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EXHIBIT 10O
EMPLOYMENT AGREEMENT
AGREEMENT, dated this 27th day of March, 1997 between Information
Resource Engineering, Inc., a Delaware corporation (the "Company") with offices
at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxx, XX and Xxxxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company and the Executive wish to enter into an employment
and compensation arrangement on the following terms and conditions;
1. Employment. Subject to the terms and conditions of this Agreement,
the Company agrees to employ the Executive as its Chief Executive Officer
during the Employment Period (as defined in Section 7) and to perform such acts
and duties and furnish such services to the Company and its affiliates and
related parties as the Company's Board of Directors shall from time to time
direct. The Executive shall have general and active charge of the business and
affairs of the Company as its Chief Executive Officer and, in such capacity,
shall have responsibility for the day-to-day operations of the Company, subject
to the authority and control of the Board of Directors of the Company. During
the Employment Period, the Company shall continue to take such actions as
necessary to cause the Executive's nomination as a member of the Board of
Directors of the Company. The Executive hereby accepts such employment and
agrees to devote his full time and best efforts to the duties provided herein,
provided, that the Executive may engage in other business activities which (i)
involve no conflict of interest with the interests of the Company (subject to
approval by the Board of Directors, which approval shall not be unreasonably
withheld) and (ii) do not materially interfere with the performance by the
Executive of his duties under this Agreement.
2. Compensation. For services rendered to the Company during the term
of this Agreement, the Company shall compensate the Executive with an initial
salary, payable in bi-weekly installments, of $250,000 per annum. Such base
salary shall be reviewed on an annual basis by the Compensation Committee of
the Company's Board of Directors (the "Compensation Committee") and shall be
increased by at least ten (10%) percent per annum.
(1)
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3. Incentive Compensation. The Executive shall also be entitled to
annual incentive compensation of up to fifty (50)% of the applicable base
salary if the Company's business objectives as set forth in the Company's
annual business plan are achieved. The nature and extent of such incentive
compensation shall be determined by the Compensation Committee no later than
ninety (90) days following the end of the Company's fiscal year.
4. Stock Options. As further compensation, Employee shall be issued
50,000 incentive stock options (subject to allowable limitations set forth in
the Internal Revenue Code of 1986, as amended, hereinafter "stock options")
upon the effective date of this Agreement. The stock options shall be issued at
the fair market value of the Employer's common stock as of the date of this
Agreement and shall then be vested at 20% per full year of service (and shall
not be vested for interim periods on a pro-rata basis, except as otherwise
provided in the applicable Stock Option Agreement) from the date of this
Agreement, over a five year period, all of the foregoing to be in accordance
with the provisions of Employer's Stock Option Plan, as may be amended from
time to time, which is incorporated by reference herein.
If the Executive's employment is terminated (i) because of his death or
disability pursuant to Section 8 of this Agreement, (ii) by the Company for any
reason other than for Cause or (iii) by the Executive for Good Reason:
(x) the portion of the stock option which was exercisable
at termination shall remain exercisable for a period of 3 years after such
date; and
(y) with respect to that portion, if any, of the stock
option which was not yet exercisable at termination, such portion shall
immediately become exercisable and shall remain exercisable until the end of
such 3-year period. The stock option shall be memorialized in a separate
written stock option agreement reasonably satisfactory to the Company and the
Executive.
In the event that the Common Stock to be issued upon the exercise of
said options has not been registered under the Securities Act of 1933 (the
"Act"), it must be held by the Executive indefinitely, and may not be sold or
disposed of unless (i) a registration statement covering those shares becomes
effective under the Act, or (ii) if an exemption from registration becomes
available. The Company is not under any obligation to register the shares under
the Act. The Company shall use its best efforts to timely file all reports,
statements and other documents as may be required under
(2)
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the Securities and Exchange Act of 1934 to keep available the exemption under
Rule 144 of the Act or other comparable rules or regulations of the Securities
and Exchange Commission.
