EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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This Employment Agreement (this "Agreement"), made as of July 1, 1998,
by and among Avery Communications, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), and Patrick J. Haynes, III (hereinafter referred
to as "Employee").
W I T N E S S E T H:
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WHEREAS, the Company desires to employ the services of Employee as its
Chairman of the Board, President and Chief Executive Officer under the terms and
conditions set forth herein; and
WHEREAS, Employee desires to provide such services for the Company
under the terms and conditions set forth herein.
THEREFORE, in consideration of the mutual covenants undertaken herein,
and with the intent to be legally bound hereby, the parties hereby agree as
follows:
1. Employment. The Company hereby agrees to employ Employee and
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Employee hereby agrees to said employment in accordance with the terms and
conditions hereinafter set forth.
2. Term. Employment herewith shall commence as of July 1, 1998 (the
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"Effective Date"), and continue through June 30, 2003 (the "Termination Date"),
unless otherwise terminated pursuant to the terms hereof. This Agreement may be
extended for additional one year periods upon the mutual agreement of Employee
and the Company.
3. Location. Employer's duties hereunder shall be performed in the
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Chicago, Illinois, area. Employer agrees to maintain offices for the Company at
190 South LaSalle Street, Suite 1910, Chicago, Illinois 60603, or such other
address in the financial district of downtown Chicago as is selected by the
Board of Directors as the principal executive offices of the Company, and to
provide all equipment, supplies and other items required for the performance of
the Employee's duties under this Agreement at such address.
4. Duties. From and after the Effective Date through the Termination
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Date, Employee shall serve as Chairman of the Board, President and Chief
Executive Officer and as a member of the Board of Directors of the Company, and
with Employee's consent, each operating affiliate, provided that Employee shall
not be obligated to become or remain an officer of any Company affiliate (i)
whose organization documents do not provide indemnification provisions
reasonably satisfactory to Employee and (ii) which is not covered by the
directors' and officers' liability policy referred to in Paragraph 8 hereof.
Employee shall be responsible for the overall business of the Company and its
subsidiaries, including strategic planning, management recruiting, strategic
relationships, capital formation, operations reviews and oversight, and investor
and financial community relations.
5. Compensation.
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(a) For all services rendered by Employee in any capacity during his
employment under this Agreement (including, without limitation, services as an
executive, officer, or director of the Company, or any subsidiary or affiliate
of the Company, or as a member of any committee of the Board of Directors of the
Company ("Board") or any subsidiary or affiliate of the Company), the Company
shall pay Employee as compensation an annual salary ("Base Salary"). Effective
the Effective Date and until adjusted in accordance with the provisions hereof,
Base Salary shall be paid at the rate of not less than $200,000.00 per year.
(b) Employee shall be eligible for annual cash bonuses of up to 100% of
Employee's Base Salary, the amount of such bonus to be determined by the Board
based on Employee's attainment of certain performance goals as established by
the Board or a committee designated by the Board relating to the Company's
annual business plan/budget, such as the consummation of strategic business
relationships, the raising of additional debt and equity capital, the level of
appreciation in the publicly traded price of the Company's common stock, and
such other performance goals as may be specified by the Board. Such annual cash
bonuses determined by the Board shall be paid no later than 90 days following
the close of the fiscal year to which such bonus relates.
(c) Employee's Base Salary shall be payable in accordance with the
customary payroll practices of the Company, but in no event less frequently than
monthly. All salary and bonus compensation paid to Employee pursuant to this
Agreement shall be subject to the usual and customary federal and state tax
withholding and other employment taxes as required with respect to compensation
paid by Employer to its salaried personnel.
(d) Employee's Base Salary shall be reviewed on an annual basis. Such
review shall be conducted by the Board or a committee designated by the Board.
Such review shall take into consideration the Employee's performance, duties,
and responsibilities. As a result of such review, the Board may increase but not
decrease Employee's base salary. At the end of Employee's first employment
anniversary (June 30, 1999), Employee shall be eligible for a Base Salary
increase of ten percent provided Employee is performing at a satisfactory level.
