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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of January 1, 1996, by and between STAR VENDING, INC., a Nevada corporation
(the "COMPANY"), and XXXXX XXXX XXXXXX ("EMPLOYEE").
WHEREAS, the Company and Employee desire to enter into this Agreement
to assure the Company of the continuing and exclusive services of Employee and
to set forth the rights and duties of the parties hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, terms and conditions set forth herein, the parties hereto agree as
follows:
1. EMPLOYMENT. During the term hereof, the Company hereby employs
Employee, and Employee hereby accepts employment, as an Executive Vice President
of the Company. Employee's primary duties will be to manage the Company's sales
and marketing efforts in accordance with the policies established by the
Company's Board of Directors. Employee will faithfully perform his duties to the
best of his ability in accordance with the reasonable directions of the Company
as given through the Board of Directors, the Chief Executive Officer and the
President. Employee will devote his full business time, ability, attention and
loyalty to the business of the Company during the term of this Agreement, and
will not, directly or indirectly, render any services of a business, commercial,
or professional nature to any other person, firm, corporation, or organization
for compensation without the prior written consent of the Company. The foregoing
notwithstanding, the parties agree that Employee may render services to Digital
Network other than during normal business hours, provided that such activity
does not adversely affect the performance of Employee's duties to the Company or
involve Employee in any conflict of interest with respect to the Company.
2. TERM. The term of Employee's employment by the Company pursuant to
this Agreement shall be for a period of three years, commencing January 1, 1996
and ending December 31, 1998. The term of Employee's employment is subject to
earlier termination as hereinafter provided in Paragraph 7.
3. COMPENSATION; FRINGE BENEFITS
(a) Base Salary. The Company shall pay Employee a
monthly salary during the term of this Agreement. This salary
shall initially be $10,000.00 per month. Employee's monthly
salary shall be increased for the respective calendar years (or
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applicable portion thereof) commencing January 1, 1997, and January 1, 1998, as
follows:
(i) Before January 31, 1997, the parties shall
ascertain from the official Consumers Price Index for All Urban Wage Earners and
Clerical Workers (Revised Series), Los Angeles-Anaheim-Riverside Average
(1982-1984 = 100) as published by the Bureau of Labor Statistics, Department of
Labor (the "Index"), the index figure for December 1995 (the "Base Period
Index") and for December 1996 (the "Comparison Period Index"). If the Comparison
Period Index exceeds the Base Period Index, the monthly salary payable by the
Company to Employee for the entire calendar year 1997 shall be increased (but
not decreased) by multiplying Employee's then-existing monthly salary by a
fraction, the numerator of which shall be the Comparison Period Index and the
denominator of which shall be the Base Period Index. If the Comparison Period
Index does not exceed the Base Period Index, the monthly minimum salary payable
to Employee by Company during calendar 1997 shall remain at the initial monthly
salary.
(ii) A similar adjustment shall be made to
Employee's monthly salary for the entire calendar year 1998; but for the purpose
of such adjustment, the Base Period Index shall be calculated as of December,
1996 and the Comparison Period Index shall be calculated as of December 1997.
(iii) If the Index is no longer published, then
appropriate index figures for the Base Period Index and the Comparison Period
Index shall be derived from any successor or comparable index mutually agreed by
the parties to be authoritative.
(iv) The parties acknowledge that the Comparison
Period Index figures for each year of the Employment Agreement hereunder may not
be available in a timely manner. Therefore, the monthly salary in effect during
the preceding month shall continue in effect until the respective average index
figures for the Comparison Period Indexes have been ascertained. Upon
determination of the respective Comparison Period Indexes for each year, an
appropriate adjustment shall be made, retroactive to January 1 of 1997 and 1998,
respectively, and the Company shall immediately pay to Employee any increased
salary found to be due.
Employee may receive such other increases in his salary in
addition to those set forth above as the Board of Directors of the Company may
approve from time to time. Employee's salary shall not be reduced at any time
during the term of this Agreement, but the foregoing shall not limit the
Company's rights under Section 7 hereof.
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(b) Incentive Compensation. In addition to the salary set
forth in (a) above, Employee shall be entitled to receive incentive compensation
in the form of a commission on certain of the Company's accounts. This
commission shall be calculated as set forth on Exhibit A hereto and shall be
applied to those accounts specified on Exhibit B hereto. Exhibits A and B are
incorporated herein by reference. The Company's obligation to pay Employee
incentive compensation pursuant to this Section 3(b) shall automatically
terminate upon the payment of a bonus pursuant to Section 3(e) below.