5. Benefits. During the Employment Period, the Company shall provide
or cause to be provided to the Executive such employee benefits as are provided
to other executive officers of the Company, including family medical and
dental, disability and life insurance, and participation in pension and
retirement plans, incentive compensation plans, stock option plans and other
benefit plans. During the Employment Period, the Company may provide or cause
to be provided to the Executive such additional benefits as the Company may
deem appropriate from time to time. The Company shall also provide the
Executive the use of an automobile of at least equal value to that which is
presently utilized by the Executive as of the date of this Agreement
6. Vacation. The Executive shall be entitled to annual vacations in
accordance with the Company's vacation policies in effect from time to time for
executive officers of the Company.
7. Term; Employment Period. The "Employment Period" shall commence on
the date of this Agreement and shall terminate 5 years thereafter, unless
extended by written agreement between the parties or unless earlier terminated
pursuant to Section 8. If the Executive shall remain in the full-time employ of
the Company beyond the Employment Period without any written agreement between
the parties, this Agreement shall be deemed to continue on a month to month
basis and either party shall have the right to terminate this Agreement at the
end of any ensuing calendar month on written notice of at least 30 days.
8. Termination.
(a) Executive's employment with the Company shall be "at will".
Either the Company or the Executive may terminate this Agreement and
Executive's employment at any time, with or without Cause or Good Reason (as
such terms are defined below), in its or his sole discretion, upon thirty (30)
days' prior written notice of termination.
(b) Without limiting the foregoing Section 8(a), (i) the Executive
may terminate his employment with the Company at any time for Good Reason, or
(ii) the Company may terminate his employment at any time for Cause. "Good
Reason" shall mean death, Disability (as defined below)
(3)
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or a termination of employment as a result of a substantial diminution in the
Executive's responsibilities, or base salary below $250,000 or a demotion in
title or status. "Cause" shall mean (i) the Executive's willful, repeated or
neglectful failure to perform his duties hereunder or to comply with any
reasonable or proper direction given by or on behalf of the Company's Board of
Directors following ten (10) days written notice to such effect; (ii) the
Executive being guilty of serious misconduct on the Company's premises or
elsewhere, whether during the performance of his duties or not, which may cause
damage to the reputation of the Company or render it difficult for the
Executive to satisfactorily continue to perform his duties; (iii) the Executive
being found guilty in a criminal court of any offense of a nature likely to
affect the reputation of the Company or to prejudice its interests if the
Executive were to continue to be employed by the Company; (iv) the Executive's
commission of any act of fraud, theft or dishonesty, or any intentional tort
against the Company; or (v) the Executive's violation of any of the material
terms, covenants, representations or warranties contained in this Agreement.
(c) "Disability" shall mean that the Executive, in the good faith
determination of the Board of Directors of the Company, is unable to render
services of the character contemplated hereby and that such inability (i) may
be expected to be permanent, or (ii) may be expected to continue for a period
of at least three (3) consecutive months (or for shorter periods totaling more
than six (6) months during any period of twelve consecutive months).
Termination resulting from Disability may only be effected after at least
thirty (30) days written notice by the Company of its intention to terminate
the Executive's employment.
(d) "Termination Date" shall mean (i) if this Agreement is
terminated on account of death, the date of death; (ii) if this Agreement is
terminated for Disability, the date established by the Company pursuant to
Section 8(c) hereof; (iii) if this Agreement is terminated by the Company, the
date on which a notice of termination is given to the Executive; (iv) if the
Agreement is terminated by the Executive, the date the Executive ceases work;
or (v) if this Agreement expires by its terms, the last day of the term of this
Agreement.
(4)
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9. Severance.
(a) If (i) the Company terminates the employment of the Executive
against his will and without Cause, or (ii) the Executive terminates his
employment for Good Reason (excluding death or Disability), the Executive shall
be entitled to receive salary, target incentive compensation and vacation
accrued through the Termination Date plus the lesser of (i) $600,000 or (ii)
the balance of the Executive's compensation hereunder to the end of the term of
this Agreement computed using the latest applicable salary rate. The Company
shall make such termination payment within 30 days of such termination.
