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EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") dated as of July 24, 1997, is entered into by
and between CIC SYSTEMS, INC., a Delaware corporation (the "Company"), and John
Paget (the "Executive").
RECITALS
The Company, through its Board of Directors, desires to retain the services
of Executive, and Executive desires to be retained by the Company, on the terms
and conditions set forth in this Agreement.
AGREEMENT
For and in consideration of the foregoing and of the mutual covenants of
the parties herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby employs Executive to serve in the
capacities described herein and Executive hereby accepts such employment and
agrees to perform the services described herein upon the terms and conditions
hereinafter set forth.
2. TERM. The term of Executive's employment pursuant to this Agreement
shall commence on August 15, 1997 and shall terminate at the close of business
on June 30, 2002, subject to earlier termination in accordance the other terms
and conditions set forth herein.
3. DUTIES. Executive shall serve as and have the title of the President and
Chief Executive Officer of the Company. The Executive's principal place of
employment shall be Charlotte, North Carolina. Executive agrees to devote his
full business time, energy, skills and best efforts to such employment while so
employed. Nothing in this Agreement shall preclude Executive from engaging, so
long as, in the reasonable determination of the Board of Directors, such
activities do not interfere with his duties and responsibilities hereunder, in
charitable and community affairs, from managing any passive investment made by
him or from serving, subject to the prior approval of the Board of Directors, as
a member of the board of directors or as a trustee of any other corporation,
association or entity.
4. COMPENSATION.
(a) BASE COMPENSATION. The Company shall pay Executive, and Executive
agrees to accept, base compensation at the rate of $256,000 per year, payable in
equal, bi-weekly
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installments, through the term of this Agreement ("Base Compensation"). The Base
Compensation specified in this Section 4(a) may be increased annually during the
term of this Agreement in the sole discretion of the Compensation Committee of
the Board of Directors.
(b) BONUS COMPENSATION. Subject to the attainment by the Company of
the sales targets (the "Sales Target") and net income targets (the "Income
Target") set forth on EXHIBIT A hereto in any fiscal year of the Company during
the term of this Agreement, the Company shall pay Executive an annual bonus
("Bonus Compensation") within 30 days following the Company's receipt of audited
financial statements for such fiscal year. In the event that the Company meets
or exceeds the Sales Target AND the Income Target in a fiscal year, Executive
shall receive Bonus Compensation equal to $150,000 for such fiscal year;
provided, however, that: (i) if the Company meets the Sales Target but fails to
attain the Income Target, Executive shall receive Bonus Compensation equal to
$105,000, and (ii) if the Company meets the Income Target but fails to attain
the Sales Target, Executive shall receive Bonus Compensation equal to $45,000.
If the Company fails to attain both targets in a fiscal year, Executive shall
not receive any Bonus Compensation for such fiscal year. The Compensation
Committee of the Board of Directors may, in its sole discretion, revise the
Sales Target and the Income Target for fiscal year 1998-1999 and any fiscal year
thereafter.
(c) STOCK OPTIONS. The Company shall grant Executive a stock option
award in amounts, at such exercise prices, and on such terms as set forth in the
Stock Option Agreement by and between the Company and the Executive of even date
herewith.
5. FRINGE BENEFITS.
(a) GENERALLY. Executive shall be eligible for fringe benefits
pursuant to any insurance, pension or other employee fringe benefit plan
approved by the Board of Directors that now or hereafter may be made available
to employees of the Company and for which Executive will qualify according to
his eligibility under the provisions thereof.
(b) HEALTH AND DISABILITY INSURANCE. Executive shall be entitled to
participate in such health and disability insurance plans that the Company
offers to other executive officers of the Company from time to time, provided
that such participation shall not exclude any pre-existing conditions with
respect to the Executive or his family..
(c) LIFE INSURANCE. The Company shall, at its sole expense, provide
Executive with term life insurance in a face amount equal to not less than
$1,100,000.00.
(d) FLEX DAYS. During the term of this Agreement, Executive shall be
entitled to twenty-four (24) flex days per year which Executive may use for
vacation, holidays, illness or any other purpose.
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(e) RELOCATION EXPENSES. Executive shall be reimbursed for: (i) all
moving expenses, including packing and unpacking costs, incurred in connection
with Executive's relocation from Houston, Texas to Charlotte, North Carolina;
(ii) temporary housing expenses for a period not to exceed 180 days; (iii)
closing costs on the sale of Executive's existing home, not to exceed two
percent (2%) of the sale price of such home; (iv) closing costs on the purchase
of Executive's new home, not to exceed one percent (1%) of the purchase price of
such home; and (v) the broker's commission on the sale of Executive's existing
home, not to exceed seven percent (7%) of the sale price of such home.
