EXHIBIT 10.10
EMPLOYMENT AGREEMENT
FOR
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THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and
between DAW TECHNOLOGIES, INC., a Utah corporation whose principal office is
located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ (the "Company") and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(the "Employee"), as of February 1, 2002.
RECITALS
WHEREAS, Employee desires to become employed as the Chief Executive
Officer and appointed a member of the Board of Directors of the Company;
WHEREAS, the Company desires to hire Employee as its Chief Executive
Officer and to have Employee appointed a member of its Board of Directors on the
terms and conditions set forth herein; and
WHEREAS, the Employee is willing and desires to become employed by the
Company on the terms and conditions set forth herein:
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee, and the
Employee hereby accepts employment, as the Company's Chief Executive Officer
upon the terms and conditions hereinafter set forth. The Board of Directors of
the Company will appoint Employee to fill a vacant position as a director on the
Board of Directors of the Company and Employee will be nominated to stand for
re-election as a director during the term of this Agreement.
2. TERM AND LOCATION.
a. TERM. The employment of the Employee by the Company
pursuant to this Agreement will be for an initial period commencing effective as
of February 1, 2002 and terminating on the date three (3) years from the date
hereof (the "Employment Term").
b. LOCATION. The Company shall provide to Employee
suitable offices and facilities in Salt Lake City, Utah appropriate for, and
commensurate with, his position and suitable for the performance of Employee's
responsibilities.
3. DUTIES. Employee agrees to perform the duties outlined in the
Company's bylaws as being applicable for the Company's Chief Executive Officer,
and to perform such other duties as may be appropriate for the Company's Chief
Executive Officer or as may be assigned from time to time by the Board of
Directors of the Company including overall day to day management and supervision
of all aspects of the Company's business and operations. Employee agrees to
serve as a member of the
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Company's Board of Directors. In addition to such employment, Employee agrees to
serve in such other substantially similar offices or positions with the Company
or any subsidiary of the Company and such substitute or further offices or
positions of substantially consistent rank and authority as shall, from time to
time, be determined by the Company's Board of Directors. The Employee agrees
that he will devote his full time and attention during usual working hours to
the affairs of the Company, and that during the Employment Term he shall report
directly to the Board of Directors of the Company. Notwithstanding the
foregoing, Employee will be permitted to assist Cornerstone Capital Group, LLC
and Cornerstone Capital Partners 1, L.P. with the winding up of their affairs
including serving as a director of PowerQuest Corporation. Employee may make and
manage personal business investments of his choice and serve in civic,
educational, religious, charity or trade organizations without seeking or
obtaining approval of the Board of Directors, providing that such activities do
not interfere with the performance of his duties hereunder.
4. COMPENSATION.
a. BASE SALARY. The Company shall pay the Employee a
base salary in the initial amount of $185,000 per year, payable in accordance
with the Company's normal payroll schedule (such amount, as it may be increased
from time to time, is hereinafter referred to as the "Base Salary"). The Base
Salary shall be reviewed by the Compensation Committee of the Board of Directors
annually, and may be adjusted as the Compensation Committee may determine based
on criteria including performance, executive compensation for comparably sized
enterprises and related factors. Notwithstanding the annual reviews of
Employee's Base Salary by the Compensation Committee, the Base Salary shall be
increased upon the Company achieving the following milestones at any time during
the Employment Term:
(i) Upon the closing of a line of credit having
a term of at least twenty four (24) months from a bank or other
financial institution whose identity is reasonably acceptable to the
Board of Directors in the principal amount of at least $4,000,000 on
terms that are no less favorable to the Company than the Company's
existing line of credit from US Bank, Employee's Base Salary shall be
increased to $215,000 per year;
(ii) At such time as the market value of the
Company's outstanding common stock is $18 million, or greater, for
twenty (20) consecutive trading days, Employee's Base Salary shall be
increased to $225,000 per year.
