EXHIBIT 4.1
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 10 day of January 1995 by and between HAUPPAUGE
DIGITAL, INC., with offices at 00 Xxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000
(hereinafter the "Employer") and XXXXXXX XXXXXXX, 00 Xxxx Xxxx Xxxxx, Xxx Xxxxx,
Xxx Xxxx 00000 (hereinafter the "Employee").
WHEREAS, the Employee is presently employed by the Employer as its Chief
Executive Officer, Vice President, Secretary and Chairman of the Board of
Directors; and
WHEREAS, the Employer and Employee desire to enter into an employment
agreement in accordance with the terms and conditions set forth below; and
WHEREAS, the Employee is hereby granted an option to purchase certain
shares of common stock of the Employer in accordance with this Agreement.
NOW, THEREFORE, in consideration of the premises and covenants and
agreements set forth herein, the parties agree as follows:
1. Definitions. The following term as used in this Agreement shall have the
meaning described as set forth below:
1.1 "Automobile Expenses" shall mean those expenses as defined in Section
5.2 of this Agreement.
1.2 "Base Salary" shall mean that salary as defined in Section 4 of this
Agreement.
1.3 "Common Stock" shall mean the Common Stock of the Employer, par value
$.01 per share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of Section 12 of this Agreement.
1.4 "Corporation Group" shall mean the Employer and all of its wholly
owned subsidiaries, including any of its subsidiaries to be organized in the
future.
1.5 "Just Cause" shall be as defined in Section 11.4.1 of this Agreement.
2. Term
The Employer agrees to, and does, employ the Employee for a period of
three (3) years commencing on the consummation of a proposed initial public
offering by the Employer with Xxx Xxxxxxxxxx & Co., Inc. as underwriter
presently pending under Registration No. 33-85426 (the "Effective Date").
3. Duties
3.1 Chief Executive Officer, Vice-President, Secretary and Chairman of the
Board of Directors. The Employer shall employ the Employee as its Chief
Executive Officer, Vice-President, Secretary and Chairman of the Board of
Directors during the term of this Agreement. The Employee shall serve in such
capacity for each corporation in the Corporate Group. The Employee's position,
authority, duties and responsibilities shall be that of an executive officer
subject to the direction of the board of directors of the Employer and the board
of directors of the Corporate Group, as applicable, and shall be commensurate
with the duties and responsibilities of such Employee for the ninety (90) days
preceding the Effective Date.
3.2 Performance of duties. Excluding periods of vacation and sick leave to
which the Employee is entitled, the Employee agrees to devote his working time
and efforts on a full-time basis, during normal business hours, to the business
and affairs of the Employer and the Corporate Group in a faithful and diligent
manner, during the term of this Agreement.
3.3 Other activities. Nothing contained in this Agreement shall be
construed to prevent the Employee, during the term of this Agreement, from: (i)
serving on corporate, civic or charitable boards or committees, (ii) delivering
lectures, fulfilling speaking engagements or teaching at educational
institutions, (iii) managing personal investments and (iv) making investments of
any passive nature in any business; provided that all such activities and
investments do not compete or interfere with the performance of Employee's
duties hereunder.
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4. Compensation
As compensation for his services rendered to the Employer and the
Corporate Group during the term of this Agreement, the Employer shall pay the
Employee a base salary ("Base Salary") at the annual rate of $60,000, for the
first year of this Agreement, $80,000, for the second year of this Agreement and
$100,000, for the third year of this Agreement, which shall be payable in equal
weekly installments. The Employee shall be entitled to such increases in Base
Salary, other compensation and bonuses as the board of directors may declare.
5. Expenses
5.1 Accountable Expenses. The Employer will arrange for the payment of
expenses incurred by the Employee, in furtherance of or in connection with the
business of the Corporate Group, including, but not limited to, all traveling
expenses and all entertainment expenses, whether incurred at Employee's
residence, while traveling, or otherwise. If any such expenses are paid in the
first instance by Employee, the Employer will arrange for his reimbursement
therefor. The Employer recognizes that, in the performance of his duties,
Employee may be required to entertain various persons and representatives of
organizations with whom the Corporate Group has or would like to have business
relationships. The Employer will arrange for the prompt reimbursement of these
expenses upon presentation by the Employee of expense vouchers for such
expenses.
5.2 Automobile Expenses. During the term of this Agreement, the Employer
shall pay all of the Employee's reasonable expenses for the use and maintenance
of his automobile, such as gasoline, oil, tires, repairs and automobile
insurance. In addition, the Employee shall be entitled to $400 per month payable
on the first day of each month to reimburse the Employee for the purchase or
lease of an automobile at any time acquired by him.