(f) To the extent that any of the payments to be made pursuant to
Section 5(e) create taxable income (net of any deductions allowable to Executive
under the Internal Revenue Code of 1986, as amended (the "Code")) for Executive,
Executive shall receive an additional payment (the "Additional Payment") such
that the total amount payable pursuant to Section 5(e) and the Additional
Payment, after deducting from such payments all taxes imposed thereon, shall be
equal to the amount payable pursuant to Section 5(e). Such calculations shall be
made with respect to all taxes on the assumption that federal, state and local
income taxes are payable at the highest applicable statutory rates.
6. EXPENSES. The Executive shall be reimbursed for all usual expenses
incurred on behalf of the Company, in accordance with Company practices and
procedures, provided that:
(a) Each such expenditure is of a nature deductible under Section 162
of the Internal Revenue Code of 1986, as amended (the "Code") on the Federal
income tax return of the Company as a business expense and not as deductible
compensation to Executive; and
(b) Executive furnishes the Company with adequate documentary evidence
required by the Code or any regulation promulgated thereunder for the
substantiation of such expenditures as a deductible business expense of the
Company and not as deductible compensation to Executive.
Executive agrees that, if at any time, any payment made to Executive by the
Company as a business expense reimbursement shall be disallowed in whole or in
part as a deductible expense to the Company by the appropriate taxing
authorities, Executive shall reimburse the Company to the full extent of such
disallowance.
7. TERMINATION. The term of Executive's employment under this Agreement may
be terminated prior to expiration of the term provided in Section 2 hereof in
accordance with the following paragraphs.
(a) FOR CAUSE. This Agreement may be immediately terminated by the
Company for Cause (as herein defined) and, upon thirty (30) days written notice
to Executive, without Cause, for any reason or for no reason. For purposes of
this Agreement, the term "Cause"
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shall mean the termination of the Executive by the Board of Directors of the
Company as a result of the existence or occurrence of one or more of the
following conditions or events:
(i) a material breach by the Executive of any provision of
this Agreement, or the willful and continued failure of Executive substantially
to perform his duties under his employment with the Company;
(ii) Executive's willful misconduct or gross negligence in
connection with the performance of his duties as an employee or officer of the
Company;
(iii) performance by the Executive of any act of fraud or
material misrepresentation or a material act of misappropriation which results
or is intended to result in Executive's personal enrichment at the expense of
the Company;
(iv) conviction of the Executive of any crime which
constitutes either (i) a felony offense involving violence (but not involving a
motorized vehicle) or fraud, embezzlement, theft or business activities, or (ii)
a misdemeanor involving fraud, embezzlement or theft in the United States or
which, if it had been committed in the United States, would constitute either a
felony offense involving violence or fraud, embezzlement, theft or business
activities or a misdemeanor involving fraud, embezzlement or theft in the United
States;
(v) violation by the Executive of any law which results in
the entry of a judgment or order enjoining or preventing the Executive from such
activities as are essential for the Executive to perform his services as
required by this Agreement; or
(vi) a good faith determination by the Board of Directors
that Executive has engaged in conduct or activities materially damaging to the
business of the Company, monetarily or otherwise, it being understood that
neither conduct or activities pursuant to the Executive's exercise of his good
faith business judgment nor unintentional physical damage to properties by the
Executive shall be a ground for such a determination.
(b) EXECUTIVE. Executive may voluntarily terminate his employment
hereunder upon thirty (30) days written notice to the Company.
(c) MUTUAL. Executive's employment under this Agreement may be
terminated upon mutual written agreement of the Company and the executive.
(d) DEATH. In the event of the death of Executive, this Agreement
shall terminate immediately.
(e) DISABILITY. If, during Executive's employment under this
Agreement, Executive shall become permanently disabled and unable to perform his
duties as required herein
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("Disability") for a consecutive period of one hundred eighty (180) days, then
the Company may, upon thirty (30) days written notice to Executive, terminate
Executive's employment under this Agreement.
(f) CHANGE OF CONTROL. In the event of a "Change in Control" (as
defined in this Section 7(f)), Executive may elect, at any time during the
180-day period immediately following such Change in Control, to deliver 60 days'
written notice to the Company of his termination of employment hereunder.
