Employee under this Section 6(b), the
Employee shall be entitled to be paid: (i) any portion of the Employee's Base
Salary and bonus, for the period up to the date of termination that has been
earned but remains unpaid; (ii) a severance payment equal to the Employee's Base
Salary and bonus for a period of one year, payable in twelve equal monthly
installments in advance; and (iii) any benefits that have accrued to the
Employee under the terms of any employee benefit plans of the Employer, which
benefits shall be paid in accordance with the terms of those plans.
(c) Termination by the Employee for Good Reason. The Employee may
terminate his employment for Good Reason (as defined below); provided that the
Employee has provided written notice to the Employer that an event constituting
Good Reason has occurred and such event continues uncured for 30 days after
receipt by the Employer of written notice from the Employee of the occurrence of
such event, which notice shall specifically set forth the nature of the Good
Reason that is the reason for such resignation. For purposes of this Agreement,
"Good Reason" shall mean: (i) a substantial diminution of the Employee's
authority, duties or responsibilities as in effect on the date hereof or as
hereafter increased; (ii) a material
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breach by the Employer of any term or provision of this Agreement; or (iii) a
Change of Control (as defined below); provided, however, that the term Good
Reason shall not include a termination of the Employee's employment hereunder
pursuant to Section 5(b), 6(a) or 6(b). The date of termination of the
Employee's employment under this Section 6(c) shall be the effective date of any
resignation specified in writing by the Employee, which shall not be less than
30 days after receipt by the Employer of written notice of such resignation,
provided that such resignation shall not be effective pursuant to this Section
6(c) and the event giving rise to Good Reason shall be deemed to have been cured
if such event is corrected by the Employer during such 30-day period. If the
Employee shall terminate his employment hereunder for Good Reason, the Employee
shall be entitled to be paid: (i) any portion of the Employee's Base Salary and
bonus, if any, for the period up to the date of termination that has been earned
but remains unpaid; (ii) a severance payment equal to the Employee's Base Salary
and bonus for a period of one year, payable in twelve equal monthly
installments; (iii) any benefits that have accrued to the Employee under the
terms of any employee benefit plans of the Employer, which benefits shall be
paid in accordance with the terms of those plans; and (iv) the immediate vesting
of all stock options previously granted to the Employee, irrespective of whether
the stock options had yet become exercisable under the terms of the grant of the
stock options. "Change in Control" shall mean a change in the power to direct or
cause the direction of the management and policies of the Employer arising from
(1) any "person" (including a "person" as defined in Section 13(d)(3) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")) becoming the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Employer representing more than 50% of the
combined voting power of the Employer's then outstanding securities or (2) more
than 50% of the assets of the Employer being disposed of by the Employer
pursuant to a partial or complete liquidation of the Employer, a sale of assets
(including stock of a subsidiary or subsidiaries) of the Employer or otherwise.
7. Employer Documentation. The Employee shall hold in a fiduciary
capacity for the benefit of the Employer all documentation, disks, programs,
data, records, drawings, manuals, reports, sketches, blueprints, letters, notes,
notebooks and all other writings, electronic data, graphics and tangible
information and materials of a secret, confidential or proprietary information
nature relating to the Employer or the Employer's business that are in the
possession or under the control of the Employee.
8. Supersedes Other Agreements. This Agreement supersedes and is in
lieu of any and all other employment arrangements between the Employee and the
Employer, but shall not supersede any existing confidentiality or nondisclosure
agreements between the Employee and the Employer.
9. Amendments. Any amendment to this Agreement shall be made in
writing and signed by the parties hereto.
10. Enforceability. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, then such provision shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed excised from this
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law as if such provision had been
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originally incorporated herein as so modified or restricted or as if such
provision had not been originally incorporated herein, as the case may be.
11. Construction. This Agreement shall be construed and interpreted in
accordance with the internal laws of the State of Delaware, U.S.A.
12. Assignment.
(a) By the Employer. The rights and obligations of the Employer
under this Agreement shall inure to the benefit of, and shall be binding upon,
the successors and assigns of the Employer. The Employer shall require each and
every successor (whether direct or indirect, by asset or stock purchase, share
exchange, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Employer, by agreement in form and substance
satisfactory to the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent the Employer would be
required to perform it if no such succession had taken place. As used in this
Agreement, "the Employer" shall mean the Employer as hereinbefore defined and
any successor to its business and/or assets as provided above that executes and
delivers the agreement provided for in this Section 15(a) or that otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) By the Employee. This Agreement and the obligations created
hereunder may not be assigned by the Employee, but all rights of the Employee
hereunder shall inure to the benefit of and be enforceable by his heirs,
devisees, legatees, executors, administrators and personal representatives.
13. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when mailed by
certified mail, return receipt requested, or delivered by a national overnight
delivery service addressed to the intended recipient as follows:
If to the Employer:
Q-Net Technologies, Inc.
Xxxxx 0000
Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
If to the Employee:
Xxxxxxx X. Xxxx, XX
000 X. Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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Any party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.
14. Waivers. No claim or right arising out of a breach or default
under this Agreement shall be discharged in whole or in part by a waiver of that
claim or right unless the waiver is supported by consideration and is in writing
and executed by the aggrieved party hereto or his or its duly authorized agent.
A waiver by any party hereto of a breach or default by the other party hereto of
any provision of this Agreement shall not be deemed a waiver of future
compliance therewith, and such provisions shall remain in full force and effect.
15. Survival of Covenants. The provisions of Sections 6, 7, 8 and 9
hereof shall survive the termination of this Agreement. Furthermore, any
provision of this Agreement which provides a benefit to the Employee and which
by the express terms hereof does not terminate upon the termination of the
Employee's employment shall remain binding upon the Employer until such time as
such benefits are paid in full to the Employee or his successors.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of
the date first above written.
Q-NET TECHNOLOGIES, INC.
/s/ Xxxxxx Xxxx
By:_______________________________
Chairman
Title:________________________
/s/ Xxxxxxx X. Xxxx
___________________________________
Xxxxxxx X. Xxxx, XX
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