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Exhibit 2.3
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EMPLOYMENT AGREEMENT dated July 31, 1997 by
and between ADVANCED DIGITAL SERVICES, INC.,
a New York corporation, formerly known as
Xxxx Digital Acquisition Inc. (the
"Company"), and XXXX XXXXXX (the
"Employee").
The parties hereto desire to provide for the Employee's employment by the
Company in accordance with the terms and provisions set forth below:
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT; TERM.
The Company agrees to employ the Employee, and the Employee agrees to work
for the Company as its Vice President - Sales and Marketing for a period of five
(5) years commencing on the date hereof unless sooner terminated in accordance
with Section 8 hereof. Such period, together with the period of any extension or
renewal of such employment, is referred to herein as the "Employment Period."
2. DUTIES.
During the Employment Period: (i) the Employee shall serve as the Vice
President - Sales and Marketing of the Company and perform such duties for the
Company or an Affiliate (as hereinafter defined) as shall, from time to time, be
reasonably assigned to the Employee by the President or the Board of Directors
of the Company consistent with his position and abilities; and (ii) the Employee
shall also serve as Vice President - Sales and Marketing of Xxxx Digital
Technologies, Inc., a Delaware corporation ("KDTI").
3. DEVOTION OF TIME.
During the Employment Period, the Employee shall: (i) expend substantially
all of his working time for the Company; (ii) devote his best efforts, energy
and skill to the services of the Company and the promotion of its interests; and
(iii) not, directly or indirectly, engage, participate or invest in, or render
any services for, any other business enterprise or activity engaged in a
business competitive to the business of the Company; provided, however, that,
the foregoing notwithstanding, the Employee may invest in or own securities of
any corporation or other entity provided that such securities are listed on a
registered securities exchange or actively traded in the over-the-counter market
and the number or amount or such securities represents not more than 1% of the
total number or amount of such securities then outstanding.
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4. COMPENSATION.
a. In consideration for the services to be performed by the Employee
during the Employment Period hereunder, the Company shall compensate
the Employee at an annual base salary from the date hereof at the
annual rate of $255,209.75 per annum (the "Base Salary"), payable in
accordance with the Company's customary payroll practices.
Commencing with the second anniversary of the date of this
Agreement, the Base Salary shall be increased at the rate of four
percent (4%) per annum, or such higher increases as may be approved
by the Board of Directors of the Company and its parent corporation
KDTI in their discretion.
b. In addition, the Employee shall be entitled to receive the Bonus
Payments provided for in the 1998 Xxxx Digital Technologies, Inc.
Target Bonus Plan, a copy of which is annexed hereto as Exhibit A,
and the terms of which are incorporated herein by reference.
c. Upon execution of this Agreement, the Employee is receiving an
option to purchase 120,000 shares of common stock of the Company's
parent corporation KDTI upon the terms and conditions contained in
the Stock Option Agreement attached hereto as Exhibit B.
5. USE OF AUTOMOBILE; REIMBURSEMENT OF EXPENSES; ADDITIONAL
BENEFITS.
a. Employee shall be reimbursed for expenses incurred by him in
connection with the ownership or lease of an automobile of the make
and type approved by the Company, which expenses shall not exceed
$650 per month.
b. The Company shall pay directly, or reimburse the Employee for, all
other reasonable and necessary business expenses and disbursements
incurred by him for and on behalf of the Company in the performance
of his duties under this Agreement, including reimbursement for car
expenses, such as gas, insurance, one parking space and a cellular
phone used for Company business. For such purposes, the Employee
shall submit to the Company itemized reports of such expenses in
accordance with the Company's policies.
c. Employee shall be entitled to paid vacations during the Employment
Period in accordance with the Company's then prevalent practices for
executive employees.
d. Employee shall be entitled to participate in, and to receive
benefits under, any employee benefit plans of the Company
(including, without limitation, pension, profit sharing, group life
insurance and group medical insurance plans) as may exist from time
to time for its executive employees.