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6. Vacations
At all times throughout the term of this Agreement, the Employee shall be
entitled to four (4) weeks paid vacations for each calendar year of this
Agreement to be taken at such times as determined by the Employee.
7. Disability.
If the Employee is unable to perform his duties hereunder by reason of any
illness, disability or incapacity, as reasonably determined by the Employee's
medical doctor, he shall be entitled to one hundred (100%) percent of his Base
Salary and his Automobile Expenses for the first six (6) months of his
disability, less such benefits or compensation as payable to the Employee by
reason of State, Federal, Social Security, disability, worker's compensation or
comparable government benefits and such policies of disability insurance
procured by the Employer for the Employee. Under no circumstance shall the
Employee receive less than that amount of disability insurance maintained for
him by the Employer.
8. Other Benefits.
8.1 Medical Insurance. At times throughout the term of this Agreement, the
Employer shall maintain in full force and effect, and pay timely the premiums
due on, a policy or policies of major medical and hospitalization insurance for
the benefit of the Employee and his immediate family with benefits not less than
that supplied for other executives of the Employer. In lieu of the foregoing,
the Employee may elect to receive direct payment from the Employer of such
equivalent amount as would otherwise be payable by the Employer for such medical
insurance. The illness, disability or incapacity of the Employee and the
termination of this Agreement by reason of same, shall not result in the
reduction or termination of benefits under this Section 8.1 provided, however,
that the payment for same shall not exceed the term of this Agreement.
8.2 Other Benefits. This Agreement is not intended to and shall not be
deemed to be in lieu of any rights, benefits and privileges to which the
Employee may be entitled as an
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employee of the Employer or as a participant under any retirement, pension,
profit-sharing, or stock option, and it is understood that the Employee shall
have the same rights and privileges to participate in such plans and benefits as
any other employee during his period of employment.
9. Confidential Information.
The Employee will not, during or subsequent to his employment hereunder,
without the consent of the Board of Directors of the Employer, divulge, furnish
or make accessible to any person or entity (except to employees of the Corporate
Group, as may be necessary in the regular course of business of the Corporate
Group and except as may be required pursuant to any court order, judgment or
decision from any court of competent jurisdiction) any knowledge or information,
customer lists, techniques, processes, formulas, machinery, plans, devices or
materials of the Corporate Group with respect to any confidential or secret
development or research work of the Corporate Group or with respect to any other
confidential or secret aspect of the business of the Corporate Group. The
foregoing shall not apply to information which is in the public domain on the
date hereof; which, after it is disclosed to Employee by the Employer is
published or becomes part of the public domain through no fault of Employee;
which is known to Employee prior to disclosure thereof to him by the Employer as
evidenced by his written records; or, after Employee is no longer employed by
the Employer, which is thereafter disclosed to Employee in good faith by a third
party who is not under any obligation of confidence or secrecy to the Corporate
Group with respect to such information at the time of disclosure to him. In the
event of a violation of this Section, the Employer shall be entitled, in
addition to any other relief at law or in equity, and without any election of
remedy limitation, to injunctive relief in a Court of competent jurisdiction.
10. Covenant Not To Compete.
10.1 Provided the Employer is not in default of any of its obligations
under this Agreement, the Employee agrees at all times during the term of this
Agreement, and for one (1)
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year after its termination, not to, directly or indirectly, on his own or in
concert with others, for his own behalf or in behalf of others;
10.1.1 persuade or attempt to persuade, sell, solicit the sale,
offer to sell, or make sales calls to any person or entity which is a customer,
client or supplier of the Corporate Group, or was its customer, client or
supplier within six (6) months prior to the termination of his employment by the
Corporate Group, with respect to any products or services sold by the Corporate
Group, and any products or services similar to that sold by the Employer or the
Corporate Group, except on behalf of the Corporate Group; or
10.1.2 own an equity interest in or serve as a director or officer
of, or work for, any corporation, partnership or business entity which competes,
directly or indirectly, with the business of the Employer or any members of the
Corporate Group, except that the Employee shall not be prohibited from owning an
equity interest in a competitor thereof which is not in excess of five (5%)
percent of the outstanding shares of such competitor whose common stock is
regularly traded on a national stock exchange or quoted by NASDAQ; or
10.1.3 interfere with, attempt to interfere with, solicit, persuade
or attempt to persuade, or entice away any of the Employer's employees or
employees of the Corporate Group, or any of the Employer's employees or
employees of the Corporate Group within six (6) months prior to termination of
his employment by the Employer, from their continued employment.