6. Stock Warrants and Options.
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(a) Employee will be granted warrants (the "Stock Warrants") to
purchase up to 420,000 shares of the Company's common stock, par value $0.01 per
share (the "Common Stock"), which Stock Warrants will be exercisable as to each
tranche of shares through the day immediately preceding the third (3rd)
anniversary of the vesting date of such tranche at a price of $3.00 per share,
and the Stock Options shall become vested in accordance with the following
schedule: 140,000 shares upon signing of this Employment Agreement, and an
additional 140,000 shares on July 1, 1999 and 2000.
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Employee shall also be entitled to participate in any other stock
option or stock incentive plans adopted from time to time by the Company
(collectively, the "Stock Plans"). The resale of the Common Stock issued or to
be issued on exercise of the Stock Warrants and such other options that may be
granted to Employee under the Stock Plans (collectively, "Options") shall be
registered on a Registration Statement on Form S-8 (including a "reoffer
Prospectus" prepared in accordance with Part I of Form S-3) filed with the
Securities and Exchange Commission ("SEC") pursuant to the applicable provisions
of the Securities Act of 1933, as amended (the "1933 Act"), within sixty (60)
days following the date the Company is eligible to file a Registration Statement
on Form S-8 with the SEC; provided, however, that such Registration Statement
shall be amended, or a new Registration Statement shall be filed, so as to
permit Employee to sell such shares of Common Stock without regard to the volume
requirements specified in Rule 144(e) under the 1933 Act, which amendment or new
Registration Statement shall be filed with the SEC within thirty (30) days of
the time that the Company satisfies the registrant requirements for use of Form
S-3. The Company will use its best efforts to cause the grant of the Options and
other awards under the Stock Plans (collectively, "Awards"), and the sale of
shares of Common Stock to the Company in payment of the exercise price thereof
or in payment of withholding or other taxes in connection with such Awards, to
be exempt from liability under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), pursuant to Rule 16b-3 thereunder.
The Stock Warrants and the Awards and the shares of Common Stock issued
or to be issued pursuant to the Stock Warrants and the Awards shall have the
registration rights referred to in, and the Stock Warrants shall be subject to
the anti-dilution adjustments set forth in, the Stock Warrant Certificate
attached hereto as Exhibit A.
Notwithstanding anything else to the contrary contained herein, the
Stock Warrants and the Awards, whether or not vested or earned at the time,
shall be vested and earned in their entirety immediately upon a "Change in
Control" (as such term is defined in subparagraph (b) of this Paragraph 6
below).
(b) Change in Control. For purposes of this Agreement, a "Change in
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Control" shall mean the occurrence, after the Effective Date, of any of the
following events, directly or indirectly or in one or more series of
transactions: (i) approval by the Board of a consolidation or merger of the
Company with any third party (which includes a single person or entity or a
group of persons or entities acting in concert, other than those persons and
entities who or which are included within the definition of the "Shareholder
Group" set forth in subparagraph (f) of this Paragraph 6 below, and the group
created thereby (collectively, the "Existing Group")) not wholly owned directly
or indirectly by the Company (any such third party, other than the Existing
Group or a member thereof, being hereinafter referred to as a "Third Party"),
unless the Company is the entity surviving such merger or consolidation; (ii)
approval by the Board of a transfer, in one or a series of transactions, of all
or substantially all of the assets of the Company to a Third Party or a complete
liquidation or dissolution of the Company; (iii) a Third Party (other than an
employee benefit plan or related trust sponsored or maintained by the Company or
one of its subsidiaries), directly or indirectly, through one or more
subsidiaries or transactions or acting in concert with one or more persons or
entities: (A) acquires beneficial ownership of more than 30% of the classes of
stock of the Company entitled
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to vote generally in the election of directors of the Company ("Voting Stock");
(B) acquires irrevocable proxies representing more than 30% of the Voting Stock;
(C) acquires any combination of beneficial ownership of Voting Stock and
irrevocable proxies representing more than 30% of the Voting Stock; (D) acquires
the ability to control in any manner the election of a majority of the directors
of the Company; or (E) acquires the ability to directly or indirectly exercise a
controlling influence over the management or policies of the Company; (iv) any
election has occurred of persons to the Board that causes a majority of the
Board to consist of persons other than (A) persons who were members of the Board
