Exhibit 10.9
SENIOR MANAGEMENT AGREEMENT
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THIS AGREEMENT (this "Agreement") is made as of August 12, 1999, between
EMPYREAN GROUP HOLDINGS, INC., a Delaware corporation (formerly Business
Solutions Group, Inc., the "Company"), and the Executive whose name appears on a
Signature Page hereto ("Executive"). This Agreement is entered into individually
with each of the Executives named on the signature pages hereto. Except for the
numbered matters in [__] which are reflected on each individual Executive's
Annex A attached hereto, this Agreement shall be the same for each of the
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Executives named on the signature pages; provided, however, that all references
herein to Executive or Executive Stock shall be deemed to refer only to such
individual Executive and his Executive Stock (including the portion of Executive
Stock held by such Executive's Permitted Transferees).
Recitals
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A. The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, [1] shares of the
Company's Common Stock, par value $.01 par value per share (the "Common Stock")
and [2] shares of the Company's Class A Preferred Stock, $.01 par value per
share (the "Preferred Stock"). All shares of Common Stock and Preferred Stock
purchased by an Executive are referred to herein as "Executive Stock" (as
further defined in Section 10).
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B. The execution and delivery of this Agreement by the Company and
Executive is a condition to the purchase of shares of Common Stock and Preferred
Stock by Thayer ITech Holdings, L.L.C. (the "Investor") pursuant to a purchase
agreement between the Company and the Investor (the "Equity Purchase
Agreement"). Certain provisions of this Agreement are intended for the benefit
of, and will be enforceable by, the Investor.
C. Certain definitions are set forth in Section 10 of this Agreement.
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Agreement
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The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. Purchase and Sale of Executive Stock.
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(a) Pursuant to the terms of this Agreement, Executive will purchase,
and the Company will sell, an aggregate of [1] shares of Common Stock at a price
of $.10 per share. At the time of such purchase, the Company will deliver to
Executive the certificates
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representing such Executive Stock, and Executive will deliver to the Company [3]
in the aggregate amount of $[4].
(b) Within 30 days after Executive purchases any Executive Stock from the
Company, Executive will make an effective election with the Internal Revenue
Service under Section 83(b) of the Internal Revenue Code and the regulations
promulgated thereunder in the form of Annex A attached hereto.
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(c) In connection with the purchase and sale of the Executive Stock
hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive pursuant to this
Agreement will be acquired for Executive's own account and not with a view
to, or intention of, distribution thereof in violation of the Securities
Act, or any applicable state securities laws, and the Executive Stock will
not be disposed of in contravention of the Securities Act or any applicable
state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his investment in
the Executive Stock for an indefinite period of time because the Executive
Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or
an exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the
Company as he has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Executive, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which Executive is a party or any judgment, order
or decree to which Executive is subject.
(vi) Executive is a resident of [5].
(d) As an inducement to the Company to issue the Executive Stock to
Executive, as a condition thereto, Executive acknowledges and agrees that
neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason pursuant to Section 7 hereof.
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2. Vesting of Certain Executive Stock.
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(a) Except as otherwise provided in Section 2(d) below, [6] shares or
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50% of the Common Stock issued pursuant to Section 1(a) above (the "Time Vesting
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Shares") shall become vested in accordance with the following schedule, if as of
each such date Executive is still employed by the Company or any of its
Affiliates:
Cumulative Percentage of
Date Common Stock to be Vested
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First Anniversary of
the Date hereof 25%
Second Anniversary
of the Date hereof 50%
Third Anniversary
of the Date hereof 75%
Fourth Anniversary
of the date hereof 100%
Notwithstanding the foregoing, if Executive ceases to be employed by the Company
or its Affiliates on any date after the first anniversary of the date hereof but
prior to the fourth anniversary, the cumulative percentage of Time Vesting
Shares to become vested will be determined on a pro rata basis according to the
number of full months elapsed since the prior anniversary date (for example if 5
full months have elapsed since the first anniversary date, then an additional
5/12 (10.41%) or a total of 35.41% shall have become vested). Notwithstanding
the foregoing sentence, (i) all Time Vesting Shares shall become vested in the
event of a Sale of the Company and (ii) an additional 20% of all Time Vesting
Shares (not to exceed 100%) shall become vested in the event that Executive has
been terminated without Cause. Notwithstanding the foregoing, in the event that
Executive is terminated for Cause prior to the earlier of (i) the fourth
anniversary of the date hereof or (ii) the effective date of an Initial Public
Offering, then all Time Vesting Shares (whether or not then vested) will be
deemed to be "Unvested Shares" for purposes of this Agreement.
