EXHIBIT 10.7
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 1st day of February, 2001, between PALADYNE
CORP., a Delaware corporation with its principal office at 610 Executive
Crescent Court, Suite 124, Lake Mary, Florida 32746 (the "Corporation"), and
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Terrence J. Leifheit, an individual residing at 1017 Wild Dunes Road, Wilmington
North Carolina 28405 (the "Executive").
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WITNESSETH:
WHEREAS, the Corporation develops and services provider customer support
services and software for electronic commerce (the "Business"), which Business
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has been developed after the expenditure of significant time, money and human
resources; and
WHEREAS, as of the date hereof, the Corporation is acquiring (the "ecom
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Acquisition") e-commerce support centers, inc., a North Carolina corporation
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("ecom"), and a condition to the Closing of the ecom Acquisition is the entry
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into this Agreement, and accordingly, effective upon such Closing the
Corporation desires to employ the Executive on the terms and conditions herein;
and
WHEREAS, prior to the ecom Acquisition, the Executive has been an employee
of ecom, and desires to become an employee of the Corporation in connection with
the ecom Acquisition on the terms and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Employment Term. Subject to the terms and conditions hereof, the
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Corporation hereby employs the Executive, and the Executive agrees to be so
employed by the Corporation, from the date hereof through December 31, 2003.
Thereafter, this Agreement shall be automatically renewed for two successive six
month terms unless either party notifies the other party at least thirty (30)
days prior to the expiration of the then current term of his or its desire to
terminate the Agreement (the "Employment Term").
2. Duties. The Executive shall serve as President and Chief Operating
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Officer of the Corporation, but shall be named the Chief Executive Officer (CEO)
on or before February 1, 2003. As such the Executive shall be responsible for
supervising operations of the Corporation. The Executive shall report to the CEO
or Board of Directors of the Corporation. Throughout the term of this Agreement,
Executive shall be based in an office located in either Jacksonville, North
Carolina or Raleigh, North Carolina as Executive determines is appropriate.
3. Time and Efforts. During the Employment Term, the Executive shall
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diligently and conscientiously devote his full business time, attention and
ability to the business of the Corporation. The Executive shall fulfill the
duties and responsibilities hereby conferred upon him honestly, diligently, in
good faith, with his best efforts and in the best interests of the Corporation.
The Executive shall not, during the Employment Term, engage in any other
business activity without the prior written approval of the Corporation, except
for personal investments in a passive capacity.
4. Remuneration.
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4.1. Compensation. During the Employment Term, the Corporation shall
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pay the Executive base compensation and other compensation for his services as
set forth in Schedule A attached to this Agreement.
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4.2. Benefits. During the Employment Term, the Executive, by reason of
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his position, title, tenure, health and other qualifications that make him
eligible, shall participate in employee health, disability, vacation and other
benefit plans offered by the corporation at the same level as the most senior
executives of the Corporation and additional items, if any, as set forth in
Schedule B attached to this Agreement.
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5. Expenses. The Corporation shall pay or reimburse the Executive for
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all reasonable and necessary expenses incurred by him in carrying out his duties
under this Agreement upon presentation by the Executive of an itemized account
of such expenditures in accordance with the Corporation reimbursement policies.
6. Termination.
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6.1. By the Corporation. Notwithstanding anything contained herein to
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the contrary, this Agreement may be terminated by the Corporation immediately
upon written notice for Cause. For purposes of this Section, "Cause" means: (i)
conviction of the Executive for a felony involving a crime of moral turpitude,
including fraud, (ii) any material breach by Executive in the performance of his
duties under this Agreement that is not cured within fifteen (15) days after
written notice thereof, or (iii) any willful failure to follow the direction of
the Board of Directors of the Corporation (provided the action directed by the
Board is lawful and ethical) by the Executive in the performance of his duties
under this Agreement which is not cured within fifteen (15) days after written
notice thereof, or (iv) theft or embezzlement of the assets of the Corporation
by the Executive. In addition, this Agreement shall automatically terminate,
without any further action of either party, upon the death or disability of the
Executive. For the purposes of this Agreement, "disability" shall mean a mental
or physical illness or condition rendering the Executive incapable of performing
his usual and customary duties on behalf of the Corporation on a full time basis
for ninety (90) consecutive days.