on the Effective Date and/or (B) persons who were nominated for election as
members of the Board by the Board (or a committee of the Board) at a time when
the majority of the Board (or of such committee) consisted of persons who were
members of the Board on the Effective Date; provided, however, that any persons
nominated for election by the Board (or a committee of the Board), a majority of
whom are persons described in clauses (A) and/or (B), or are persons who were
themselves nominated by such Board (or a committee of such Board), shall for
this purpose be deemed to have been nominated by a Board composed of persons
described in clause (A); or (v) a determination is made by the Securities and
Exchange Commission ("SEC") or any similar agency having regulatory control over
the Company that a change in control, as defined in the securities laws or
regulations then applicable to the Company, has occurred. Notwithstanding any
provision contained herein, a Change in Control shall not include any of the
above described events if they are the result of a Third Party's inadvertently
acquiring beneficial ownership or irrevocable proxies or a combination of both
for 30% or more of the Voting Stock, and the Third Party as promptly as
practicable thereafter divests itself of beneficial ownership or irrevocable
proxies for a sufficient number of shares so that the Third Party no longer has
beneficial ownership or irrevocable proxies or a combination of both for 30% or
more of the Voting Stock.
7. Fringe Benefit Plans. The payments provided for in this Agreement,
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except where specifically provided otherwise, are in addition to any other
benefits to which Employee may be, or may become, entitled under any of the
Company's or Employer's group hospitalization, health, dental care, and/or
sick-leave plans; provided, however, that if no such plans are then in full
force and effect, or if the Employee is not eligible, or does not elect, to
participate therein, the Company shall reimburse or pay on behalf of Employee
any costs and expenses incurred by the Employee in providing such coverage for
himself and his dependents; life, other insurance and/or death benefit plans;
travel and/or accident insurance plans; deferred compensation plans; capital
accumulation programs; restricted and/or stock purchase plans; stock option
plans; retirement income and/or pension plans; supplemental pension plans;
excess benefit plans; short- and long-term disability programs; and other
present and future group employee benefit plans and programs for which Company
or Employer executives are or shall become eligible. Employee shall be eligible
to receive, during the period of his employment under this Agreement and during
any subsequent period for which he shall be entitled to receive payments from
the Company or Employer under Paragraph 12, all of the foregoing benefits and
emoluments for which executives are eligible under every such plan and program
to the extent permissible under the general terms and provisions of such plans
and programs and in accordance with the provisions thereof. Nothing contained in
this Agreement shall prevent the Board from amending or otherwise altering any
such plan, program, or arrangement as long as such amendment or alteration
equitably affects all the Company's executive officers (of the level of vice
president or above). Employer will provide the Employee with, or
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reimburse Employee for, any and all costs of purchasing or leasing an automobile
of his choice during the term of this Agreement.
8. Employee and Employer Representations. Employee hereby represents
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and warrants to the Company that (i) the execution, delivery and performance of
this Agreement by Employee do not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Employee is a party or is presently bound, and (ii) Employee is
not a party to or bound by any employment agreement, non-competition agreement
or confidentiality agreement with any other person or entity, and the execution
and delivery by Employee of this Agreement and the performance by Employee of
his duties and obligations hereunder will not conflict with, breach, violate or
cause a default under the terms and provisions of any such agreement. The
Company hereby represents that it will maintain directors' and officers'
liability insurance in an amount of no less than $3,000,000, and that Employee
will be covered under such policy while serving in all capacities contemplated
hereby.
9. Business Expenses. Employer shall reimburse Employee for all
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reasonable business and professional expenses incurred by Employee in connection
with his employment within thirty (30) days of Employer's receipt of vouchers,
receipts or other appropriate documentation.
10. Vacation. Employee shall be entitled to an annual vacation of not
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more than four (4) weeks. Scheduling of each vacation shall be with the
reasonable consent of Employer.
11. Professional Education. Employee's attendance at professional
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seminars shall be decided on an ad hoc basis by Employer and Employee.