(b) [6] shares or 50% of the Common Stock issued pursuant to Section 1(a)
above (the "Performance Vesting Shares") shall become vested in accordance with
the following schedule if the Investor shall have earned or deemed to have
earned the Return set forth below as of any Date of Determination (as defined
below):
Cumulative Percentage
of Performance
Return Vesting Shares "Vested"
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25.00% 25.00%
26.50% 32.50%
28.00% 40.00%
29.50% 47.50%
31.00% 55.00%
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32.50% 62.50%
34.00% 70.00%
35.50% 77.50%
37.00% 85.00%
38.50 92.50%
40.00% or more 100.00%
The above "Return" shall be calculated (each a "Date of Determination") at any
time after Market Liquidity exists (i.e., at any date that Market Liquidity
exists and the Investor would have achieved a specified Return set forth above
as of such date if it sold all of its remaining Company equity securities on
such date, the requisite percentage of Performance Shares will vest) and at the
following times: (i) upon a Sale of the Company and (ii) after the effective
date of an Initial Public Offering upon the occurrence of either (A) Executive's
death or permanent disability or (B) upon Executive's having been terminated
without Cause. Notwithstanding anything in this Agreement to the contrary, all
Performance Vesting Shares then outstanding will become Vested Shares on the
eighth anniversary of the date hereof.
(c) All shares of Preferred Stock acquired by Executive will vest
immediately upon such purchase.
(d) Upon the occurrence of a Sale of the Company, all Time Vesting Shares
which have not yet become vested shall become vested at the time of such event.
Shares of Executive Stock which have become vested (whether pursuant to Section
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2(a) or 2(b) above or upon purchase thereof (i.e., the shares referred to in
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Section 2(c) above)) are referred to herein as "Vested Shares," and all other
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shares of Executive Stock are referred to herein as "Unvested Shares".
3. Repurchase Option.
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(a) In the event that Executive ceases to be employed by the Company and
its Affiliates for any reason (the "Termination"), then, subject to Section 3(g)
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below, all of the Executive Stock (whether held by Executive or one or more of
Executive's Permitted Transferees) will be subject to repurchase by the Company
and the Investor pursuant to the terms and conditions set forth in this Section
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3 (the "Repurchase Option").
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(b) In the event of Termination, (i) the purchase price for each Unvested
Share of Common Stock will be the lower of (A) Executive's Original Cost for
such share and (B) the Fair Market Value for such share; (ii) the purchase price
for each Vested Share of Common Stock will be the Fair Market Value for such
share; and (iii) the purchase price for each share of Preferred Stock will be
the Liquidation Value of such share (as defined in the Company's Restated
Certificate of Incorporation) plus all accrued and unpaid dividends thereon.
(c) Subject to Section 3(g) below, the Board shall use its reasonable best
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efforts to purchase all or any portion of the Unvested Shares and the Vested
Shares subject to repurchase by delivering written notice (the "Repurchase
Notice") to the holder or holders of the Executive Stock within 90 days after
Termination (a "Company Repurchase Option"). The
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Repurchase Notice will set forth the number of Unvested Shares and Vested Shares
of each class to be acquired from each holder pursuant to such Company
Repurchase Option (it being understood that the Company shall first apply all
amounts utilized to repurchase Executive Stock to the repurchases of Unvested
Shares, with the balance, if any, to be utilized to repurchase Vested Shares),
the aggregate consideration to be paid for such shares and the time and place
for the closing of the transaction.
(d) If for any reason the Company does not elect to purchase all of the
Executive Stock pursuant to the Repurchase Option, the Investor shall be
entitled to exercise any unutilized portion of the Company Repurchase Option for
the repurchase of shares (it being understood that the Investor shall first
apply all amounts utilized to repurchase Executive Stock to the repurchases of
Unvested Shares, with the balance, if any, to be utilized to repurchase Vested
Shares) of any class of Executive Stock the Company has not elected to purchase
(the "Available Shares"). As soon as practicable after the Company has
determined that there will be Available Shares, but in any event within 60 days
after Termination, the Company shall give written notice (the "Option Notice")
to the Investor setting forth the number of Available Shares and the purchase
price for the Available Shares. The Investor may elect to purchase any or all of
the Available Shares by giving written notice to the Company within twenty (20)
days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten (10) days, after the expiration of the
twenty (20) day period set forth above, the Company shall notify each holder of
Executive Stock to be repurchased as to the number of shares of each class being
purchased from such holder by the Investor (the "Supplemental Repurchase
Notice"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Executive Stock, the Company shall also deliver written notice
to the Investor setting forth the number of shares of each class the Investor
will purchase, the aggregate purchase price and the time and place of the
closing of the transaction.