b. INCENTIVE COMPENSATION. In addition to the Base
Salary, the Company may pay the Employee incentive compensation in the form of
an annual cash bonus. The amount of such bonuses, if any, shall be determined by
the Board of Directors of the Company, or the Compensation Committee thereof,
taking into consideration the relative contribution by Employee to the business
of the Company, the amount of cash available for payment of bonuses, the economy
in general, and such other factors as the Board of Directors and/or Compensation
Committee deem relevant. During the initial year of employment with the Company
Employee shall be eligible for up to $100,000 in additional cash compensation
("Incentive Compensation") if and when the following goals and milestones are
met:
(i) up to $12,500 of the Incentive Compensation
shall be paid to Employee at the end of each of the first four calendar
quarters of the Employment Term in which Employee or the Company shall
have achieved certain goals to be established by the Compensation
Committee of the Board of Directors prior to the beginning of each such
respective calendar quarter;
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(ii) up to $50,000 of the Incentive Compensation
shall be paid to Employee if the Company is successful, within six (6)
months from the date of this Agreement, in (a) eliminating the
Company's outstanding Convertible Series A Preferred Stock ("Preferred
Stock") in a manner acceptable to the Board, or (b) negotiating an
acceptable floor in the number of shares of common stock into which the
Preferred Stock can be converted (collectively the "Recapitalization").
The amount of Incentive Compensation to be paid to Employee under this
subsection shall be based on the net savings of shares of common stock
that are or that may be issued as a result of the Recapitalization, as
adjusted by any cash paid or debt incurred by the Company in connection
with the Recapitalization. Specifically, the amount of Incentive
Compensation to be paid shall equal two percent (2%) of the market
value at the Recapitalization date of the difference between (a) the
number of shares of common stock that would be issued to the holders of
the Preferred Stock ("Holders") if the Holders converted all of their
respective shares of Preferred Stock into common stock as of the date
of this Agreement (approximately 4,730,000), and (b) the number of
shares of common stock actually issued, or that may be issued, to the
Holders or other parties as a result of the Recapitalization. In the
event the Recapitalization entails the Company paying cash to the
Holders or incurring any debt, the amount of the Incentive Compensation
shall be proportionately adjusted to take such cash or debt into
account. Incentive Compensation to be paid under this subsection shall
not exceed $50,000. By way of example, assume that as of the date of
this Agreement the Preferred Stock is convertible into a total of
4,730,000 shares of common stock based on a market value of
$1.15/share. If Employee is successful in completing a Recapitalization
pursuant to which all of the Preferred Stock is retired in exchange for
a cash payment of $1,000,000, which the Company borrows, and 2 million
shares of common stock, then Employee shall be entitled to Incentive
Compensation calculated as follows: The number of shares into which the
Preferred Stock is convertible as of the date of this Agreement
(4,730,000) will be reduced by the number of shares represented by the
debt incurred by the Company ($1,000,000/$1.15 = 869,565 shares). The
adjusted number of shares (4,730,000-869,565 = 3,860,435) is then used
to calculate the net savings in shares of common stock by subtracting
the 2,000,000 shares issued to the Holders from the 3,860,435 adjusted
amount, which equals 1,860,435 shares. The Incentive Compensation
amount is value as of the date of the Recapitalization of 2 % of
1,860,435 shares. Assuming the market value of the Company's common
stock as of the date of the Recapitalization is $1.15 per share,
Employee would be paid $42,790 (0.02 x (1,860,435 x $1.15)).
c. STOCK OPTIONS. As partial consideration for entering
into this Agreement, upon execution of this Agreement the Company shall grant to
the Employee a ten (10) year stock option under the Company's 1999 Omnibus Stock
Incentive Plan to acquire a total of 100,000 shares of the Company's $0.01 par
value common stock at an exercise price of $0.60 per share, which is the fair
market value as of February 22, 2002 (the "Initial Options"). The Initial
Options shall vest and be exercisable as follows:
(i) 50,000 shares on the first anniversary of
the date of this Agreement;
(ii) 50,000 shares on the second anniversary of
the date of this Agreement.
The unvested portion of any initial options will vest and become immediately
exercisable upon a change of control of the company.
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In addition to the Initial Options, the Company shall grant to Employee
Performance Options to purchase up to an additional 100,000 shares of the
Company's $0.01 par value common stock at exercise prices no less than the fair
market value of the Company's common stock on the dates of grant (the
"Performance Options") upon the following goals or milestones being achieved:
(i) 50,000 Performance Options shall be granted
to Employee if, during the Employment Term, the market value of the
Company's outstanding common stock equals or exceeds $18 million for at
least twenty (20) consecutive trading days;
(ii) 25,000 Performance Options shall be granted
to Employee at such time as the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") for two (2) consecutive
quarters is greater than breakeven, as determined by generally accepted
accounting principles; and
(iii) 25,000 Performance Options shall be granted
to Employee at such time as the Company's year-over-year revenue growth
is greater than twenty percent (20%), as determined by generally
accepted accounting principles.