(c) Stock Options. Employee shall be awarded incentive stock
options to purchase a total of 180,000 shares of the Company's common stock
pursuant to the Company's 1996 Stock Incentive Plan. This option grant shall be
evidenced by an Incentive Stock Option Agreement in the form attached hereto as
Exhibit C, which is incorporated herein by this reference.
(d) Fringe Benefits. During the employment term, Employee
shall be entitled to receive, at the Company's sole expense, the following
fringe benefits:
(i) Group health insurance, paid vacation leave, life
insurance and other insurance programs to the same extent, and on the same
terms, as other employees of the Company; and
(ii) Other benefits accorded to executives of the
Company as determined from time to time by the Board of Directors.
(e) Bonus upon Sale Transaction. In addition to all other
compensation set forth in this Section 3, upon a Sale Transaction (as defined
below), Employee shall receive a bonus subject to the following terms and
conditions:
(i) For the purposes of this Section 3(e), a
"Sale Transaction" shall mean the acquisition by a single entity or group of
affiliated entities (other than existing shareholders of the Company or their
affiliates) of more than seventy-five percent (75%) of the voting securities of
the Company pursuant to a tender offer or exchange offer approved in advance by
the Board of Directors.
(ii) For the purposes of this Section 3(e),
"Employee Accounts" shall mean those sales accounts of the Company relating to
customers introduced to the Company by Employee. A current listing of the
Employee Accounts is set forth in Exhibit D hereto, which is incorporated herein
by this reference. The parties agree that they will jointly update Exhibit D no
less frequently than each calendar quarter during the term of this Agreement, to
add accounts relating to customers subsequently introduced by Employee and to
delete accounts of
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customers no longer active with the Company. Such updating will be accomplished
through the reasonable determinations of the parties acting in good faith.
(iii) For the purposes of this Section 3(e),
"Monthly Gross Sales," with respect to any specified customer accounts of the
Company, shall mean the gross sales recognized by the Company during a given
calendar month for such accounts, exclusive of taxes, equipment costs, rental
charges, and other incidental charges. Monthly Gross Sales shall be determined
by the Company consistently with its customary accounting practices.
(iv) Upon the successful consummation of a Sale
Transaction prior to the termination of this Agreement, Employee shall be
entitled to receive a bonus equal to the lesser of (i) $1,500,000, or (ii) a
percentage (the "Bonus Percentage") of the Monthly Gross Sales with respect to
the Employee Accounts for the calendar month immediately preceding the date of
such consummation; provided, however, that Employee continues to be employed by
the Company until such date and no breach or default upon Employee's part under
this Agreement has then occurred and is continuing. The Bonus Percentage shall
equal ten percent (10%) of the Monthly Gross Sales from Employee Accounts for
such month up to $3,000,000; plus twenty percent (20%) of such Monthly Gross
Sales, if any, in excess of $3,000,000 but less than $5,000,000; plus thirty
percent (30%) of such Monthly Gross Sales, if any, in excess of $5,000,000. Any
bonus to which Employee is entitled under this Section 3(e) shall be paid to the
Employee in cash within ninety (90) days after the successful consummation of
the Sale, provided, however, that if the Sale Transaction involves consideration
to STAR or its shareholders other than cash (including, without limitation, a
stock-for-stock transaction), the Company in its sole discretion may in lieu of
the all cash bonus described above in this subparagraph instead pay to Employee
up to 50 percent of such bonus in the form of shares of Company stock, or shares
of the stock of any such acquirer, with such shares being valued in good faith
by the parties as of the close of any such Sale Transaction.
(f) Possible Reduction of Payments. Any provision in this
Agreement to the contrary notwithstanding, in no event will Employee receive a
payment which would trigger the excise taxes and disallowance of deductions
contemplated by Sections 280G and 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"). In the event that any amount calculated hereunder would
result in such a payment, such amount shall be reduced to the largest amount
that would not result in such a payment. This reduction shall apply to any and
all compensation, including compensation pursuant to stock option grants
governed by separate agreement between the Company and Employee. If, at the time
of any such payment, no stock of the Company is readily tradable on an
established securities market or otherwise, then the Company
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agrees to use its best efforts to cause such payment to meet the exemption set
forth in Sections 280G(b)(5)(A)(ii) and (B) of the Code, so that no reduction
will be required hereunder.
(g) Taxes. Compensation paid to Employee under this Section 3
shall be subject to withholding for federal and state income tax purposes. All
payments received hereunder by Employee shall be reported on his federal and
state tax returns as compensation for employment in a manner consistent with
this Agreement.