(e) The closing of the purchase of the Executive Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than 45 days after the delivery of the Repurchase Notice. The Company will
pay for the Executive Stock to be purchased by it pursuant to the Repurchase
Option by first offsetting amounts outstanding under any bona fide debts owed by
Executive to the Company. The Investor will pay for the Executive Stock to be
purchased by it pursuant to the Repurchase Option by delivery of a check or wire
transfer of funds in the aggregate amount of the purchase price for such shares.
The Company and the Investor will be entitled to receive customary
representations and warranties from the sellers regarding such sale.
(f) Notwithstanding anything to the contrary contained in this Agreement,
all repurchases of Executive Stock by the Company shall be subject to any
customary restrictions contained in applicable corporate and securities laws and
in the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Executive Stock hereunder which
the Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
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(g) Any shares of Executive Stock not purchased by the Company or the
Investor pursuant to a Repurchase Option after Termination of the Executive's
employment with the Company for any reason shall vest in full and shall no
longer be subject to the provisions of Sections 2 or 3 of this Agreement.
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(h) Notwithstanding any other provision of this Agreement, after the
closing date of an Initial Public Offering, Vested Shares shall not be subject
to the Repurchase Option.
4. Restrictions on Transfer of Executive Stock. The Executive Stock is
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subject to certain restrictions on transfer and certain tag-along and drag-along
rights which are provided for in the Stockholders Agreement, and nothing in this
Agreement shall be deemed to amend, modify or limit in any way the restrictions
on the issuance of shares of Preferred Stock or Common Stock set forth in the
Equity Purchase Agreement, in the Stockholders Agreement or in any other
agreement to which the Company is bound. Except for Permitted Transfers and
Transfers pursuant to the Repurchase Option, the Executive may not Transfer or
cause or permit to be Transferred any Unvested Shares, and any purported
Transfer in violation hereof shall be null and void.
5. Additional Restrictions on Transfer of Executive Stock.
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(a) Legend. The certificates representing the Executive Stock will bear a
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legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A (1) SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY
DATED AUGUST 12, 1999 AND (2) STOCKHOLDERS AGREEMENT AMONG THE
COMPANY AND CERTAIN OF ITS STOCKHOLDERS, DATED AS OF AUGUST
12, 1999, AS AMENDED FROM TIME TO TIME. COPIES OF SUCH
AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
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(b) Opinion of Counsel. No holder of Executive Stock may sell, transfer or
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dispose of any Executive Stock (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel (reasonably acceptable in form and substance to the Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such Transfer.
6. Stockholder Agreements. Nothing contained in this Agreement shall be
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deemed to limit in any way the restrictions on the shares of Preferred Stock or
Common Stock set forth in the Equity Purchase Agreement, in the Stockholders
Agreement or in any other agreement to which the Company is bound. By execution
of this Agreement, Executive hereby agrees to execute a joinder to and to be
bound by the terms and conditions of the Stockholders Agreement.
PROVISIONS RELATING TO EMPLOYMENT
7. Employment. The Company hereby engages Executive to serve as [7] of the
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Company, and Executive agrees to serve the Company, during the Service Term (as
defined in Section 7(d) hereof) in the capacities, and subject to the terms and
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conditions, set forth in this Agreement.
(a) Services. During the Service Term, Executive, as [7], shall have all
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the duties and responsibilities customarily rendered by [7] officers of
companies of similar size and nature and as may be delegated from time to time
by the Board and [8]. Executive will devote his best efforts and substantially
all of his business time and attention (except for vacation periods and periods
of illness or other incapacity) to the business of the Company and its
Affiliates. Notwithstanding the foregoing, and provided that such activities do
not interfere with the fulfillment of Executive's obligations hereunder,
Executive may (A) serve as a director or trustee of any charitable or non-profit
entity; (B) acquire investment interests in one or more entities which are not,
directly or indirectly, in competition with the Company or its Subsidiaries and
which do not have a material business relationship with the Company; (C) own up
to 3% of the outstanding voting securities of any publicly-held company; or (D)
[9]. Unless the Company and Executive agree to the contrary, Executive's place
of employment shall be at the Company's principal executive offices in the
Washington, D.C. metropolitan area; provided, however, that Executive will
travel to such other locations of the Company and its Affiliates as may be
reasonably necessary and/or as required by the Board in its sole discretion in
order to discharge his duties hereunder.
(b) Salary, Bonus and Benefits.