Notwithstanding the foregoing, the Company shall not be required to pay any
severance pay for any period following the Termination Date if the Executive
violates the provisions of Section 15, Section 16 or Section 17 of this
Agreement. In such event, the Company shall provide written notice to the
Executive detailing such violation.
(b) If, after two years of service pursuant to this Agreement, the
Executive voluntarily terminates his employment other than for Good Reason,
then the Executive shall be entitled to receive salary, accrued vacation and
six months' severance pay.
(c) If (i) prior to two years of service pursuant to this Agreement
the Executive voluntarily terminates his employment other than for Good Reason,
(ii) the Executive's employment is terminated due to death or Disability, or
(iii) the Executive is terminated by the Company for Cause, then the Executive
shall be entitled to receive salary and accrued vacation through the
Termination Date only.
(d) In addition to the provisions of Section 9(a), 9(b) and 9(c)
hereof, to the extent COBRA shall be applicable to the Company or as provided
by law, the Executive shall be entitled to continuation of group health plan
benefits for a period of one (1) year following the Termination Date if the
Executive makes the appropriate conversion and payments.
(e) The Executive acknowledges that, upon termination of his
employment, he is entitled to no other compensation, severance or other
benefits other than those specifically set forth in this Agreement or any
applicable Stock Option Agreement.
(5)
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10. Expenses. The Company shall pay or reimburse the Executive for all
expenses normally reimbursed by Company, reasonably incurred by him in
furtherance of his duties hereunder and authorized and approved by the Company
in compliance with such rules relating thereto as the Company may, from time to
time, adopt and as may be required in order to permit such payments as proper
deductions to Company under the Internal Revenue Code of 1986, as amended, and
the rule and regulations adopted pursuant thereto now or hereafter in effect.
11. Facilities and Services. The Company shall furnish the Executive
with office space, secretarial, support staff and such other facilities and
services as shall be reasonably necessary for the performance of his duties
under this Agreement.
12. Mitigation Not Required. In the event this Agreement is
terminated, the Executive shall not be required to mitigate amounts payable
pursuant hereto by seeking other employment or otherwise. The Executive's
acceptance of any such other employment shall not diminish or impair the
amounts payable to the Executive pursuant hereto.
13. Place of Performance. The Executive shall perform his duties
primarily in Baltimore, Maryland or locations within a reasonable proximity
thereof, except for reasonable travel as the performance of the Executive's
duties may require.
14. Insurance and Indemnity. During the Employment Period, if available
at reasonable costs, the Company shall maintain, at its expense, officers and
directors fiduciary liability insurance covering the Executive and all other
executive officers and directors in an amount of no less than $1,000,000. The
Company shall also indemnify the Executive, to the fullest extent permitted by
law, from any liability asserted against or incurred by the Executive by reason
of the fact that the Executive is or was an officer or director of the Company
or any affiliate or related party or is or was serving in any capacity at the
request of the Company for any other corporation, partnership, joint venture,
trust, employment benefit plan or other enterprise. This indemnity shall
survive termination of this Agreement.
(6)
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15. Noncompetition.
A. The Executive agrees that, except in accordance with his duties
under this Agreement on behalf of the Company, he will not during the term of
this Agreement:
Participate in, be employed in any capacity by, serve as director,
consultant, agent or representative for, or have any interest, directly or
indirectly, in any enterprise which is engaged in the business of distributing,
selling or otherwise trading in products or services which are competitive to
any products or services distributed, sold or otherwise traded in by the
Company or any of its subsidiaries during the term of the Executive's
employment with the Company, or which are competitive to any products or
services being actively developed, with the bona fide intent to market same, by
the Company or any of its subsidiaries during the term of the Executive's
employment with the Company;
In addition, the Executive agrees that for a period of two years after
the end of the term of this Agreement (unless this Agreement is terminated due
to a breach of the terms hereof by the Company in failing to pay to the
Executive all sums due him under the terms hereof, in which event the following
shall be inapplicable), the Executive shall observe the covenants set forth in
this Section 15 and shall not own, either directly or indirectly or through or
in conjunction with one or more members of his or his spouse's family or
through any trust or other contractual arrangement, a greater than five percent
(5%) interest in, or otherwise control either directly or indirectly, any
partnership, corporation, or other entity which distributes, sells, or
otherwise trades in computer network security products or other products which
are competitive to any products or services being developed, distributed, sold,
or otherwise traded in by the Company or any its subsidiaries, during the term
of this Agreement, or being actively developed by the Company or any of its
subsidiaries during the term of this Agreement with the Company with a bona
fide intent to market same. Executive further agrees, for such two year period
following termination, to refrain from directly or indirectly soliciting
Company's vendors, customers or employees.