6.2. Termination Benefit. In the event the Executive's employment
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hereunder is terminated by reason of Section 6.1 hereof, the Corporation's
obligations hereunder shall terminate and payment, shall thereafter be made by
the Corporation to the Executive of his compensation earned through the date of
termination.
6.3. By the Executive. Notwithstanding anything contained herein to
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the contrary, this Agreement may be terminated by the Executive immediately and
without notice for Cause. For purposes of this Section, "Cause" means: (i) any
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act or acts of the Corporation which would constitute a felony (or its
equivalent) or fraud, (ii) any breach by Corporation in the performance of its
duties under this Agreement which is not cured within fifteen (15) days after
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notice thereof, or (iii) any material change in duties, position or authority
without his prior written consent.
6.4. Executive Termination Benefits. In the event the Executive
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terminates his employment pursuant to Section 6.3 hereof or the Corporation
terminates his employment without cause as defined in Section 6.2 hereof, the
Corporation shall pay the Executive's compensation for the remainder of the then
Employment Term and continue to pay the premiums on his health insurance policy
for the balance of the then Employment Term.
7. Confidentiality.
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7.1. Confidentiality of the Corporation's and Clients' Information.
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The Executive acknowledges that the Corporation currently possesses, will
develop and will come into the possession of business information which is owned
by or may be valuable to the Corporation or the clients of the Corporation. The
Executive shall not use, exploit, reveal, divulge or make known to any person,
firm or corporation, any information or materials supplied by the Corporation or
the Corporation's clients to the Executive or otherwise learned by the Executive
while employed by the Corporation, including without limitation, discoveries,
works, source code, know-how, developments, inventions, accounting and financial
information, technology, computer software, computer programs, trade secrets,
forms, customer lists, mailing lists, databases, pricing, operating records,
marketing strategies, processes, plans, business practices and strategies, sales
information and commercial and other information or data, whether communicated
in writing, electronically, orally, by observation or other sensory detection
(the "Proprietary Information"). The Proprietary Information of the Corporation
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and its clients shall also include all letters, memoranda, notes, reports and
other documents containing or referencing the Proprietary Information, and all
copies, reproductions and extracts thereof, prepared by the Executive or the
Corporation or its agents. Any prior Confidentiality Agreements or
Non-Disclosure Agreements between the Executive and the Corporation are
incorporated herein, and in the event of any inconsistency between the provision
of any such agreements and this Agreement, the provisions of this Agreement
shall govern as of the date hereof.
7.2. Limitations. The Executive shall have the right to communicate
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the Proprietary Information to such of the Corporation's officers, directors,
employees, agents and other representatives as may be necessary to enable the
Corporation to provide services to its clients. Further, the obligation with
regard to confidentiality and non-use contained in this Section 7 shall not
extend to any Proprietary Information which: (a) at the time of disclosure is,
through no fault of the Executive, in the public domain or thereafter becomes
part of the public domain by publication or otherwise through no fault of the
Executive, (b) the Executive can establish was properly in the Executive's
possession prior to the time of disclosure to the Executive, (c) is
independently made available to the Executive by a third party who has not
violated a confidential relationship with the Corporation or its clients, or (d)
is required to be disclosed by legal process, provided that the Executive uses
his best efforts to timely inform the Corporation or the client and permit the
Corporation or its client to attempt by appropriate legal means to limit such
disclosure. The exclusions enumerated above shall not apply to any specific
information merely because it is included in more general non-proprietary
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information nor to any specific combination of information merely because
individual elements, but not the combination, are included in non-proprietary
information.
7.3. Definition. For purposes of this Section 7 and also for Sections
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8 through 11 hereof the term the "Corporation" shall be deemed to include any
subsidiary or affiliate of Paladyne Corp., including, but not limited to, ecom.
8. Work Product. The Executive agrees and acknowledges that all work
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product made or conceived by the Executive during his employment by the
Corporation, jointly or with others, that relates to the Business (including
actual or demonstrably anticipated research or development of the Corporation),
or results from any work performed by the Executive for the Corporation, shall
be owned by the Corporation. The term "work product" includes, but is not
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limited to, software, source code, databases, correspondence, reports, customer
lists, marketing plans and strategies and business plans and strategies,
including any new idea or concept which is developed by the Corporation as a
business strategy. The Executive shall: (a) promptly notify, make full
disclosure to, and execute and deliver any documents requested by the
Corporation to evidence or better assure title to such work product in the
Corporation, (b) assist the Corporation in obtaining or maintaining for itself
at its own expense United States and foreign copyrights, patents, trade secret
protection or other protection of any and all such work product, and (c)
promptly execute, whether during the Executive's employment by the Corporation
or thereafter, all applications or other endorsements necessary or appropriate
to maintain rights for the Corporation and to protect its title thereto.