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(i) Salary and Bonus. During the Service Term, the Company will pay
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Executive a base salary (the "Annual Base Salary") as the Board may
designate from time to time, at the rate of not less than $[10] per annum
payable bi-weekly; provided, however, that the Annual Base Salary shall be
subject to review annually by the Board for upward increases thereon. The
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Executive will be eligible to receive an annual bonus in an amount not to
exceed [11]% of Executive's Annual Base Salary for such year (other than in
1999 for which Executive's annual bonus shall be determined in accordance
with the offer letter provided to such Executive by the Company), in each
case as determined by the Board.
(ii) Benefits. During the Service Term, Executive will be entitled to
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such other benefits approved by the Board and generally made available to
the Company's senior executives. These benefits shall include customary
vacation time, healthcare benefits, expense reimbursement, 401(k) or
similar plans and, after an IPO Event, the right to be eligible to receive
grants of stock options pursuant to the Company's then existing stock
option plans.
(c) Termination.
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(i) Events of Termination. Executive's employment with the Company
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shall cease upon:
(A) Executive's death.
(B) Executive's voluntary retirement at age 65 or older.
(C) Executive's disability, which means his incapacity due to
physical or mental illness such that he is unable to perform the
essential functions of his previously assigned duties for a period of
six months in any twelve month period and such incapacity has been
determined to exist by either (1) the Company's disability insurance
carrier or (2) by the Board in good faith based on competent medical
advice in the event that the Company does not maintain disability
insurance on the Executive.
(D) Termination by the Company by the delivery to Executive of a
written notice from the Board that Executive has been terminated
("Notice of Termination") with or without Cause or Performance
Cause[12]. "Cause" shall mean:
(1) Executive's (aa) conviction of a felony or Executive's
commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Affiliates or any
of their customers, vendors or suppliers or involving intentional
discrimination or intentional harassment with respect to the
employees of the Company or its Subsidiaries, (bb)
misappropriation of funds or assets of the Company or (cc)
engaging in any conduct relating to (i) the Company's business or
(ii) involving moral turpitude, that is reasonably likely to
bring the Company or any of its Affiliates into public disgrace
or disrepute;
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(2) Executive's failure to perform or substantial neglect of
his reasonable duties, after written notice thereof from the Board,
and such failure or neglect has not been cured within 30 days after
Executive receives notice thereof from the Board;
(3) Executive's gross negligence or willful misconduct in
the performance of his duties hereunder that results, or is
reasonably expected to result, in material damage to the Company;
or
(4) Executive's engaging in intentional or willful conduct
constituting a breach of Sections 8 or 9 hereof.
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In order for the termination to be effective: Executive must be notified in
writing (which writing shall specify the cause in reasonable detail) of any
termination of his employment for Cause or Performance Cause. Executive will
then have the right, within ten days of receipt of such notice, to file a
written request for review by the Company. In such case, Executive will be
given the opportunity to be heard, personally or by counsel, by the Board
and a majority of the Directors must thereafter confirm that such
termination is either for Cause or Performance Cause. If the Directors do
not provide such confirmation, the termination shall be treated as other
than for Cause or Performance Cause. Notwithstanding anything to the
contrary contained in this paragraph, Executive shall have the right after
termination has occurred to appeal any determination by the Board to
arbitration in accordance with the provisions of Section 12(h) hereof.
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(E) Executive's voluntary resignation by the delivery to the Board of
written notice from Executive that Executive has resigned with or
without Good Reason; provided that in either event, Executive shall
provide the Company with at least 45 days written notice of any
resignation. "Good Reason" shall mean Executive's resignation from
employment with the Company within 45 days after the occurrence of
any one of the following:
(1) the failure of the Company to pay an amount owing
to Executive hereunder after Executive has provided the Company with
written notice of such failure and such payment is in fact owed and
has not thereafter been made within 15 days of the delivery of such
written notice;
(2) a substantial reduction in Executive's duties from
those previously assigned to such Executive such that Executive is no
longer a manager or officer of the Company; or
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(3) the required relocation of Executive from the
Washington, D.C. area without his consent.
The delivery by the Executive of notice to the Company that
he does not intend to renew this Agreement as provided in Section 7(d)
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shall constitute a resignation by the Execution without Good Reason unless
such notice fulfills the requirements of Section 7(c)(i)(E)(1) , (2) or
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(3) above.
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(ii) Rights on Termination.
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(A) In the event that termination is by Executive with Good
Reason or by the Company without either Cause or Performance Cause, the
Company will continue to pay Executive a monthly portion of the Annual
Base Salary plus a monthly portion of the Executive's bonus for the prior
year for a period equal to 12 months commencing on the date of termination
on regular salary payment dates. In the event that termination is by the
Company for Performance Cause, the Company will continue to pay Executive
a monthly portion of the Annual Base Salary for a period equal to six-
months commencing on the date of termination on regular salary payment
dates. The payments to Executive pursuant to the foregoing two sentences
are referred to as the "Severance Payments."