Termination of Executive's employment under this Agreement pursuant to the
provisions of the preceding sentence shall be deemed a termination without Cause
for purposes of Section 9 hereof and shall not be deemed to be a voluntary
resignation or termination by Executive. For purposes of this Agreement, a
"Change in Control" shall be deemed to have occurred when:
(i) any person, who is not the owner of more than fiver percent
of the outstanding common stock of the Company on the date hereof, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, acquires that number of shares of the Company's voting stock that
would permit it, or such group, as the case may be, to elect a majority of the
Board of Directors of the Company;
(ii) the shareholders of the Company approve a reorganization,
merger, consolidation or similar transaction (in each case a "Business
Combination") with respect to which all or substantially all holders of the
outstanding capital stock of the Company immediately prior to such Business
Combination do not, following such Business Combination, beneficially own,
directly or indirectly, more than 50% of the outstanding capital stock of the
Company; or
(iii) the sale of all or substantially all of the Company's
assets to any person, or group of persons, other than to an affiliate of the
Company.
8. DEATH AND DISABILITY. In the event of the termination of Executive's
employment under this Agreement by reason of the Executive's death or
Disability, the Company shall pay Executive (or his heirs and/or personal
representatives), Base Compensation through the date of death or the date of
termination for Disability as provided in Paragraph 7(e), respectively.
9. SEVERANCE. In the event of the termination of Executive's employment
under this Agreement for any reason other than Executive's death or Disability,
the Company shall provide the payments and benefits to Executive as indicated
below:
(a) WITH CAUSE OR VOLUNTARY TERMINATION BY EXECUTIVE. If Executive is
terminated for Cause (as defined in Section 7(a) of this Agreement), or if
Executive voluntarily terminates his employment with the Company, the Company
shall be obligated only to continue to pay to Executive his Base Compensation,
if any, earned up to the date of termination and shall
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reimburse the Executive for any expenses to which the Executive is due
reimbursement by the Company under Section 6 hereof. In addition, Company shall
pay any vested benefits, if any, owed to Executive under any plan provided for
Executive under Paragraph 5 hereof in accordance with the terms of such plan as
in effect on the date of termination of employment under this Paragraph 9.
(b) WITHOUT CAUSE OR FOLLOWING A CHANGE OF CONTROL. If the Company
terminates this Agreement without Cause, or the Executive gives notice of
termination during the 180-day period immediately following a Change of Control,
or at any time after August 15, 1998 for any reason whatsoever, Executive shall
continue to receive until the date twenty-four (24) months from the date of such
termination, or, in the case of termination by the Executive after August 15,
1998, until the date twelve (12) months from the date of termination: (i) Base
Compensation under this Agreement; and (ii) health and life insurance, with
benefits substantially similar to those that Executive was entitled to receive
prior to such termination, or at the Company's option, a lump sum equal to the
value of such benefits; provided, however, that the severance benefits included
in this Paragraph 9(b) shall be discontinued in the event that Executive earns
income by rendering services to, or on behalf of, any other person or entity
during said twenty-four month, or twelve month, period, respectively.
10. CONFIDENTIAL INFORMATION. Executive recognizes and acknowledges that he
will have access to certain confidential information of the Company and of
corporations with whom the Company does business, and that such information
constitutes valuable, special and unique property of the Company and such other
corporations. During the term of this Agreement and for a period of five (5)
years immediately following the date of termination of this Agreement, Executive
agrees not to disclose or use any confidential information, including without
limitation, information regarding research, developments, product designs or
specifications, manufacturing processes, "know-how," prices, suppliers,
customers, costs or any knowledge or information with respect to confidential or
trade secrets of the Company, it being understood that such confidential
information does not include information that is publicly available unless such
information became publicly available as a result of a breach of this Agreement.
Executive acknowledges and agrees that all notes, records, reports, sketches,
plans, unpublished memoranda or other documents belonging to the Company, but
held by Executive, concerning any information relating to the Company's
business, whether confidential or not, are the property of the Company and will
be promptly delivered to it upon Executive's leaving the employ of the Company.
Executive also agrees to execute such confidentiality agreements that the Board
may adopt, and may modify from time to time, as a standard form to be executed
by all employees of the Company, to the extent such standard forms are not
materially more restrictive than the provisions of this Agreement.
11. NON-SOLICITATION. At all times during the term of this Agreement and
thereafter, Executive shall not, directly or indirectly, induce, influence,
combine or conspire with, or attempt to induce, influence, combine or conspire
with, any of the officers, employees, agents or consultants of the Company to
terminate their employment, or other relationship, with or compete against the
Company or any future subsidiaries, parents or affiliates of the Company in the
business of selling,
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distributing, installing and/or servicing microcomputers, peripherals,
components and/or accessories, microcomputer software products, and
custom-designed microcomputer systems (the "Business").