The Performance Options shall be granted under the Company's 1999 Omnibus Stock
Incentive Plan, and they shall vest and become exercisable as follows:
(i) one-half on the date of grant;
(ii) one-half on the first anniversary of the
date of grant.
d. COMPANY STOCK. Employee shall be entitled to fully
participate in any stock related incentive plans that are now in effect or that
may hereafter be established, which are at least equal to the benefits available
to executive management of the Company, including, but not limited to, any plan
allowing employees and/or management to purchase stock, obtain stock options,
stock appreciation rights, phantom stock, restricted stock or stock warrants.
e. EMPLOYEE BENEFITS. During the Employment Term, the
Employee shall be entitled to all employee benefits and arrangements now in
effect or that may hereafter be established, which are at least equal to the
benefits available to the executive management personnel of the Company,
including, without limitation, any pension and profit sharing plans; health,
accident, dental, life and disability insurance; paid vacations and paid sick
leave. The benefits applicable to the Employee shall be the same type and level
of benefits available to other executive management personnel of the Company.
f. BUSINESS EXPENSES. The Employee shall be entitled to
reimbursement for all necessary and reasonable business expenses incurred by
Employee in the course of his employment hereunder, at the rates and in
accordance with the policies and practices set by the Board of Directors of the
Company for executive management personnel of the Company. The Employee shall be
entitled to reimbursement for all expenses related to travel or entertainment
incurred conducting activities for or on behalf of the Company.
5. TERMINATION OF EMPLOYMENT.
a. TERMINATION BY THE COMPANY. The Company shall have
the right to terminate the Employee's employment prior to the expiration of the
employment term, with or without "Cause,"
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subject to the specific contractual obligations of the Company to Employee as
set forth in this Agreement. For purposes of this Agreement, "Cause" shall mean
(i) substantial and continued willful failure by Employee to perform his duties
which results in substantial harm to the business, which failure is not cured
(if curable) by Employee within thirty (30) days after written notice of the
failure is delivered to Employee by the Company, (ii) gross misconduct including
embezzlement, fraud or misappropriation relating to the company or (iii) the
conviction of a felony.
b. DEATH. In the event Employee dies during the Term,
this Agreement shall automatically terminate, such termination to be effective
on the date of Employee's death.
c. DISABILITY. In the event Employee shall suffer a
documented mental or physical illness or disability that prevents the Employee
from substantially performing his duties under this Agreement for a period of
six (6) consecutive months as determined in good faith by the Board of Directors
of the Company, the Company may terminate Employee's employment upon thirty (30)
days written notice
d. TERMINATION BY EMPLOYEE FOR GOOD REASON. This
Agreement may be terminated by Employee upon thirty (30) days prior written
notice to the Company at any time after the occurrence of any of the following
events, each of which shall constitute "Good Reason" for termination, unless
otherwise agreed to in writing by Employee: (i) there is a Change in Control of
the Company (as hereinafter defined); (ii) the Company and any subsidiaries
sell, lease or otherwise transfer all or substantially all of their assets to an
entity which has not either assumed the Company's obligations under this
Agreement or entered into a new employment contract which is mutually
satisfactory to Employee and such entity; (iii) a material diminution occurs in
the duties, title, authority or responsibilities of Employee (e.g., Employee is
placed in a direct reporting relationship to anyone other than the Board) and
the diminution is not cured within fifteen (15) days after written notice is
received by the Company; (iv) the Company's failure to pay compensation or grant
Options as required under this Agreement and the failure is not cured within
fifteen (15) days after written notice is received by the Company; (v) Employee
is removed from the position of Chief Executive Officer of the Company; (vi) the
principal executive offices of the Company are moved to a location more than
fifty (50) miles from Salt Lake City, Utah without Employee's consent; (vii) a
liquidation or dissolution of the Company occurs. For purposes of this Paragraph
5(d) a Change in Control of the Company shall be defined as a corporate
reorganization, acquisition or merger with another entity in a transaction of
any type in which the Company is not the controlling survivor.
A termination by Employee for reasons other than set forth above shall
be considered a voluntary quit. Employee shall provide the Company with at least
ninety (90) days written notice of his voluntary termination and the last day of
his employment.