(B) If the Company terminates Executive's employment for
Cause, if Executive retires or if Executive resigns without Good Reason
(including by operation of the last paragraph of Section 7(c)(i)(E)), the
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Company's obligations to pay any compensation or benefits under this
Agreement will cease effective as of the date of termination. Executive's
right to receive any health or other benefits will be determined under the
provisions of applicable plans, programs or other coverages.
(C) If Executive's employment terminates because of Executive's
death or disability, the Company will pay Executive or his estate an
amount, if any, equal to his maximum bonus for the current year prorated
to reflect the number of days Executive has worked during the year in
which he dies or becomes disabled (such amount to be paid after the end of
such year when bonuses are normally paid to other senior executives of the
Company).
Notwithstanding the foregoing, the Company's obligation to Executive for
severance payments or other rights under either subparagraphs (A) or (B) above
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shall cease if Executive is in violation of the provisions of Sections 8 or 9
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hereof. Until such time as Executive has received all of his Severance Payments,
he will be entitled to continue to receive any health, life, accident and
disability insurance benefits provided by the Company to Executive under this
Agreement. If Executive dies or is permanently disabled, then Executive or his
estate shall be
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entitled to any disability income or life insurance payments from any insurance
policies paid for by the Company or its Affiliates as specified in such
policies.
(d) Term of Employment. Unless Executive's employment under this Agreement
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is sooner terminated as a result of Executive's termination in accordance with
the provisions of Section 7(c) above, Executive's employment under this
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Agreement shall commence on August 12, 1999 and shall terminate on the third
anniversary of the date thereof (the "Service Term"); provided, however, that
Executive's employment under this Agreement, and the Service Term, shall be
automatically renewed for one-year periods commencing on the third anniversary
of the date hereof and, thereafter, on each successive anniversary of such date
unless either the Company or Executive notifies the other party in writing
within six months prior to any such anniversary that it or he desires to
terminate Executive's employment under this Agreement as of such anniversary.
All references herein to "Service Term" shall include any renewals thereof.
8. Confidential Information and Goodwill; Inventions. Executive
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acknowledges and agrees that:
(a) As a necessary function of Executive's employment hereunder, Executive
will have access to and utilize Confidential Information which constitutes a
valuable and essential asset of the Company's business.
(b) The Confidential Information, observations and data obtained by him
during the course of his performance under this Agreement concerning the
business and affairs of the Company are the property of the Company, including
information concerning the acquisition opportunities in or reasonably related to
the Business of which Executive becomes aware during the Service Term.
Therefore, Executive agrees that he will not disclose to any unauthorized person
or use for his own account any of the Confidential Information without the
Board's written consent. Executive agrees to deliver to the Company at the
termination of his employment, or at any other time the Company may request, all
memoranda, notes, plans, records, reports and other documents (including copies
thereof) relating to the Company, the Business or any other Confidential
Information.
(c) All inventions, innovations, developments, improvements, methods,
designs, analyses, drawings, software, copyrights, patents, trademarks, reports
and all similar or related information (whether or not patented or patentable)
developed by Executive during the Service Term which (i) directly or indirectly
relate to the Company or its Affiliates or the Business, or (ii) result from any
work performed by Executive while employed by the Company or its Affiliates
shall belong to the Company and its Affiliates. Executive shall promptly
disclose all such inventions to the Board and perform all actions reasonably
requested by the Board (whether during or after the Service Term) to establish
and confirm such ownership (including, without limitation, assignments,
consents, powers of attorney and other instruments).
9. Noncompetition and Nonsolicitation.
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(a) Noncompetition. Executive acknowledges that in the course of his
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employment with the Company he will become familiar with the Company's and its
Affiliates'
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trade secrets and with other confidential information concerning the Company and
that his services will be of special, unique and extraordinary value to the
Company and its Affiliates. Therefore, Executive agrees that, during the Service
Term and for a period of 12 months after termination thereof; provided, however,
that in the event that Executive has been terminated by the Company without
either Cause or Performance Cause or the Executive has resigned for Good Reason,
such period of time after the Service Term shall be limited to the time period
during which the Executive is entitled to receive Severance Payments
(collectively, the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the Business of the Company and
its Subsidiaries or any businesses with which the Executive has knowledge that
the Company or its Subsidiaries have firm documented or Board-approved plans to
engage in at the time of the termination of the Executive's employment with the
Company.