B. The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 15 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 15 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.
(7)
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16. Assignment of Patents. Executive shall disclose fully to the
Company any and all discoveries he shall make and any and all ideas, concepts
or inventions which he shall conceive or make during his period of employment,
or during the period of six months after his employment shall terminate, which
are in whole or in part the result of his work with the Company. Such
disclosure is to be made promptly after each discovery or conception, and the
discovery, idea, concept or invention will become and remain the property of
the Company, whether or not patent applications are filed thereon. Upon
request and at the expense of the Company, the Executive shall make application
through the patent solicitors of the Company for letters patent of the United
States and any and all other countries at the discretion of the Company on such
discoveries, ideas and inventions, and to assign all such applications to the
Company, or at its order, forthwith, without additional payment by the Company
during his period of employment and for reasonable compensation for time
actually spent by the Executive at such work at the request of the Company
after the termination of the employment. He is to give the Company, its
attorneys and solicitors, all reasonable assistance in preparing and
prosecuting such applications and, on request of the Company, to execute all
papers and do all things that may be reasonably necessary to protect the right
of the Company and vest in it or its assigns the discoveries, ideas or
inventions, applications and letters patent herein contemplated. Said
cooperation shall also include all actions reasonably necessary to aid the
Company in the defense of its rights in the event of litigation.
17. Trade Secrets.
A. In the course of the term of this Agreement, it is anticipated
that the Executive shall have access to secret or confidential technical and
commercial information, records, data, specifications, systems, methods, plans,
policies, inventions, material and other knowledge ("Confidential Material")
owned by the Company and its subsidiaries. The Executive recognizes and
acknowledges that included within the Confidential Material are the Company's
confidential commercial information, technology, methods of manufacture,
designs, and any computer programs, source codes, object codes, executable
codes and related materials, all as they may exist from time to time, and that
they are valuable special and unique aspects of the Company's business. All
such Confidential material shall be and remain the property of the Company.
Except as required by his duties to the Company, the Executive shall not,
directly or indirectly, either during the term of his employment or at any time
thereafter, disclose or disseminate to anyone or make use of, for any
(8)
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purpose whatsoever, any Confidential Material. Upon termination of his
employment, the Executive shall promptly deliver to the Company all
Confidential Material (including all copies thereof, whether prepared by the
Executive or others) which are in the possession or under the control of the
Executive. The Executive shall not be deemed to have breached this Section 17
if the Executive shall be specifically compelled by lawful order of any
judicial, legislative, or administrative authority or body to disclose any
confidential material or else face civil or criminal penalty or sanction.
B. The Executive hereby agrees that damages and any other remedy
available at law would be inadequate to redress or remedy any loss or damage
suffered by the Company upon any breach of the terms of this Section 17 by the
Executive, and the Executive therefore agrees that the Company, in addition to
recovering on any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of this Section 17 by injunction or specific
performance, and may obtain any other appropriate remedy available in equity.
18. Payment and Other Provisions After Change of Control
(a) In the event Executive's employment with the Company is
terminated within one year following the occurance of a Change of Control
(other than as a consequence of death or disability) either (x) by the Company
for any reason other than for Cause, or (y) by Executive for Good Reason, then
Executive shall be entitled to receive from the Company, in lieu of the
severance payment otherwise payable pursuant to Section 9(a), the following:
(i) Base Salary: Executive's annual base salary as in
effect at the date of termination, multiplied by three, shall be paid on the
date of termination;
(ii) Target Incentive Compensation: The amount of the
Executive's target incentive compensation under the applicable Executive Bonus
Plan for the fiscal year in which the date of termination occurs, multiplied by
three, shall be paid on the date of termination; and
(iii) Other Benefits: Notwithstanding the vesting period
provided for in the Company's Stock Option Plan and any related stock option
agreements between the Company and the Executive for stock options ("options")
granted Executive by the Company all of options shall be fully vested and
exercisable upon a Change of Control and termination of employment.