10.2 In the event of a violation of this Section the Employer shall be
entitled, in addition to any other relief at law or in equity, and without any
election of remedy limitation to injunctive relief in a Court of competent
jurisdiction.
11. Termination.
11.1 General. This Agreement may not be termination, except upon the death
of the Employee, disability of the Employee for more than one hundred
eighty-three (183) days during the term of this Agreement, or for Just Cause as
hereinafter defined.
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11.2 Termination Upon Death. If the Employee's employment is terminated by
reason of the Employee's death during the term of this Agreement, this Agreement
shall terminate without further obligations by the Employer to the Employee's
legal representatives under this Agreement, other than the following obligations
which shall be paid by the Employer: (i) all compensation, benefits and expenses
through the date of death to the extent required to be paid and not theretofore
paid, and (ii) any accrued unpaid vacation time, not to exceed six (6) weeks.
All of the foregoing shall be paid to the Employee's estate or beneficiaries, as
applicable, in a lump sum in cash within thirty (30) days of the date of death.
11.3 Termination for Disability.
11.3.1. The Employee shall be deemed disabled for one hundred and
eighty-three (183) days if he receives the benefits provided under Section 7 in
full during the term of this Agreement.
11.3.2 The Employer may terminate this Agreement if the Employee is
disabled for one hundred and eighty-three (183) days during the term of this
Agreement.
11.3.3 If the Employee's employment shall be terminated for
disability, the Employer shall pay to the Employee all compensation and expenses
provided under Section 7 of this Agreement and not paid through the date of
termination.
11.4 Termination for Just Cause.
11.4.1 For purposes of this Agreement, "Just Cause" is limited to,
and shall mean, the following only:
11.4.1.1 gross misconduct, willful or continued failure of the
Employee to perform substantially the Employee's duties under this Agreement
(other than any such failure resulting from incapacity due to physical or mental
illness) or the willful and continued violations of Section 9 and 10 of this
Agreement, or
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11.4.1.2 the willful engaging, by the Employee, in fraudulent
or illegal conduct, which is significant and demonstrably injurious to the
Corporate Group, or is convicted of a felony, involving moral turpitude.
11.4.2 For the purposes of this provision, no act or failure to act
on the part of the Employee shall be considered "willful" unless it is done, or
omitted to be done, by the Employee in bad faith or without reasonable belief
that the Employee's action or omission was in the best interests of the
Corporate Group.
11.4.3 If the Employee's employment shall be terminated for Just
Cause, the Employer shall pay to the Employee the Employee's Base Salary, Bonus,
all unpaid vacation days and any unpaid expenses, including automobile expenses,
through the date of termination.
12. Stock Option Grant.
12.1 Grant. The Employer hereby grants the Employee an option to purchase
up to 150,000 shares of Common Stock.
12.2 Exercise Price. The exercise price of the option shall be $3.15 per
share, subject to adjustment as provided hereunder. The purchase price may be
paid in cash. The options hereunder may be exercised in whole or in part. It
shall be a condition to the obligation of the Employer to issue shares of Common
Stock upon exercise of an option, that the Employee pay to the Employer upon its
demand, such amount as may be requested by the Employer for the purpose of
satisfying any liability to withhold federal, state, local and foreign income or
other taxes. If the amount requested is not paid, the Employer may refuse to
issue shares of Common Stock.
12.3 Adjustment Provision. In the event that any recapitalization, or
reclassification, split-up, stock dividend or consolidation of shares of Common
Stock shall be affected, or the outstanding shares of Common Stock are, in
connection with a merger or consolidation of the Corporate Group or a sale by
the Corporate Group of all or part of its assets, exchanged for a
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different number or class of shares of stock or other securities of any other
corporation, or new, different or additional shares or other securities of the
Corporate Group or of another corporation are received by the holder of Common
Stock or any distribution is made to the holders of Common Stock other than a
cash dividend, (a) the number and class of shares or other securities that may
be issued or transferred and (b) the option price shall in each case be
proportionately adjusted as the board of directors, in the reasonable exercise
of its discretion, determine.
12.4 Term. The options shall be for a period of ten years term commencing
on the Effective Date.