(b) Nonsolicitation. During the Noncompete Period and for a period of 12
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months thereafter, Executive shall not directly or indirectly through another
entity (i) induce or attempt to induce any senior management employee of the
Company or any Subsidiary or, to the actual knowledge of the Executive, any
other employee of the Company or any Subsidiary, to leave the employ of the
Company or such Subsidiary, or in any way interfere with the relationship
between the Company or any Subsidiary and any employee thereof or (ii) induce or
attempt to induce any customer, supplier, vendor, licensee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or to modify its business relationship with the
Company in a manner adverse to the Company or any Subsidiary, or in any way
disparage the Company or its Subsidiaries to any such customer, supplier,
vendor, licensee or business relation of the Company or any Subsidiary.
(c) Enforcement. The Executive understands and agrees that the sale of the
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Executive Stock to Executive pursuant to Section 1 of this Agreement and the
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terms and conditions of Executive's employment hereunder are in consideration
for Executive's covenants contained in Section 8 and 9 of this Agreement. If, at
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the time of enforcement of Section 8 or 9 of this Agreement, a court holds that
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the restrictions stated herein are unreasonable under circumstances then
existing the parties hereto agree that the maximum duration, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum duration, scope and area
permitted by law. Because Executive's services are unique and because Executive
has access to confidential information, the parties hereto agree that money
damages would be an inadequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to enforce,
or prevent any violations of, the provisions hereof (without posting a bond or
other security).
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GENERAL PROVISIONS
10. Definitions.
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"Affiliate" of any Person means any other Person which directly or
indirectly controls, is controlled by or is under common control with such
Person.
"Board" means the Company's board of directors or the board of
directors or similar management body of any successor of the Company.
"Business" means any business of the Company or its Subsidiaries now or
hereafter engaged in during the Service Term, including without limitation the
business of providing information technology consulting services, systems
integration and software systems applications.
"Competitive Activity" means any business or activity of Executive or
any third party that is the same as the Business or competitive with the
Business.
"Confidential Information" means all confidential information and trade
secrets of the Company and its Affiliates including, without limitation, the
following: the identity, written lists, or descriptions of any customers,
referral sources or Organizations; financial statements, cost reports, or other
financial information; information technology or intellectual property developed
by or utilized by the Company, contract proposals or bidding information;
business plans; training and operations methods and manuals; personnel records;
fee structures; and management systems, policies or procedures, including
related forms and manuals. "Confidential Information" shall not include any
information or knowledge which: (a) is in the public domain other than by
Executive's breach of this Agreement or (b) is disclosed to Executive lawfully
by a third party who is not under any obligation of confidentiality.
"Executive Stock" will mean all shares of Common Stock and Preferred
Stock purchased by Executive pursuant to this Agreement. Such shares will
continue to be Executive Stock in the hands of any holder other than Executive
(except for the Company, any transferee permitted by the Stockholders Agreement
(other than to a Permitted Transferee) and except for transferees in a Public
Sale), and except as otherwise provided herein, each such other holder of
Executive Stock will succeed to all rights and obligations attributable to
Executive as a holder of Executive Stock hereunder. Executive Stock will also
include shares of the Company's capital stock issued with respect to Executive
Stock by way of a stock split, stock dividend or other recapitalization.
Notwithstanding the foregoing, all Unvested Shares shall remain Unvested Shares
after any Transfer thereof.
"Family Members" with respect to an individual shall mean such
individual's spouse, parents, siblings, children and grandchildren.
"Fund$" shall mean the aggregate amount invested by Investor to
purchase shares of the Company's Common Stock and Preferred Stock pursuant to
the Equity
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Purchase Agreement dated of even date herewith and the Recapitalization
Agreement involving the Company dated August 11, 1999.
"Fair Market Value" of each share of Executive Stock means the average of
the closing prices of the sales of Common Stock on all securities exchanges on
which such Common Stock may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
such Common Stock is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such Common Stock is not quoted in the NASDAQ System, the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock (without minority discount) determined in
good faith by an independent appraisal firm selected by the Board, that is
reasonably acceptable to the Executive. The costs of such appraisal firm shall
be split evenly between the Company and the Executive.
"Initial Public Offering" shall mean the completion of the first Public
Offering of the Company's Common Stock with net proceeds to the Company prior to
any redemptions of the Preferred Stock of not less than $30 million.
"Market Liquidity" shall be deemed to exist after two years following the
effective date of an Initial Public Offering, if, and so long as, a Public
Market exists for the Common Stock.
"Organization" means any organization that has contracted with the Company
for the performance of services in connection with the Business.
"Original Cost" means with respect to each share of Common Stock purchased
hereunder, $.10 (as proportionately adjusted for all subsequent stock splits,
stock dividends and other recapitalizations).