12. Term of Employment. The term of the Employee's employment shall
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commence on the Effective Date and shall continue for the period set forth in
Paragraph 2 above unless sooner terminated as hereunder provided:
a. By Employer, "For Cause," as that term is defined below, upon
ten (10) days' written notice to Employee.
b. Upon the death of Employee.
c. By Employee, up to ten (10) days after written notice to
Employer of resignation by Employee (which time period shall
be in the sole discretion of Employer).
d. If Employee fails to perform his duties under this Agreement
on account of Disability (as hereinafter defined), Employer
may give notice to Employee to terminate this Agreement on a
date not less than thirty (30) days thereafter ("Notice
Period"), and, if Employee has not resumed full performance of
his duties under this Agreement within such Notice Period,
then Employee's employment under this Agreement will terminate
on the date provided in the notice. As used in this Agreement,
the term "Disability" shall mean the complete inability of
Employee to perform his duties
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under this Agreement by reason of his total and permanent
disability, as determined by an independent physician selected
with the approval of the Board and Employee. During any period
of Disability, Employer shall maintain and pay for health
insurance benefits for Employee at least equal to those he had
at the commencement of such Disability.
e. By Employee, in the event Employer is in material breach of
any of its obligations hereunder and such breach is not cured
within thirty (30) days of written notice thereof from
Employee. A material breach of Employer's obligations under
this Agreement includes, without limitation, (i) a material
change in Employee's reporting structure, responsibilities or
obligations under this Agreement without Employee's prior
written consent, or (ii) Employee's Base Salary, as in effect
on the Effective Date or as the same may be increased by the
Board from time to time, is reduced unless such reduction is
agreed to by Employee in writing; or (iii) the Company
requires Employee to be based somewhere other than Chicago,
Illinois.
f. By Employee if there shall occur a Change in Control.
For purposes of this Agreement, "For Cause" shall mean (i) the
conviction of Employee of either (A) a felony (excluding traffic violations) or
(B) any crime in connection with Employee's employment by the Company that
causes the Company a substantial and material financial detriment; (ii) the
commission of any other act involving dishonesty or fraud with respect to
Employer; (iii) substantial and repeated failure to perform duties as reasonably
directed by Employer that are permitted by law and necessary to implement
policies or procedures or other actions adopted, authorized or approved by the
Board of Directors of the Company and which, if Employee is not a member of the
Board of Directors of the Company, have been communicated to Employee in
writing, which failure is not cured within fifteen (15) days after written
notice thereof to Employee from Employer; (iv) gross negligence or willful
misconduct with respect to Employee's performance hereunder which results in a
substantial and material financial detriment to the Company; provided, however,
that the Company's failure to achieve certain results shall not be deemed to
constitute "For Cause" so long as Employee uses his reasonable best efforts to
perform such duties; or (v) any other material breach of this Agreement by
Employee which is not cured within thirty (30) days after written notice thereof
to Employee from Employer.
Anything in this Agreement to the contrary notwithstanding, Employer
reserves the right to terminate the term of Employee's employment at any time in
its sole discretion other than For Cause. If Employee's employment is terminated
(i) pursuant to subparagraphs (b), (c) or (d) of this Paragraph 12, Employee or
Employee's estate shall be entitled to exercise all of the Stock Warrants and
the Options and retain all Awards, which have then vested, in accordance with
their terms; and (ii) if Employee's employment is terminated by Employer other
than For Cause, or by Employee pursuant to subparagraph (e) or (f) of this
Paragraph 12, Employee or Employee's estate shall be entitled to exercise all of
the Stock Warrants and the Options and retain all Awards, regardless of whether
they have then vested, in accordance with their terms. If Employee's employment
is terminated pursuant to subparagraphs (b), (d), (e) or (f) of this Paragraph
12 or by Employer other
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than For Cause, Employee or Employee's estate shall be entitled to receive, as a
severance payment, a lump sum equal to the greater of (i) the Employee's then
current Base Salary through and including the Termination Date, or (ii) an
amount equal to 2.99 times the Employee's then current Base Salary, and
continuation of Employee's then current health, disability, medical and other
fringe benefits under Paragraph 7 at Employer's expense for one (1) year from
the date of such termination. Such lump sum payments payable hereunder shall be
payable within thirty (30) days of such termination. Notwithstanding anything
herein to the contrary, if the aggregate amount payable hereunder to the
Employee in respect of a Change of Control (the "Base Payment") would constitute
an "excess parachute payment" (as such term is defined in Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code")) subjecting the Employee
to an excise tax under Code Section 4999, then the Employee shall receive an
additional "Gross Up Payment" such that the net amount payable hereunder, after
reduction for the payment of such excise tax and for the payment of all other
excise, income, payroll, or other taxes payable in respect of the Gross Up
Payment, shall equal the Base Payment.