12.5 Exercisability. The options shall not be exercisable for a period of
ten years except as follows:
12.5.1 For the first full fiscal year after the Effective Date and
for each of the four fiscal years thereafter, should the Corporate Group attain
an audited annual pre-tax income of at least $1,000,000, options to purchase up
to 30,000 shares of Common Stock shall then become immediately exercisable.
12.5.2 If the Corporate Group fails to attain the $1,000,000 plateau
during the first full fiscal year, should the Corporate Group's combined pre-tax
income for the first two fiscal years exceed $2,000,000, then options to
purchase up to 60,000 shares of common stock shall then become immediately
exercisable.
12.5.3 Audited annual pre-tax income shall be as determined from the
financial statements included in the Employer's filing under form 10k or form
10k-SB or other comparable annual report to be filed with the Securities and
Exchange Commission for the Employer or any successor to the Employer.
12.5.4 The option shall only exercisable by the Employee, except in
the event of the Employee's death during the term of this option grant, a duly
authorized representative of the Employee's estate may exercise such option.
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12.5.5 In the even that the Employee is not offered an renewal of
this Agreement on terms at least as beneficial as that in effect at the time of
the termination of his employment, or if the Employee is terminated at any time,
for any reason other than Just Cause, death or disability, all the remaining
shares of Common Stock available pursuant to this option agreement may be
exercised by the Employee within ninety (90) days from the termination of this
Agreement.
12.5.6. In the event that the Employee is terminated because of his
death, the duly authorized representative of the Employee's estate may exercise
the option within ninety (90) days from the termination of this Agreement.
12.5.7 In the event that the Employee is terminated because of
disability, the Employee may exercise the option within ninety (90) days from
the termination of this Agreement.
12.5.8 The Common Stock to be issued to the Employee upon the
exercise of this option shall be deemed "restricted securities" as the term is
defined under the Securities Act of 1933, as amended (the "Act"), and may only
be sold pursuant to the registration under the Act, in compliance with Rule 144
under the Act, pursuant to another exemption therefrom or pursuant to an opinion
of counsel satisfactory to the Employer that registration under the Act is not
required.
13. Notices.
All notices or demands required or given under this Agreement shall be in
writing and sent by registered mail or certified mail, return receipt requested,
to the addresses hereinabove set forth or to such other addresses as any of the
parties hereto may designate in writing, transmitted by registered mail or
certified mail, return receipt requested, to the other.
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14. Successors.
14.1 Binding Effect. This Agreement shall inure to the benefit of and be
binding up the Employer, its successors and assigns, including, without
limitation, any corporation which may acquire all or substantially all of the
assets and business of the Employer, or with or into which the Employer may be
consolidated or merged.
14.2 Assumption of Agreement. The Employer will required any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
who acquires all or substantially all of the business and/or assets of the
Employer, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Employer would be required to perform it
if no such succession had taken place. As used in this Agreement, "Employer"
shall mean the Employer as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.
15. Arbitration.
Any dispute or controversy arising out of this Agreement shall be referred
to and determined by the American Arbitration Association in accordance with its
rules and procedures at its Nassau County, New York office. The determinations
of the American Arbitration Association shall be final and binding upon the
parties hereto, and either party hereto may confirm the arbitration award in a
court having competent jurisdiction and enter judgment thereon.
16. Attorneys' Fees.
In any litigation, action, proceeding, arbitration or claim arising out of
this Agreement, each party agrees to pay its own attorneys' fees and expenses.
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17. Miscellaneous.
17.1 Governing Law. This Agreement is intended to and shall be governed in
all respects by the laws of the State of New York, without reference to
principles of conflicts of laws.
17.2 Invalidity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
17.3 Non-Waiver. The failure by either party to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of such
provision or any other provision hereof.
17.4 Entire Agreement. This Agreement supersedes and replaces all prior
agreements between the Employer and Employee which relate to the employment of
the Employee.
17.5 Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or legal effect.
17.6 Modifications. This Agreement contains the parties entire
understanding with respect to the subject matter hereof and may not be modified
except in writing signed by each of the parties hereto.
17.7. Notice of Default. No default may be declared under this Agreement
by either party unless at least five (5) days notice is given with respect to a
monetary obligation and thirty (30) days notice is given with respect to a
non-monetary obligation and during such period the alleged defaulting party
shall have the opportunity to cure such default.
17.8 Binding Agreement. This Agreement shall be binding upon the heirs,
successors and assigns of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
Attest: HAUPPAUGE DIGITAL, INC.
By: Xxxxxxx X. Xxxxxxxx, President
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/s/ Xxxxxxx Xxxxxxx
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XXXXXXX XXXXXXX
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