9. Indemnification.
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9.1. General. The Corporation will (i) defend and pay defense costs,
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including legal fees of mutually agreed upon legal counsel retained by the
Corporation on behalf of the Executive, and (ii) pay any judgment, settlement or
other liability against Executive resulting directly or indirectly from his
actions as an officer, director or employee of the Corporation or any subsidiary
or affiliated company to the fullest extent permitted by law.
9.2. Securities Law Compliance. The Corporation shall retain its legal
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counsel and pay for legal and other expenses in connection with the Executive's
compliance with securities laws, including, without limitation, Sections 13 and
16 of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5
thereunder.
10. Corporate Opportunity. The Executive agrees that during the
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Employment Term he shall not take any action which might divert from the
Corporation any opportunity which would be within the scope of the Business of
the Corporation, the loss of which would have, in the reasonable judgment of the
Board of Directors of the Corporation, an adverse effect upon the Corporation,
unless the Board of Directors of the Corporation has given prior written
approval, including but not limited to, the following: (a) entering into or
engaging in competition with the Corporation, (b) contacting any customer,
client or prospective client or customer of the Corporation on any matter
relating to the Business of the Corporation except for the benefit of the
Corporation, or (c) owning, managing, operating, controlling, being employed by,
participating in or being connected in any manner with the ownership, operation
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or control of any business or venture which competes in any manner with the
Corporation or otherwise engages in the Business, provided that the foregoing
restriction shall not prohibit the Executive form owning less than a five
percent (5%) equity interest in a publicly held corporation.
11. Restriction on Competition.
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11.1. Non-Competition. For one (1) year following the termination of
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the Executive's employment with Corporation by the Corporation for Cause
pursuant to Section 6.1 hereof, or by the Executive except pursuant to 6.3
hereof, the Executive shall not, either directly or indirectly, act as sole
proprietor, an agent, consultant or employee of, or on behalf of, or in
conjunction with, a person, firm, corporation or other entity, or as a partner
of or an investor in a partnership, or as a member of or an investor in a
limited liability company, or as a shareholder, director or officer of a
corporation: (a) enter into or engage in competition with the Corporation in the
continental United States (the "Territory"), (b) contact any client or
prospective client of the Corporation on any matter relating to the Business of
the Corporation except for the benefit of the Corporation, or (c) own, manage,
operate, control, be employed by, participate in or be connected in any manner
with the ownership, operation or control of any business or venture in the
Territory which competes in any manner with the Corporation or otherwise engages
in the Business; provided, however, that a foregoing restriction shall not
prohibit the Executive from owning less than a five percent (5%) equity interest
in a publicly held company.
11.2. Non Solicitation. For three months following the termination of
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the Executive's employment with the Corporation by the Corporation for Cause
pursuant to Section 6.1 hereof, or by the Executive except pursuant to Section
6.3 hereof, or for five months following the termination of Executive's
employment with the Corporation for any other reason, the Executive shall not,
either directly or indirectly, as a sole proprietor, agent, consultant or
employee of, or on behalf of, or in conjunction with, a person, firm,
corporation or other entity, or as a partner of or an investor in a partnership,
or as a member of or an investor in a limited liability company, or as a
shareholder, director or officer of a corporation, or by means of any corporate
or other device entice away, employ or solicit for employment any current or
former employee (as of February 1, 2001) of the Corporation, or engage, whether
as an employer, employee, partner, member, agent, owner, shareholder, operator
or otherwise, or by means of any corporate or other device, in any business with
any current of former employee of the Corporation that materially and directly
competes with the Business of the Corporation.
12. Remedies.
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12.1. Injunctive Relief. Both Parties agree that the remedy of
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monetary damages for any breach or threatened breach by the other of the
covenants set forth in this Agreement will be inadequate to remedy fully the
breach because any breach or attempted breach by such Party would cause
immediate, substantial and irreparable loss to the other Party in an amount
which would be impossible to ascertain. Accordingly, in the event of any breach
or threatened breach of any of said covenants by either Party, in addition to
any and all other legal and equitable remedies which may be available, including
suit for recovery of actual damages, the Parties, and/or any parent, affiliated
or related company, any successor of the Corporation or heir or devisee of the
Executive shall be entitled to preliminary and permanent injunctive relief,
without the necessity of proving actual loss, by reason of such breach and, to
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the extent permissible under the applicable law, a temporary restraining order
shall be granted immediately on commencement of any such suit.