"Permitted Transfer" shall mean a Transfer of Common Stock by the Executive
to (i) one or more Family Members of the Executive or (ii) to a trust solely for
the benefit of one or more Family Members of the Executive, provided that, prior
to any such Transfer, each transferee shall agree in writing, in a form
satisfactory to the Company, that such transferee shall receive and hold such
Common Stock subject to the provisions of this Agreement.
"Permitted Transferee" shall have the meaning assigned to such term in the
Stockholders Agreement.
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"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock.
"Public Market" for the Common Stock of the Company shall mean such Common
Stock is traded on a national exchange, the NASDAQ National Market System or any
registered interdealer quotation system involving at least three registered
market makers.
"Public Market Price" shall mean the average of the closing trading prices
of the Common Stock in the Public Market averaged over the four-calendar week
period immediately preceding the date upon which the determination of whether a
"Public Market" exists is made.
"Public Sale" means any sale pursuant to a registered public offering under
the Securities Act or any sale to the public pursuant to Rule 144 promulgated
under the Securities Act effected through a broker, dealer or market maker.
"Return" shall mean the annual rate of return which, when used to calculate
the net present value of the Cash Inflows and the Cash Outflows as of the Date
of Determination, causes such net amount to equal zero. As used in this
definition, "Cash Inflows" shall include, without duplication, (i) all cash
payments received by the Investor on or prior to the Date of Determination with
respect to Common Stock and Preferred Stock acquired with the Fund$ on or prior
to the Date of Determination (whether such payments are received from the
Company or any third party and whether such payments are received as interests,
dividends, proceeds with respect to sale or redemption of such securities, upon
a liquidation of the Company or otherwise), (ii) the fair market value of all
non-cash consideration received by the Investor in connection with the sale of
any Common Stock or Preferred Stock acquired by the Investor with Fund$, (iii)
if Market Liquidity exists on the Date of Determination, the Public Market Price
on the Date of Determination of any shares of Common Stock (including Common
Stock issuable upon conversion of Preferred Stock) acquired with Fund$ held by
the Investor on the Date of Determination, and (iv) if no Market Liquidity
exists on the Date of Determination, the Fair Market Value on the Date of
Determination of any shares of Common Stock (including Common Stock issuable
upon conversion of Preferred Stock) acquired with Fund$ held by the Investor on
the Date of Determination. As used in this definition, "Cash Outflows" shall
include the sum of all cash payments and investments made by the Investor to and
in the Company to purchase Common Stock and/or Preferred Stock acquired with
Fund$.
"Sale of the Company" means any transaction or series of transactions
pursuant to which any Person or Person(s) acting as a "Group" (as such term is
defined under the rules and regulations of the Securities Exchange Act of 1934,
as amended) other than the Investor and its Affiliates in the aggregate
acquire(s) (i) capital stock of the Company possessing the voting power (other
than voting rights acquiring only in the event of a default, breach or
-15-
event of noncompliance) to elect a majority of the Board (whether by merger,
consolidation, reorganization, combination, sale or transfer of the Company's
capital stock, stockholder or voting agreement, proxy, power of attorney or
otherwise) or (ii) all or substantially all of the Company's assets determined
on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Stockholders Agreement" means the Stockholders Agreement dated as of
August 12, 1999 among the Company, the Executive, the Investor and other
stockholders of the Company that may become a party thereto, as amended or
restated from time to time.
"Subsidiary" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
"Transfer" means to sell, transfer, assign, pledge or otherwise dispose of
all or any portion of any interest (whether with or without consideration and
whether voluntarily or involuntarily or by operation of law, including upon
death).
11. Notices. Any notice provided for in this Agreement must be in writing
-------
and must be either personally delivered, mailed by first class United States
mail (postage prepaid, return receipt requested) or sent by reputable overnight
courier service (charges prepaid) or by facsimile to the recipient at the
address below indicated:
If to the Executive:
-------------------
c/o Empyrean Group Holdings, Inc.
8300 Boone Boulevard, Suite 250
Vienna, VA 22182
Tel No.: (703) 790-9008
Fax No.: (703) 790-9033
with a copy to:
--------------
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Attention: Bruce A . Rosenblum
Tel No.: (202) 457-5111
Fax NO.: (202) 457-5151
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If to the Investor or the Company:
---------------------------------
c/o Thayer Equity Investors IV, L.P.
1455 Pennsylvania Avenue, NW
Suite 350
Washington, D.C. 20004
Attention: Robert Michalik
David McCoy
Tel No.: (202) 371-0150
Fax No.: (202) 371-0391
with a copy to:
--------------
Hogan & Hartson, LLP
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Attention: Christopher J. Hagan
Tel No.: (202) 637-5771
Fax No.: (202) 637-5910
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
12. General Provisions.
------------------
(a) Expenses. The Company agrees to pay Executive's reasonable legal,
--------
accounting and other expenses incurred in connection with the negotiation and
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement; provided, however, that the Company will in no
event be responsible for any such expenses incurred in excess of $10,000 for
Executive and all other executives executing signature pages hereto as a group.