(9)
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(b) For purposes of this Agreement, the term "Change of Control" shall
mean:
(i) The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Rule 13d-3 promulgated
under the Exchange Act or any successor provision) (any of the foregoing
described in this Paragraph 18.b.i hereafter a "Person") of 50% or more of
either (a) the then outstanding shares of Capital Stock of the Company
(the"Outstanding Capital Stock") or (b) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"),
provided, however, that any acquisition by (x) the Company or any of its
subsidiaries, or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (y) any Person
that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act, to
file a statement on Schedule 13G with respect to its beneficial ownership
of Voting Securities, whether or not such Person shall have filed a
statement on Schedule 13G, unless such Person shall have filed a statement
on Schedule 13D with respect to beneficial ownership of 50% or more of the
Voting Securities or (z) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Capital Stock and Voting Securities immediately prior to such acquisition
in substantially the same proportion as their ownership, immediately prior
to such acquisition, of the Outstanding Capital Stock and Voting
Securities, as the case may be, shall not constitute a Change of Control;
or
(ii) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the Directors of the Company (as such terms
are
(10)
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used in Rule 14a-11 of Regulation 14A, or any successor section,
promulgated under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of the
Outstanding Capital Stock and Voting Securities immediately prior to such
Business Combination do not, following such Business Combination,
beneficially own, directly or indirectly, more than 60% of, respectively,
the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from the Business Combination; or
(iv) (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the assets
of the Company other than to a corporation with respect to which,
following such sale or disposition, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors is then owned beneficially, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Capital Stock and
Voting Securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the Outstanding
Capital Stock and Voting Securities, as the case may be, immediately prior
to such sale or disposition.
19. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail, return receipt requested to his residence in the case of the
Executive, or to its principal office in the case of the Company, or to such
other addresses as they may respectively designate in writing.
20. Entire Agreement; Waiver. This Agreement contains the entire
understanding of the parties and may not be changed orally but only by an
agreement in writing, signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. Waiver of or failure to
exercise any rights provided by this Agreement in any respect shall not be
deemed a waiver of any further or future rights.
(11)
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21. Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of the Company
by reorganization, merger or consolidation, or any assignee of all or
substantially all of the Company's business or properties. The Executive's
rights hereunder are personal to and shall not be transferable nor assignable
by the Executive.
22. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
23. Governing Law; Arbitration. This Agreement shall be construed in
accordance with and governed for all purposes by the laws and public policy of
the State of Delaware applicable to contracts executed and to be wholly
performed within such state. Any dispute or controversy arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the rules of the American Arbitration Association and judgment upon the award
may be entered in any court having jurisdiction thereover. The arbitration
shall be held in Wilmington, Delaware or in such other place as the parties
hereto may agree.
24. Further Assurances. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any time and from time to time, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and/or
assurances as may be necessary or proper to carry out the provisions or intent
of this Agreement.
25. Severability. The parties agree that if any one or more of the
terms, provisions, covenants or restrictions of this Agreement shall be
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
26. Counterparts. This Agreement maybe executed in several
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
(12)
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IN WITNESS WHEREOF, INFORMATION RESOURCE ENGINEERING, INC. has caused
this instrument to be signed by a duly authorized officer and the Executive has
hereunto set his hand the day and year first above written.
INFORMATION RESOURCE ENGINEERING, INC.
By /s/ XXXXX X. XXXXXXXXX
-------------------------------
Vice President, Finance
/s/ XXXXXXX X. XXXXXX
-------------------------------
XXXXXXX X. XXXXXX
(13)