12.2. Validity. If any paragraph, sentence, clause or other provision
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of this Agreement, or the application of such provision, is held invalid or
unenforceable by a court of competent and relevant jurisdiction, such provision
shall be deemed to be modified in a manner consistent with the intent of such
original provision, so as to make it valid and enforceable, and this Agreement,
and the application of such provision to persons or circumstances other than
those with respect to which it would be invalid or unenforceable, shall not be
affected thereby.
13. Miscellaneous.
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13.1. Assignment. The Executive acknowledges that the services to be
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rendered by him are unique and personal. Accordingly, Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement, except as otherwise expressly provided herein.
13.2. Binding Effect. This Agreement shall inure to the benefit of and
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be binding upon the Corporation, its successors and assigns, including without
limitation any person, partnership, company or corporation which may acquire
substantially all of the Corporation's assets or business, or with or into which
the Corporation may be consolidated, merged or otherwise combined, and shall
inure to the benefit and be binding upon Executive, his heirs, distributes and
personal representatives.
13.3. Notice. All offers, acceptances, notices, requests, replies,
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waivers, consents, demands and other communications hereunder or relating hereto
are effective as of the date they are sent if: (a) sent by certified mail,
postpaid with return receipt requested, or (b) sent by prepaid "overnight"
delivery service. Any communication given in any other manner shall be effective
only if and when received by the party to be notified. For the purposes of this
Section 12.3, the addresses of the parties shall be as set forth in the heading
of this Agreement. Either party may change the address to which such
communications are to be sent by notice to the other party as provided herein.
13.4. Waiver. Failure of either party to insist in any one or more
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instances upon performance of any of the terms or conditions of this Agreement
shall not be construed as a waiver of future performance of any such term,
covenant or condition, but the obligations of either party with respect thereto
shall continue in full force and effect.
13.5. Entire Agreement. This Agreement contains the entire
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understanding and agreement between the parties with respect to the subject
matter hereof and cannot be amended, modified or supplemented in any respect
except by a subsequent written agreement entered into by both parties.
13.6. Governing Law. This Agreement is a contract made under, and
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shall be governed by and construed in accordance with, the law of the State of
North Carolina applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of such State.
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13.7. Heading. The headings are to be used solely for convenience and
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are not to be used in construing or interpreting this Agreement.
13.8. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
PALADYNE CORP.
By: /s/ John D. Foster
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John D. Foster, Chairman of the Board
EXECUTIVE:
/s/ Terrence J. Leifheit
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Terrence J. Leifheit
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SCHEDULE A
SALARY
1. Base Compensation.
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A. First Year. During the first year of the Employment Term, the
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Corporation shall pay Executive as annual base compensation for his services a
salary of Three Hundred Thousand Dollars ($300,000) paid bi-monthly at the rate
of $12,500.00 in accordance with normal payroll practices.
B. Deferral of First Year Base Compensation. Notwithstanding the
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foregoing Section 1 A above, Executive has agreed to defer his base salary until
the earlier to occur of the following: (i) August 1, 2001, or (ii) the closings
of an aggregate of Three Million Dollars ($3,000,000) in financing (including
any bridge financings or the like). During such deferral period, the Executive
shall be paid a base salary at an annual rate of One Hundred Sixty Thousand
Dollars ($160,000) paid bi-monthly at the rate of $6,666.67 in accordance with
normal payroll practices.
C. Second Year. During the second year of the Employment Term, the
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Corporation shall pay Executive as annual base compensation for his services a
minimum salary of Four Hundred Thousand Dollars paid bi-monthly at the rate of
$16,666.67 in accordance with normal payroll practices.
D. Third Year. During the third year of the Employment Term, the
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Corporation shall pay Executive as annual base compensation for his services a
minimum salary Four Hundred Thousand Dollars paid bi-monthly at the rate of no
less than $16,666.67 in accordance with normal payroll practices.