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6. EMPLOYEE KNOWLEDGE.
a. Employee hereby agrees to communicate and make known to the Company
all knowledge possessed by him relating to any methods,
developments, inventions and/or improvements, whether patented,
patentable or unpatentable, which relate to the business of the
Company; whether acquired by him before or during the Employment
Period; provided, however, that nothing herein shall be construed as
requiring any such communication where the method, development,
invention and/or improvement is lawfully protected from disclosure
as the trade secret of a third party or by any other lawful bar to
such communications existing prior to the commencement of employment
hereunder.
b. Employee hereby agrees to keep all such records in connection with
the Employee's employment as the Company may from time to time
reasonably direct, and all such records shall be the sole and
exclusive property of the Company.
c. It is expressly agreed between the Employee and the Company that any
invention the Employee developed entirely on his own time without
using the Company's equipment, supplies, facilities or trade secret
information belong to the Employee except for those inventions that
either: (a) relate at the time of conception or reduction to
practice of the invention to the Company's business or actual or
demonstrably anticipated research or development of the Company; or
(b) result from any work performed by the Employee for the Company.
7. CONFIDENTIALITY.
a. ACKNOWLEDGEMENTS BY EMPLOYEE. The Employee acknowledges that his
position with the Company will require the performance of services
which are special, unique, extraordinary and of an intellectual
character and places and will continue to place him in a position of
confidence and trust with the Customers of the Company. The Employee
further acknowledges that his performance of services for the
Company necessarily requires the disclosure to the Employee of
confidential information and trade secrets of the Company. The
Employee also acknowledges that he has developed prior to the date
hereof, as an employee and stockholder of Advanced Digital Services,
Inc., a New York corporation ("ADSI-NY") which merged with and into
the Company pursuant to a Plan and Agreement of Merger dated July
31, 1997 among ADSI-NY, KDTI, the Company, under its former name
Xxxx Digital Acquisition Inc., and the shareholders of ADSI-NY (the
"Merger Agreement") concurrently with the execution and delivery of
this Agreement, a personal acquaintance and relationship with
Customers of ADSI-NY and that he will continue to develop such
relationships with such Customers as an employee of the Company. The
Employee also acknowledges that in the course of his employment by
the Company he will develop a personal acquaintanceship and
relationship with other
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Customers of KDTI and its Affiliates. The Employee further
acknowledges that he has and will acquire a knowledge of such
Customers' affairs and requirements which may constitute a primary
contact of the Company or KDTI and its Affiliates with such
Customers, and that therefore, the Company's and KDTI's and its
other Affiliates relationships with its Customers may be placed in
the Employee's hands in confidence and trust. The Employee therefore
agrees that it is reasonable and necessary for the protection of the
goodwill and business of the Company that the Employee make the
covenants contained herein.
b. DEFINITIONS Capitalized terms used in this Section 7 shall, unless
the context otherwise requires, have the meanings specified below.
i. The term "Customer" means (i) anyone who is a customer of any
of the KDTI Companies at the time of the alleged prohibited
conduct or at any time during the two (2) year period
immediately preceding the alleged prohibited conduct; (ii) any
customer of Advanced Digital Solutions, Inc., a New York
corporation, or Xxxxx Xxxx Studio, Inc., a New York
corporation; or (iii) any prospective customers to whom any of
the KDTI Companies makes a presentation (or similar offering
of services) within a period of 360 days immediately preceding
the alleged prohibited conduct or, if the alleged prohibited
conduct occurs after the termination of the Employment Period,
within a period of 360 days immediately preceding such
termination.
ii. The term "Affiliate" means any corporation, partnership,
company, firm, entity or proprietorship which, directly or
indirectly, controls or is controlled by or under common
control with KDTI, and includes the Company.
iii. The term "KDTI Companies" means KDTI, the Company and any
other Affiliate.
c. CONFIDENTIAL INFORMATION. The Employee shall keep secret and retain
in strictest confidence, and shall not use for the benefit of
itself, himself or others, except in connection with the business
and affairs of the KDTI Companies, all confidential matters relating
to the business of the KDTI Companies, including, but not limited
to, "know-how," trade secrets, customer lists, subscription lists,
pricing policies, operational methods, marketing plans or
strategies, product development techniques or plans, information
pertaining to Customers and their requirements, business acquisition
plans, new personnel acquisition plans, formulae, methods of
manufacture, technical processes, designs and design projects,
inventions and research projects and other business affairs relating
to the business and affairs of the KDTI Companies, learned by the
Employee at any time and shall never disclose such matters to anyone
outside of the KDTI Companies, except (i) as required in the course
of performing duties for the KDTI Companies, (ii) with KDTI's
express written consent; or (iii) with respect to such information
which is generally known to the public or becomes known to the
public though no fault of the Employee or
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which is generally known to businesses engaged in the type of
business in which any of the KDTI Companies is engaged.