(b) Transfers in Violation of Agreements. Any Transfer or attempted
-------------------------------------
Transfer of any Executive Stock in violation of any provision of this Agreement
or the Stockholders Agreement shall be void, and the Company shall not record
such Transfer on its books or treat any purported transferee of such Executive
Stock as the owner of such stock for any purpose.
(c) Severability. Subject to the provisions of Section 9(c) above, whenever
------------
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.
-17-
(d) Complete Agreement. This Agreement, those documents expressly referred
------------------
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(e) Counterparts. This Agreement may be executed in separate counterparts,
------------
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
(f) Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company, the Investor and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except as
otherwise specifically provided herein.
(g) Choice of Law. The corporate law of the Company's state of
-------------
incorporation will govern all questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto will be
governed by and construed in accordance with the internal laws of the
Commonwealth of Virginia, without giving effect to any choice of law or conflict
of law provision or rule (whether of the Commonwealth of Virginia or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the Commonwealth of Virginia.
(h) Remedies and Arbitration. Each of the parties to this Agreement
------------------------
(including the Investor) will be entitled to enforce its rights under this
Agreement to recover damages and costs (including reasonable attorney's fees)
caused by any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. Except for the remedies of the Company
provided in Section 9(c) hereof, the parties hereto agree to (i) initially
------------
submit any dispute arising out of or relating to this Agreement to mediation and
(ii) in the event such mediation is unsuccessful, to submit any disputes arising
out of or relating to this Agreement to binding arbitration in Washington, D.C.
administered by the American Arbitration Association under its Commercial
Arbitration Rules, before a panel of one arbitrator (such arbitrator to be
selected by lot or the mutual agreement of two other arbitrators, one chosen by
the Company and one by the Executive), and judgment on the award rendered by the
arbitrator may be entered into any court having jurisdiction thereof. The
prevailing party in any arbitration shall be entitled to recover its reasonable
attorneys' fees and costs from the other party or parties.
(i) Amendment and Waiver. The provisions of this Agreement may be amended
--------------------
and waived only with the prior written consent of the Company, Executive and the
Investor.
(j) Business Days. If any time period for giving notice or taking action
-------------
hereunder expires on a day which is a Saturday, Sunday or holiday in the state
in which
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the Company's chief executive office is located, the time period shall be
automatically extended to the business day immediately following such Saturday,
Sunday or holiday.
(k) Termination. This Agreement shall survive the termination of
-----------
Executive's employment with the Company and shall remain in full force and
effect after such termination.
(l) Generally Accepted Accounting Principles; Adjustments of Numbers. Where
----------------------------------------------------------------
any accounting determination or calculation is required to be made under this
Agreement or the exhibits hereto, such determination or calculation (unless
otherwise provided) shall be made in accordance with generally accepted
accounting principles, consistently applied, except that if because of a change
in generally accepted accounting principles the Company would have to alter a
previously utilized accounting method or policy in order to remain in compliance
with generally accepted accounting principles, such determination or calculation
shall continue to be made in accordance with the Company's previous accounting
methods and policies. All numbers set forth herein which refer to share prices
or amounts will be appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and other recapitalizations affecting the
subject class of stock.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
Date: EMPYREAN GROUP HOLDINGS, INC.
-------------------------------------------------------
Stuart C. Johnson, Chairman, President & CEO
Address: 8300 Boone Boulevard
Suite 250
Vienna, Virginia 22182
Date:
-------------------------------------------------------
Graham B. Perkins, Vice President & Secretary
Address: 8300 Boone Boulevard
Suite 250
Vienna, Virginia 22182
Date:
-------------------------------------------------------
Jason H. Levine, Vice President
Address: 8300 Boone Boulevard
Suite 250
Vienna, Virginia 22182
Date:
-------------------------------------------------------
Thomas B. Modly
Date:
-------------------------------------------------------
Bruce H. Allan
Date:
-------------------------------------------------------
David T. Fu
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Date:
-------------------------------------------------------
Matthew B. Walker
Date:
-------------------------------------------------------
Patricia A. Withers
Date: THAYER ITECH HOLDINGS, L.L.C.
-------------------------------------------------------
Robert E. Michalik, President
Address: c/o Thayer Equity Partners
1455 Pennsylvania Avenue, N.W., Suite 350
Washington, D.C. 20004
Attention: Chris Temple
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