D. Definition. As used in this Schedule A, the term "first year"
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shall mean the period from February 1, 2001 until December 31, 2001. The term
"second year" shall mean the calendar year following the first year (January 1,
2002 through December 31, 2002). The term "third year" shall mean the calendar
year following the second year (January 1, 2003 through December 31, 2003).
2. Bonus.
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A. One Time Cash Bonus. If Executive has not been named Chief
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Executive Officer of the Corporation on or before February 1, 2003, then
Executive shall receive a one time cash bonus in the amount of Five Hundred
Thousand Dollars ($500,000) to be paid on or before March 1, 2003.
Notwithstanding the foregoing, the Corporation and the Executive may mutually
agree in writing to extend such February 1, 2003 deadline a maximum of two (2)
consecutive six month extensions.
B. 2001 Bonus. The Executive shall receive a cash bonus based on
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total revenue billed (without regard to collection) by the Corporation as of
December 31, 2001 to be paid on or before February 1, 2002. Such bonus will be
based on the following table:
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Billed Amount Bonus Amount
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$2,500,000 $100,000
$3,000,000 $150,000
$3,500,000 $250,000
C. 2002 Bonus. The Executive shall receive a cash bonus equal to
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0.5% of the total revenue billed (without regard to collection) by the
Corporation for the month of December 2002 to be paid on or before February 1,
2003.
D. 2003 Bonus. The Executive shall receive a cash bonus equal to
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0.5% of the total revenue billed (without regard to collection) by the
Corporation for the month of December 2003 to be paid on or before February 1,
2004.
3. Option. The Executive shall be granted stock options under the
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Corporation's 1996 Stock Option Plan or other plan as may be in effect from time
to time during the Employment Term, at the sole discretion of the Board of
Directors or Committee thereof which may then be administering the plan.
A. At Closing. On the date hereof, the Corporation shall grant to
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the Executive One Hundred Thousand options which shall vest immediately.
B. Year 2001 Options. The Corporation shall award Executive options
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to purchase 100,000 shares of the Corporation's Common Stock if the EBITDA of
the Corporation is between -$500,000 and $0 for the fiscal year ending August
31, 2001. Such award shall be granted on the date upon which the EBITDA is
determined under standard accounting procedures, which date shall be no later
than the official filing of the Corporation's Form 10-K for the fiscal year
ending August 31, 2001. The exercise price of the foregoing stock option award
shall be the fair market value of the Corporation's Common Stock the day before
the earlier of the filing of the Corporation's Form 10-K or the release of the
press release containing the financial performance of the Corporation for the
fiscal year ending August 31, 2001.
C. First Quarter 2002 Options. The Corporation shall award Executive
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options to purchase 100,000 shares of the Corporation's Common Stock if the
EBITDA of the Corporation is greater than $0 for the period beginning October 1,
2001 and ending December 31, 2001. Such award shall be granted on the date upon
which the EBITDA is determined under standard accounting procedures, which date
shall be no later than the official filing of the Corporation's Form 10-Q for
the fiscal quarter ending December 31, 2001. The exercise price of the foregoing
stock option award shall be the fair market value of the Corporation's Common
Stock the day before the earlier of the filing of the Corporation's Form 10-Q or
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the release of the press release containing the financial performance of the
Corporation for the fiscal quarter ending December 31, 2001.
D. Fiscal Year Ending August 31, 2002. The Corporation shall award
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Executive options to purchase 300,000 shares of the Corporation's Common Stock
which grant shall be contingent upon the Corporation achieving certain EBITDA
levels to be negotiated by the Executive and the Corporation in good faith.
E. Fiscal Year Ending August 31, 2003. The Corporation shall award
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Executive options to purchase 400,000 shares of the Corporation's Common Stock
which grant shall be contingent upon the Corporation achieving certain EBITDA
levels to be negotiated by the Executive and the Corporation in good faith.
F. General. Unless otherwise indicated above, the exercise price of
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each of the foregoing stock option awards shall be the fair market value of the
Corporations Common Stock on the date of each respective grant. All of the
foregoing grants are subject to approval of the compensation committee or board
of directors.
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SCHEDULE B
EMPLOYEE BENEFITS
In addition to all other customary employee benefits, Corporation will purchase
a "key man" life insurance policy insuring Executive's life that shall pay the
amount of One Million Dollars upon Executive's death as follows: $250,000 shall
be payable to the benefit of Executive's estate and $750,000 shall be payable to
the benefit of the Corporation.
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