d. ENFORCEMENT THROUGH INJUNCTION. Employee acknowledges that the type
and periods of restriction imposed in this Section 7 are fair and
reasonable and are reasonably required for the protection of the
KDTI Companies. The Employee acknowledge that a breach of the
provisions of this Agreement would irreparably damage the KDTI
Companies, and that once such a breach has occurred, there may be no
accurate way of determining the amount of damage or loss suffered by
the KDTI Companies. The Employee therefore agrees that the terms of
this Agreement may be enforced through preliminary or final
injunctive relief or other equitable remedy, without any of the KDTI
Companies having to (i) prove irreparable injury or likelihood of
success, (ii) prevail on the balancing of the equities test or other
legal criteria, or (iii) post a bond, and without limiting any other
damages or remedies to which any of the KDTI Companies may be
entitled, including termination of any salary or other payments
required under this Agreement other than the payments provided by
Section 8 (d).
e. BLUE LINING. If any of the provisions of this Agreement relating to
time, geographical area, services products, devices and/or
information are deemed by a court of competent jurisdiction to be
overly broad or for any other reason unenforceable, the parties
agree that such restrictions herein as to time, geographical area,
services, products, devices and/or information shall be reduced to
such time, geographical area, services, products, devices and/or
information as such court shall hold to be reasonable and legally
enforceable. In addition, if any court determines that any of the
restrictive covenants contained in this Agreement or any part
thereof, is invalid or unenforceable, the remainder of the
restrictive covenants shall not thereby be affected and shall be
given full effect without regard to the invalid portions.
i. The Employee acknowledges that the business of the KDTI
Companies extends beyond the geographic area of the State of
New York and accordingly, it is reasonable that the
restrictive covenants set forth below are not limited by
specific geographic area but by the location of the Customers.
The Employee further acknowledges that the Company and the
Employee intend to and hereby confer jurisdiction to enforce
the covenants contained in this Agreement upon the courts of
any state within the geographical scope of such covenants. In
the event that the courts of one or more of such states shall
hold such covenants wholly unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way
affect the right of any of the KDTI Companies to the relief
provided above in the courts of any other states within the
geographical scope of such covenants, as to breaches of such
covenants in such other respective states, the above covenants
as they relate to each state being, for this purpose,
severable into diverse and independent
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covenants. Notwithstanding the foregoing, no action will be
commenced in more than one jurisdiction at a time unless one
or more of the provisions of this Agreement can only be
enforced if an action is brought in another jurisdiction or
jurisdictions.
8. EARLIER TERMINATION.
a. Employee's employment hereunder shall automatically be terminated
upon the death of the Employee or Employee's voluntarily leaving the
employ of the Company and, in addition, may be terminated, at the
sole discretion of the Company, as follows:
i. upon thirty (30) days' prior written notice by the Company, in
the event of the Employee's disability as set forth in Section
8(b) below; or
ii. upon thirty (30) days' prior written notice by the Company, in
the event that the Company terminates the Employee's
employment hereunder for cause as set forth in Section 8(c)
below, and the failure of the Employee to cure the condition
constituting such cause if the same is curable within such
thirty (30) day period after such notice has been given by the
Company.
b. Employee shall be deemed disabled hereunder, if in the opinion of
the Board of Directors of the Company, as confirmed by competent
medical advice in writing, he shall become physically or mentally
unable to perform his duties for the Company hereunder and such
incapacity shall have continued for any period of ninety (90) days
in any consecutive twelve (12) months.
c. For purposes hereof, "cause" shall mean, and be limited to, the
following: (a) Employee's willful malfeasance or gross negligence in
performance of his duties as an employee of the Company; (b) the
material breach of any covenant made by Employee hereunder, under
the terms of the Merger Agreement or under the terms of the Non
Competition Agreement between and among the Employee, the Company
and KDTI; or (c) a dishonest act or omission by Employee which
either (i) results in his personal enrichment at the expense of the
Company, or (ii) results in his conviction of, or plea of nolo
contendere to, a felony or other serious crime, not including a
motor vehicle offense; (d) a breach of Employee's fiduciary duties
to the Company; or (e) a conviction of any federal or state
securities' laws.