4. CONFIDENTIAL INFORMATION. Employee shall, during the term hereof and
thereafter, hold in confidence and not disclose to any person or entity without
the express prior authorization of the Company, any and all trade secrets of the
Company (including, without limitation, all customer lists and lists of customer
sources), and any and all other secret or confidential information relating to
the services, customers, sales or business affairs of the Company or its
affiliates. Employee agrees that he will not make use of any of the above at any
time after termination of his employment hereunder. Upon termination of his
employment, Employee shall deliver to the Company all documents, records,
notebooks, work papers, and all similar repositories containing any information
concerning the Company, whether prepared by Employee, the Company or anyone
else. This Agreement will further incorporate any and all provisions with
respect to confidentiality, trade secrets, secret processes and data to which
Company may be required to cause its employees to agree under the terms and
provisions of any contract entered into by Company with any customer or client
thereof, or under the terms of any subcontract to which Company may be a party,
whether the same be in any contract to which the Company is presently a party or
may, during the course of this Agreement, become a party, or under the
provisions of any other contract with a customer of Company.
5. NO SOLICITATION OF EMPLOYEES. Employee further agrees that during
the term hereof and for a period of twelve (12) months thereafter, he will not,
directly or indirectly, for himself, or as agent, or on behalf of or in
conjunction with any other person, firm, partnership, corporation or other
entity, induce or entice any employee of the Company or its affiliates to leave
such employment or cause anyone else to do so.
6. ASSIGNMENT. Employee shall not have any right to delegate or
transfer any duty or obligation to be performed by him hereunder to any third
party, nor to assign or transfer the right, if any, to receive payments
hereunder.
7. TERMINATION. This Agreement, the employment of Employee hereunder,
and any future obligation of the Company to make
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salary, incentive or other payments hereunder, may be terminated at any time:
(a) By mutual agreement;
(b) By the Company if Employee dies or becomes physically or
mentally disabled (the term "disabled" as used herein shall mean any mental or
physical illness or disability that renders the Employee unable to perform the
essential functions of his position hereunder, after reasonable accommodation of
such disability by the Company);
(c) By the Company, for cause, if Employee (1) has committed
any material act of dishonesty, fraud or misrepresentation or any act of moral
turpitude; (2) is in default in the performance of Employee's material
obligations, services or duties hereunder; or (3) has failed to execute specific
instructions from the Company's Board of Directors or executive officers, which
failure is not corrected by Employee after reasonable notice from the Company;
(d) By the Company, without cause, at any time during the term
of this Agreement; or
(e) By the Employee if the Company is in default of its
material obligations or duties hereunder.
In the event of any termination under clauses (a),
(b), (c) or (d) of this paragraph, Employee (or, in the event of Employee's
death, his estate) shall be entitled to receive compensation accrued and payable
to him as of the date of termination or death, and all other amounts payable
hereunder, including, but not limited to, incentive compensation, shall
thereupon cease. If Employee's employment is terminated (x) pursuant to clause
(e) of this paragraph, or (y) pursuant to clause (d) of this paragraph within
four months after the consummation of a Sale Transaction relating to the
Company, then Employee shall continue to receive the compensation provided
herein until the expiration of this Agreement. Any amounts earned by him (other
than through his personal investment activities) prior to such expiration by
virtue of other employment shall be deducted from amounts to which he is
entitled hereunder.
8. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. Employee represents and
warrants that there are no agreements or arrangements, whether written or oral,
that would be breached by Employee upon execution of this Agreement or that
would impair or prevent Employee from rendering exclusive services to the
Company during the term hereof, and that Employee has not made and will
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not make any commitment or do any act in conflict with this Agreement.
9. MISCELLANEOUS. This Agreement, and the legal relations between the
parties, shall be governed by and construed in accordance with the laws of the
State of California. This Agreement supersedes all prior agreements between the
parties concerning the subject matter hereof and constitutes the entire
agreement between the parties with respect thereto. This Agreement may be
modified only with a written instrument duly executed by each of the parties. No
waiver by any party of any breach of this Agreement shall be deemed to be a
waiver of any proceeding or succeeding breach. The headings and titles to the
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed a part of or effect the construction or interpretation or any provision
hereof. This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all such counterparts together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
STAR VENDING, INC.
By____________________________________
Title_____________________________
EMPLOYEE
___________________________________
XXXXX XXXX XXXXXX
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