6. PAYMENTS ON TERMINATION.
a. ACCRUED COMPENSATION. In the event of termination of
Employee's employment for any reason, the Company shall pay to Employee (or his
beneficiary in the event of his death) any Base Salary or other compensation
earned but not paid to Employee before the effective date of the termination,
including compensation for accrued but unused vacation time.
▇. ▇▇▇▇▇▇▇▇▇. In the event of termination of Employee's
employment by Employee for Good Reason or by the Company for reasons other than
for Cause or Disability, or if employment is terminated because Employee dies
during the active performance of his duties or if there is a change in control
of the Board of Directors resulting from a change in the common stock ownership
of the
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Company of fifty percent (50%) or more, the Company shall pay Employee, in a
lump sum within thirty (30) days after termination, an amount equal to six (6)
months Base Salary plus any accrued but unpaid Incentive Compensation. In the
event Employee's employment is terminated by the Company for Cause or employee
voluntarily quits, he shall not be entitled to the payments set forth in this
paragraph.
c. NO REDUCTION OF BENEFITS. The Employee shall not be
required to mitigate the amount of any payment provided for in this Section 6 by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 6 be reduced by any compensation or
retirement benefits heretofore or hereafter earned by the Employee as a result
of employment by any other person, firm or corporation. Payments and benefits
set forth in this Section 6 are in addition to any other benefits to which
Employee may be entitled under the Company's pension, life insurance and other
employee benefits plans.
7. INDEMNIFICATION. If the Employee is made a party or is
threatened to be made a party to, or is involved in, any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is or was an employee, officer or director of the Company,
or is or was serving at the request of the Company, the Employee shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the corporation law of the state in which the Company is then incorporated, as
the same exists or may hereafter be amended, against all expenses, liability and
loss, including attorneys' fees, judgments, fines and amounts paid or to be paid
in settlement, reasonably incurred or suffered by the Employee in connection
therewith, and such indemnification shall continue as to the Employee after he
has ceased to be an employee, officer or director of the Company, and shall
inure to the benefit of his heirs, executors and administrators. The Company
will enter into its standard indemnification agreement for officers and
directors with Employee.
8. CONFIDENTIALITY. The Employee agrees that in performing under
the terms of this Agreement he will have access to confidential and proprietary
information and records of the Company. The Employee agrees that he shall keep
all such information and records confidential and shall not give or provide such
information or records to any third party or use them in any way to compete or
allow a third party to compete with the Company. The provisions of this
paragraph 8 will survive the termination of this Agreement; provided, however,
that the Employee's obligations under this paragraph 8 shall not relate to
information and records of the Company that become part of the public domain by
publication or otherwise through no fault or action of the Employee.
9. RESTRICTIONS ON SOLICITATION. During the period of employment
hereunder, and for an additional period of one year commencing on and including
the date on which the period of employment ends for whatever reason, Employee
shall not, without the prior written consent of the Board of Directors of the
Company, directly or indirectly, individually or on behalf of other persons, aid
or endeavor to solicit (i) then remaining employees of the Company or any
affiliate or successor thereof to leave their employment with the Company in
order to accept employment with him or any other person or entity, or (ii) then
customers of the Company or any affiliate successor thereof to purchase services
or products from him or any other person or entity that are similar to services
or products then offered or sold by the Company.
10. BINDING EFFECT. The Employee's rights and obligations under
this Agreement shall not be transferable by assignment or otherwise, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Employee and his
heirs and personal representatives, and shall be binding upon and inure to the
benefit of the Company, its successors and assigns.
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11. ARBITRATION. Any dispute between the parties concerning the
meaning and intent of this Agreement or the application of any of its terms and
conditions shall be submitted to arbitration in Salt Lake City, Utah in
accordance with the Labor Arbitration Rules of the American Arbitration
Association then in effect and the decision of the arbitrator shall be final and
binding upon the parties. Judgment upon any arbitration award may be entered in
any court of competent jurisdiction.
12. MISCELLANEOUS. This Agreement is to be governed by the law of
the State of Utah. This Agreement constitutes the full and complete
understanding of the parties, and except as otherwise expressly provided,
supersedes all previous agreements on the subject matters hereof, and may be
amended only by a writing executed by the parties hereto. The section headings
of this Agreement are solely for convenience and shall not be considered in its
interpretation. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement on
February 22, 2002, to be effective as of the date first written above.
COMPANY:
DAW TECHNOLOGIES, INC.
a Utah corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
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Its: Chairman of the Board
EMPLOYEE:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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