d. If the Employee's employment hereunder is terminated for any reason
or no reason, then the Employee shall be entitled to receive the
severance payment set forth below (subject to any withholding or
other payroll tax payable by the Employee and which is required by
law to be withheld by the Company) payable within ten (10) days
after such termination occurs:
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i. if such termination occurs on or before the first anniversary
of the date hereof, the Company shall pay the Employee the sum
of $218,375.00 plus an amount equal to the product of
$54,593.75 multiplied by a fraction, the numerator of which is
the number of months (measured by each one month period
commencing as of the date hereof) remaining during the one
year period commencing on the date hereof and ending on the
date immediately prior to the first anniversary of the date
hereof, and the denominator of which is twelve;
ii. if such termination occurs on or before the second anniversary
of the date hereof, the Company shall pay the Employee the sum
of $163,781.25 plus an amount equal to the product of
$54,593.75 multiplied by a fraction, the numerator of which is
the number of months (measured by each one month period
commencing as of the date hereof) remaining during the one
year period commencing on the first anniversary of the date
hereof and ending on the date immediately prior to the second
anniversary of the date hereof, and the denominator of which
is twelve;
iii. if such termination occurs on or before the third anniversary
of the date hereof, the Company shall pay the Employee the sum
of $109,187.50 plus an amount equal to the product of
$54,593.75 multiplied by a fraction, the numerator of which is
the number of months (measured by each one month period
commencing as of the date hereof) remaining during the one
year period commencing on the second anniversary of the date
hereof and ending on the date immediately prior to the third
anniversary of the date hereof, and the denominator of which
is twelve;
iv. if such termination occurs on or before the fourth anniversary
of the date hereof, the Company shall pay the Employee the sum
of $54,593.75 plus an amount equal to the product of
$54,593.75 multiplied by a fraction, the numerator of which is
the number of months (measured by each one month period
commencing as of the date hereof) remaining during the one
year period commencing on the third anniversary of the date
hereof and ending on the date immediately prior to the fourth
anniversary of the date hereof, and the denominator of which
is twelve;
v. if such termination occurs on or before the fifth anniversary
of the date hereof, the Company shall pay the Employee an
amount equal to the product of $54,593.75 multiplied by a
fraction, the numerator of which is the number of months
(measured by each one month period commencing as of the date
hereof) remaining during the one year period commencing on the
fourth anniversary of the date hereof and ending on the date
immediately prior to the fifth anniversary of the date hereof,
and the denominator of which is twelve.
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9. ASSIGNMENT.
This Agreement, as it relates to the employment of the Employee, is a
personal contract and the rights and interests of the Employee hereunder may not
be sold, transferred, assigned, pledged or hypothecated, except as otherwise set
forth herein. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns, including without limitation, any
corporation or other entity into which the Company is merged or which acquires
all of the outstanding shares of the Company's capital stock, or all or
substantially all of the assets of the Company.
10. RIGHT TO PAYMENTS.
Employee shall not under any circumstances have any option or right to
require payments hereunder otherwise than in accordance with the terms hereof.
To the extent permitted by law, the Employee shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder, and
all rights and benefits of the Employee shall be for the sole personal benefit
of the Employee, and no other person shall acquire any right, title or interest
hereunder by reason of any sale, assignment, transfer, claim or judgment or
bankruptcy proceedings against the Employee.
11. NOTICES.
Any notice or other communications required or permitted hereunder shall
be in writing and shall be deemed effective (a) upon personal delivery, if
delivered by hand and followed by notice by mail, overnight courier or delivery
service or facsimile transmission; (b) one day after the date of delivery by
Federal Express or other nationally recognized courier service that provides a
delivery receipt, if delivered by priority overnight delivery between any two
points within the United States; or (c) three (3) days after deposit in the
mails, if mailed by certified or registered mail (return receipt requested)
between any two points within the United States, and in each case of mailing,
postage prepaid, addressed as follows: (i) if to Employee, at 000 Xxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxx Xxxxxx 00000 and (ii) if to the Company, at Twenty-One Xxxx
Xxxxx, Xxx Xxxx, XX 00000, or at such other address as any such party shall
designate by written notice to the other party.