13. Termination of Compensation. Except as otherwise provided in
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Paragraph 12 hereof, if the term of Employee's employment terminates Employee
shall not be entitled to any compensation hereunder after the date of such
termination. Notwithstanding the foregoing, the parties shall be required to
carry out any provisions hereof which contemplate performance by them subsequent
to such termination, including: (i) the payment of any amounts of compensation
and fringe benefits under Paragraphs 5 and 7 hereof then accrued but unpaid;
(ii) the ability of Employee to exercise all Stock Warrants and Options and to
retain all Awards under Paragraph 6 and the Stock Plan; (iii) the covenants
regarding confidential information under Paragraph 15 hereof, the covenants
regarding work product under Paragraph 16 hereof; (iv) the registration rights
provisions contained in or referred to in subparagraph (a) of Paragraph 6 hereof
and in the Stock Warrant Certificate; (v) amounts reimbursable pursuant to
Paragraph 9 hereof; and amounts payable for unused vacation pursuant to
Paragraph 10 hereof. In addition, termination of this Agreement shall not affect
any liability or other obligation which shall have accrued prior to termination,
including, but not limited to, any liability for loss or damage on account of
default under this Agreement.
14. Loyalty. Employee shall devote his best efforts to the performance
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of services under this Agreement. During the term of this Agreement, Employee
shall not at any time or place whatsoever, either directly or indirectly, engage
in business or render services to any extent whatsoever to any third party,
except under and pursuant to this Agreement, and except that Employee may
participate in investments, volunteer, charitable, civic or similar activities
without Employer's consent, provided that such activities do not unreasonably
interfere with Employer's business or violate the provisions of this Agreement.
Employer hereby acknowledges that Employee has a broad and varied range of
investment interests and that Employee must devote such reasonable time and
attention to the proper and judicious management of such interests as may be
reasonably required from time to time. Accordingly, nothing contained in this
Agreement shall limit or be deemed to limit Employee's personal investment
activities, and Employee's engaging in such activities shall not be or be deemed
to be a breach or violation of this Agreement. In addition, and notwithstanding
contained herein to the contrary, Employee shall be entitled to receive
compensation payments subsequent to the effective date of this Agreement in
connection with services performed
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by Employee for Thurston Group, Inc. and NetDox, Inc. and their respective
affiliates, and Employee may continue to serve as the Chairman of the Board
and/or officer of Thurston Group, Inc. and NetDox, Inc. and to sit on the board
of directors or advisors of Thurston Group, Inc. and NetDox, Inc. and other
companies, provided such companies do not compete with Employer or interfere
with Employee's duties to Employer. Employer consents to Employee's continuing
to perform such services.
15. Confidential Information. Employee acknowledges that the
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proprietary information, observations and data obtained by Employee while
employed by Employer concerning the business or affairs of Employer, or any
affiliate or subsidiary thereof ("Confidential Information") is the property of
Employer or such affiliate or subsidiary; provided, however, that the term
"Confidential Information" does not include information that (a) at the time it
was received by Employee was generally available to the public; (b) prior to its
use by Employee, becomes generally available to the public through no act or
failure of Employee; (c) is received by Employee from a person who is not a
party to this Agreement and who is not under an obligation of confidence with
respect to such information; or (d) is generally known by Employee on the
Effective Date, including, without limitation, information gained by virtue of
his past experience and know how and his personal records and notes. Therefore,
Employee agrees not to disclose to any unauthorized person or use for the
Employee's account any Confidential Information without the prior written
consent of Employer. Upon request, Employee shall deliver to Employer at the
termination of this Agreement all memoranda, notes, plans, records, reports and
other documents (and copies thereof) relating to the Confidential Information.