12. WAIVER.
The waiver by either party of a breach of any provision of this Agreement
shall not operate or be construed as a Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and not in any way affect or render invalid or unenforceable any other
provisions of this Agreement, and this Agreement shall be carried out as if such
invalid or unenforceable provisions were not embodied therein.
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13. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter hereof and there are no representations,
warranties or commitments except as set forth herein. This Agreement supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties hereto relating to the
transactions contemplated by this Agreement; provided, however, that it is the
intention of the parties that this Agreement shall be interpreted and applied in
conjunction with the terms of any option, warrant or other right now in
existence or hereinafter granted to the Employee to acquire shares of capital
stock of the Company. In the event of any conflict, however, the terms of this
Agreement shall govern and prevail. This Agreement may be amended only in
writing executed by the parties hereto affected by such amendment.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ADVANCED DIGITAL SERVICES, INC., a New York corporation,
formerly known as XXXX DIGITAL ACQUISITION INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------------
Name: XXXXXX X. XXXXX
Title: VICE PRESIDENT
EMPLOYEE:
/s/ Xxxx Xxxxxx
----------------------------------------------
XXXX XXXXXX
By its execution below, Xxxx Digital Technologies, Inc. hereby guarantees
payment by the Company when due of all salary and other payments due to Employee
under the foregoing Employment Agreement.
XXXX DIGITAL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------------------
Name: XXXXXX X. XXXXX
Title: VICE PRESIDENT & CHIEF FINANCIAL OFFICER
Date: July 31, 1997
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EXHIBIT A
TO EMPLOYMENT AGREEMENT
1998 XXXX DIGITAL TECHNOLOGIES, INC.
TARGET BONUS PLAN
Bonus compensation to the Employee under the proposed 1998 Xxxx Digital
Technologies, Inc., a Delaware corporation ("KDTI") Executive Bonus Plan (the
"Bonus Plan") will be based upon Earnings Before Tax of KDTI ("EBT") as set
forth below.
1. Definitions:
a. "Compensation Base" means $200,000.00.
b. "Bonus Payment" payable with respect to a Target Year
means the result obtained by multiplying the Bonus
Percentage by the Compensation Base.
c. "Bonus Percentage" means the following:
i. if the EBT Percentage Increase is less than 15%,
the Bonus Percentage equals zero (0);
ii. if the EBT Percentage Increase is 15% or more but less than
30%, the Bonus Percentage equals a percentage between 17.5%
and 29.99%, prorated according to the amount by which the EBT
Percentage Increase is between 15% and 30%;
iii. if the EBT Percentage Increase is 30% or more but less than
45%, the Bonus Percentage equals a percentage between 30% and
34.99%, prorated according to the amount by which the EBT
Percentage Increase is between 30% and 45%;
iv. if the EBT Percentage Increase is 45% or more but less 60%,
the Bonus Percentage equals a percentage between 35% and
44.99% prorated according to the amount by which the EBT
Percentage Increase is between 45% and 60%;
v. if the EBT Percentage Increase is 60% or more, the Bonus
Percentage equals 45%.
d. "Calculation Year" means the fiscal year of KDTI
immediately preceding a Target Year.
e. "Calculation Year EBT" means the EBT for the Calculation
Year.
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f. "Cause" has the same meaning as is provided in the Employee's
Employment Agreement.
g. "EBT" means Earnings Before Provision for Income Taxes of KDTI as of
the end of the relevant fiscal year on a consolidated basis, as
stated in the financial statements audited by and reported on by the
firm of certified public accountants (the "Accountants") retained by
KDTI (the "Audited Financial Statements").
h. "EBT Percentage Increase" means the percentage obtained by a
fraction
(A) the numerator of which is the amount, greater than zero,
equal to the result obtained by subtracting the Calculation
Year EBT from the Target Year EBT, and
(B) the denominator of which is the Calculation Year EBT.
i. "Payment Date" with respect to a Bonus Payment means the date which
is thirty (30) days after delivery by the Accountants of the Audited
Financial Statements for the Target Year for which the Bonus Payment
is payable.
j. "Target Year" means the fiscal year of KDTI ended December 31, 1998,
and each fiscal year thereafter during the period in which the
Employee's employment under his Employment Agreement continues.
k. "Target Year EBT" means the EBT for the Target Year.
2. Eligibility:
In order for an Employee to be eligible to receive a Bonus Payment under the
Plan with respect to a Target Year the following conditions must be satisfied:
(A) the Employee must be employed by KDTI under his Employment Agreement
as of the Payment Date for the Bonus Payment, or
(B) if the Employee is not so employed as of such Payment Date, his
employment was terminated by KDTI without cause after the end of such
Target Year.
Payment:
The Bonus Payment with respect to each Target Year shall be determined by the
Accountants and will be paid not later than the Payment Date.
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EXHIBIT B
STOCK OPTION AGREEMENT
This Agreement, dated as of July 31, 1997, is made between XXXX DIGITAL
TECHNOLOGIES, INC., a Delaware corporation, having its principal offices at
Twenty-One Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and
_______________, having an address at Twenty-One Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the
"Optionee").
W I T N E S S E T H :
1. Grant of Option. The Company hereby grants to the Optionee, subject to the
terms and conditions herein set forth in Schedule 1 annexed hereto (the
"SCHEDULE"), the right and option (the "Option") to purchase from the Company,
all or any part of an aggregate of One Hundred and Twenty Thousand (120,000)
shares of Common Stock, par value $.001 per share, of the Company (the "OPTION
SHARES") at the purchase price of $2.7688 per share, such Option to be
exercisable as hereinafter provided.
2. Terms and Conditions. This Option, and the exercise of this Option, is
subject to the terms and conditions set forth herein.
3. Certain Definitions. The following terms in this Agreement shall have the
meanings set forth below:
i. "Accountants" shall mean the independent public accountants
then regularly retained by KDTI.
ii. "ADSI" means Advanced Digital Services, Inc., a New York
corporation, which is the survivor of the merger of Advanced
Digital Services, Inc., a New York corporation into Xxxx
Digital Acquisition Inc., a New York corporation, which
thereafter changed its name to Advanced Digital Services, Inc.
iii. "ADSI Net Revenues" during an Annual Period means (i) one
hundred percent (100%) of Net Sales of the KDTI Companies
generated and contracted for solely by Xxxxx, Xxxx or another
ADSI employee, and (ii) fifty percent (50%) of Net Sales of
the KDTI Companies generated and contracted for by Xxxxx, Xxxx
or another ADSI employee in conjunction with KDTI employees.
iv. "Affiliate" means any corporation, partnership, company, firm,
entity or proprietorship which controls or is controlled by or
under common control with the Company, and includes ADSI.
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v. "Annual Period" means each full twelve (12) calendar month
period commencing on August 1, 1997, and thereafter through
and until July 31, 2000.
vi. "Bad Debt Adjustment" means, with respect to the first Annual
Period, fifty (50%) percent of the amount of gross revenues
generated during the period commencing on August 1, 1997 and
ending on January 31, 1998 that are not collected on or prior
to July 31, 1998; with respect to the second Annual Period,
fifty (50%) percent of the amount of gross revenues generated
during the period commencing on February 1, 1998 and ending on
January 31, 1999 that are not collected on or prior to July
31, 1999; and with respect to the third Annual Period, fifty
(50%) percent of the amount of gross revenues generated during
the period commencing on February 1, 1999 and ending on
January 31, 2000 that are not collected on or prior to July
31, 2000.