16. Work Product. Employee agrees that all methods, analyses, reports,
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plans and all similar or related information which (i) relate to Employer or any
of its affiliates or subsidiaries and which (ii) are conceived, developed or
made by Employee in the course of his employment by Employer ("Work Product")
belong to Employer or its affiliates or subsidiaries. Employee will promptly
disclose such Work Product to Employer and perform all actions reasonably
requested by Employer to establish and confirm such ownership by Employer.
17. Non-Assignability. Except as otherwise provided herein, neither
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this Agreement nor any right or interest under this Agreement shall be
assignable or subject to any encumbrances, pledge, hypothecation, attachment, or
anticipation of any kind by Employee, his spouse, his estate or his legal
representatives without the Company's written consent or by the Company without
Employee's written consent. This Agreement shall inure upon the Company, and its
successors and permitted assigns, and Employee and his estate, beneficiaries,
legal representatives and permitted assigns.
18. Entire Agreement. This Agreement expresses the entire agreement and
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understanding of the parties relating to the subject matter hereof, cancels and
supersedes any prior negotiations, promises, agreements, representations,
warranties, or understandings relating to the same subject matter, and, except
as expressly provided herein, shall be subject to subsequent modification only
by another mutually signed written instrument which by its terms evidences an
intention to modify or amend the provisions hereof.
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19. Choice of Law. This Agreement shall be construed in accordance with
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the internal laws of the State of Illinois.
20. Cost of Enforcement. Each party shall bear its own costs and
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attorneys' fees in connection with any suit or proceeding against the other to
enforce any provision of this Agreement or to recover damages resulting from a
breach of this Agreement; provided, however, the party which prevails in any
such suit or proceeding shall be entitled to receive from the nonprevailing
party the costs and reasonable attorneys' fees of the prevailing party incurred
in such suit or proceeding.
21. Severability. In the event that any provision hereof is determined
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to be illegal or unenforceable, such determination shall not affect the validity
or enforceability of the remaining provisions hereof, all of which shall remain
in full force and effect.
22. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto.
23. Interpretation. All captions are included only for reference and
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shall not constitute substantive provisions hereof.
24. Notices. Any notice, request, claim, demand, document and other
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communication hereunder to any party hereto shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telecopy (with such telecopy confirmed promptly in writing sent by first class
mail) or other similar means of communications, as follows:
(i) if to the Company, addressed to 190 South LaSalle Street,
Suite 1710, Chicago, Illinois 60603, Attention: Board of
Directors and Secretary, Fax No. (312) 419-0172; or
(ii) if to Employee, addressed to him at 190 South LaSalle Street,
Suite 1710, Chicago, Illinois 60603, Fax No. (312) 419-0172;
or, in each case, to such other address or telecopy number as such party may
designate in writing to the other by written notice given in the manner
specified herein.
All such communications shall be deemed to have been given, delivered
or made when so delivered personally or sent by telecopy or express mail service
(with confirmation received).
25. Waiver. Employee on the one hand or the Company on the other hand
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may by written notice to the other party or parties hereto (i) extend the time
for the performance of any of the obligations or other actions of the other
under this Agreement; (ii) waive compliance with any of the conditions or
covenants of the other contained in this Agreement; and (iii) waive or modify
performance of any of the obligations of the other under this Agreement. Except
as provided in the
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preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant, or agreement contained herein. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any preceding or succeeding breach,
and no failure by any party hereto to exercise any right or privilege hereunder
shall be deemed a waiver of such party's rights or privileges hereunder or shall
be deemed a waiver of such party's rights to exercise that right or privilege at
any subsequent time or times hereunder.
INTENDING TO BE LEGALLY BOUND BY THIS AGREEMENT, the parties sign below
as of the date first written above.
EMPLOYEE: EMPLOYERS:
____________________________ Avery Communications, Inc.
Patrick J. Haynes, III
By:______________________________________
Name: Scot M. McCormick
Title: Vice President
ATTEST:__________________________________
Name: Mercedes Fehsel
Title: Assistant Secretary
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