vii. "Determination Procedure" means the following procedure by
which ADSI Net Revenues will be determined: The Accountants
shall determine ADSI Net Revenues in accordance with GAAP and
this Agreement, and such determination by the Accountants
shall be subject to review by the Optionee's Accountants. Any
disputes will be resolved by the Determining Accountant in the
manner set forth herein. In the event that the Optionee does
not agree with the Accountant's determination of ADSI Net
Revenues, the Optionee shall give written notice to the
Company within thirty (30) days after receipt of the
Accountants' determination of the ADSI Net Revenues that
Optionee contends that ADSI Net Revenues have not been
calculated in accordance with GAAP. Such notice shall provide
specific reasons for the disagreement. In such event, the
Company and the Optionee shall each comply with the further
provisions of this Paragraph. If no such written notice is
received, then the Accountants' determination of ADSI Net
Revenues shall be deemed to be accepted. If such notice is
given, then the Company and the Optionee shall try to resolve
the disagreement. If no agreement is reached between them
within ten (10) business days after the date on which the
Optionee gave its notice of disagreement, then the Determining
Accountant shall be appointed with instructions to resolve the
disagreement and provide a report of its determination of ADSI
Net Revenues within thirty (30) business days of its
appointment. Such decision of the Determining Accountant shall
be binding upon the Optionee and the Company. If the
Determining Accountant determines that the ADSI Net Revenues
equal or exceed, or are not less than ninety seven and
one-half percent (97.5%) of, the ADSI Net Revenues initially
determined by the Accountants, the
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Optionee shall pay the cost of the Determining Accountant;
otherwise, the Company shall pay the cost of the Determining
Accountant.
viii. "Determining Accountant" means an accountant selected by the
Accountants and the Optionee's Accountants, or in the event of
such two accountants' inability to select a determining
accountant, a Determining Accountant shall be selected by a
Judge of the Supreme Court of the State of New York, County of
New York, upon petition by either the Optionee or the Company.
ix. "GAAP" means generally accepted accounting principles,
consistently applied.
x. "KDTI Companies" means the Company, ADSI and any other
Affiliate of the Company.
xi. "Net Sales" means gross revenues, less returns, discounts,
allowances and the Bad Debt Adjustment.
xii. "Optionee's Accountant" means a firm of independent certified
public accountants retained by the Optionee.
4. Exercisability of Option. This Option be exercisable by the Optionee only
during the thirty (30) day period commencing July 1, 2007 and ending July 30,
2007, but the right to exercise the Option shall be accelerated as follows:
i. One-third (1/3) of the aggregate Option Shares shall be
exercisable if ADSI Net Revenues generated during the first
Annual Period equal or exceed $2,600,000.00;
ii. One-third (1/3) of the aggregate Option Shares shall be
exercisable if ADSI Net Revenues generated during the second
Annual Period equal or exceed $3,000,000.00; and
iii. One-third (1/3) of the aggregate Option Shares shall be
exercisable if ADSI Net Revenues generated during the third
Annual Period equal or exceed $3,500,000.00.
To the extent that the right to exercise the Options is accelerated pursuant to
the foregoing, such Options shall be exercisable by the Optionee at any time
during the period the Optionee continues to be employed by the Company or a
subsidiary corporation of the Company.
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5. Expiration of Option. This Option shall not be exercisable after 5:00 p.m.
E.S.T. on July 31, 2007.
6. Non-Assignability of Option. This Option shall not be given, granted, sold,
exchanged, transferred, pledged, assigned or otherwise encumbered or disposed of
by the Optionee, otherwise than by Will or the laws of descent and distribution,
and, during the lifetime or existence of the Optionee, shall not be exercisable
by any other person, but only by the Optionee.
7. Method of Exercise of Option. The Optionee shall notify the Company by
written notice sent by registered or certified mail, return receipt requested,
addressed to its principal office, or by hand delivery to such office, properly
receipted, as to the number of Option Shares the Optionee desires to purchase
under this Agreement, which written notice shall be accompanied by the
Optionee's check payable to the order of the Company for the full option price
of such shares of Stock. As soon as practicable after the receipt of such
written notice the Company shall, at its principal office, tender to the
Optionee a certificate or certificates issued in the Optionee's name evidencing
the Option Shares purchased by the Optionee hereunder. Any Option granted under
this Agreement shall be exercisable in whole or in part commencing on the date
such exercise is permitted under the terms of this Agreement prior to
expiration.
8. Investment Representation. The Optionee represents that at the time of any
exercise of this Option, unless the Option Shares are registered under the
Securities Act of 1933, as amended, that such Option Shares will be acquired for
investment and not for resale or with a view to the distribution thereof. Unless
prior to the exercise of the Option the shares issuable upon such exercise have
been registered with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act") (i) the notice of
exercise shall be accompanied by a representation or agreement of the individual
exercising the Option to the Company to the effect that such shares are being
acquired for investment and not with a view to the resale or distribution
thereof or such other documentation as may be required by the Company unless in
the opinion of counsel to the Company such representation, agreement or
documentation is not necessary to comply with the Securities Act, and (ii) upon
exercise of this Option and the issuance of any of the Option Shares thereunder,
all certificates representing Option Shares shall bear on the face thereof
substantially the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION FROM
REGISTRATION AND AN OPINION OF COUNSEL TO XXXX DIGITAL TECHNOLOGIES, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED."
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9. Adjustments upon Changes in Capitalization.
a. In the event that the outstanding Common Stock of the Company is
hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares,
stock dividends or the like, an appropriate adjustment shall be made in
the number of Option Shares and option price per share subject to this
Option. If the Company shall be acquired, reorganized, consolidated or
merged with another corporation, or if all of or substantially all of the
assets of the Company shall be sold or exchanged, the Optionee shall be
entitled to receive upon the exercise of this Option the same number and
kind of shares of stock or the same amount of property, cash or securities
as the Optionee would have been entitled to receive upon the happening of
such event as if the Optionee had been, immediately prior to such event,
the holder of the number of shares covered by this Agreement.
b. Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted under this Agreement.
If fractions of a share would result from any such adjustment, the
adjustment shall be revised to the next lower whole number of shares.
10. Definitions. For purposes of the Agreement, the terms "parent corporation"
and "subsidiary corporation" shall have the same meanings a set forth in
Sections 425(e) and 425(f) of the Code, respectively, and the masculine shall
include the feminine and the neuter as the context requires.
11. Death or Termination of Employment or Services. If the employment or
services of the Optionee by the Company or a subsidiary corporation of the
Company shall terminate for any reason, whether by termination or expiration of
any employment agreement between the Optionee and the Company, or voluntarily by
the Optionee, then this Option shall expire forthwith (the date on which such
termination of the Optionee's employment or services occurs is referred to as
the "Employment Termination Date"). Notwithstanding the foregoing, if such
employment or services shall be terminated without cause by the Company or any
subsidiary corporation of the Company, or by reason of death or disability of
the Optionee, then this Option shall not expire upon the Employment Termination
Date, but shall be exercisable until the date which is three (3) months after
the Employment Termination Date, and then only to purchase those number of
Option Shares that the Optionee was entitled to purchase upon exercise of this
Option prior to the Employment Termination Date, and this Option may not be
exercised at any time after the date which is three (3) months after the
Employment Termination Date; in the event of death of the Employee, the Option
may be exercised in accordance with the foregoing by the estate of the employee
or by a person who acquired the right to exercise such Options by bequest or
inheritance or by reason of the death of such employee. Provided, however, that
nothing in this Section 11 shall give any person the right to purchase Option
Shares which could not be purchased by the Optionee prior to the termination of
the Optionee's employment with the Company or
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such subsidiary. The word "cause" is used with the meaning ascribed thereto in
the Employment Agreement dated the date hereof between the Company's subsidiary,
ADSI, as Employer, and the Optionee as Employee.
12. Use of Proceeds. The proceeds from the sale of shares pursuant to Options
granted under this Agreement shall constitute general funds of the Company.
13. No Rights as Stockholder. The Optionee shall have no rights as a stockholder
in respect to the Option Shares as to which this Option shall not have been
exercised and payment made as herein provided.
14. Not a Contract of Employment. Nothing contained in this Agreement shall be
deemed to confer upon the Optionee any right to remain in the employ or service
of the Company or a subsidiary corporation of the Company.
15. Binding Effect. Except as herein otherwise expressly provided, this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their legal representatives, successors and assigns.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the New York.
17. Notices. Any notice hereunder shall be delivered by hand or by registered or
certified mail, return receipt requested, to a party at its address set forth
above, subject to the right of either party to designate at any time hereafter,
in writing, some other address.
18. Counterparts. This Agreement may be exercised in counterparts, each of which
shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the Company and the Optionee has caused this
Agreement to be executed by an appropriate officer, both as of the day and year
first written.
XXXX DIGITAL TECHNOLOGIES, INC.
By:________________________________
Name: Xxxxxx X. Xxxxx
Title: Vice President, Chief Financial Officer
OPTIONEE:
_____________________________
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