12. NON-COMPETITION. Executive acknowledges that his services and
responsibilities are unique in character and are of particular significance to
the Company, that the Company engages in a competitive business with a national
market and that Executive's continued and exclusive service to the Company under
this Agreement is of a high degree of importance to the Company. Therefore,
during the term of this Agreement and for a period of two (2) years thereafter
(the "Noncompete Period"), Executive shall not, directly or indirectly, engage
in the Business, or in any other business which, at the time of Executive's
termination, the Company is actively engaged or plans to engage in (the "Future
Business"), except as an employee or agent of the Company, and shall not,
directly or indirectly, as owner, partner, joint venturer, employee, broker,
agent, corporate officer, principal, licensor, shareholder (unless as owner of
no more than five percent (5%) of the issued and outstanding capital stock of
such entity if such stock is publicly traded) or in any other capacity
whatsoever, engage in or have any connection with any business which is
competitive with the Business or any Future Business, and which operates
anywhere in the United States. In the event Executive is terminated by the
Company without Cause prior to the expiration of the term of this Agreement, the
Noncompete Period shall be modified such that it expires on the date of such
involuntary termination.
13. RESTRICTIVE COVENANTS.
(a) If, in any judicial proceedings, a court shall refuse to enforce
any of the covenants included in Paragraphs 10, 11 or 12 hereof, then such
unenforceable covenant shall be amended to relate to such lesser period or
geographical area as shall be enforceable. In the event the Company should bring
any legal action or other proceeding against Executive for enforcement of this
Agreement, the calculation of the Noncompete Period, if any, shall not include
the period of time commencing with the filing of legal action or other
proceeding to enforce this Agreement through the date of final judgment or final
resolution, including all appeals, if any, of such legal action or other
proceeding unless the Company is receiving the practical benefits of this
Paragraph 9 during such time. The existence of any claim or cause of action by
Executive against the Company predicated on this Agreement shall not constitute
a defense to the enforcement by the Company of these covenants.
(b) Executive hereby acknowledges that the restrictions on his
activity as contained in this Agreement are required for the Company's
reasonable protection and is a material inducement to the Company to enter into
this Agreement. Executive hereby agrees that in the event of the violation by
him of any of the provisions of this Agreement, the Company will be entitled to
institute and prosecute proceedings at law or in equity to obtain damages with
respect to such violation or to enforce the specific performance of this
Agreement by Executive or to enjoin Executive from engaging in any activity in
violation hereof. The prevailing party in any litigation
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brought to enforce the restrictive provisions contained in this Agreement shall
be entitled to reimbursement from the nonprevailing party for reasonable
attorneys' fees and expenses incurred in connection with such litigation.
(c) Notwithstanding anything to the contrary contained herein, in the
event that Executive engages in any conduct prohibited by Paragraphs 10, 11 or
12 hereof for any reason whatsoever, Executive shall not receive any of the
severance benefits he otherwise would be entitled to receive pursuant to
Paragraph 9 hereof.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
the addresses below or to such other address as either party shall designate by
written notice to the other:
IF TO THE EXECUTIVE: To the address set forth below his signature on the
signature page hereof.
IF TO THE COMPANY:
CIC Systems, Inc..
2425 CrownPoint Executive Drive
Charlotte, North Carolina 28227
Attention: Chief Financial Officer
15. ENTIRE AGREEMENT; MODIFICATION.
(a) This Agreement contains the entire agreement of the Company and
Executive, and the Company and Executive hereby acknowledge and agree that this
Agreement supersedes any prior statements, writings, promises, understandings or
commitments between the parties hereof.
(b) No future oral statements, promises or commitments with respect to
the subject matter hereof, or other purported modification hereof, shall be
binding upon the parties hereto unless the same is reduced to writing and signed
by each party hereto.
16. ASSIGNMENT. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. The Executive may not assign his rights and
obligations under this Agreement.
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17. MISCELLANEOUS.
(a) This agreement shall be subject to and governed by the laws of the
State of Delaware, without regard to the conflicts of laws principles thereof.
(b) The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or the interpretation of this
Agreement.
(c) The failure of any party to enforce any provision of this
Agreement shall in no manner affect the right to enforce the same, and the
waiver by any party of any breach of any provision of this Agreement shall not
be construed to be a waiver by such party of any succeeding breach of such
provision or a waiver by such party of any breach of any other provision.
(d) All written notices required in this Agreement shall be sent
postage prepaid by certified or registered mail, return receipt requested.
(e) In the event any one or more of the provisions of this Agreement
shall for any reason be held invalid, illegal or unenforceable, the remaining
provisions of this Agreement shall be unimpaired, and the invalid, illegal or
unenforceable provision shall be replaced by a mutually acceptable valid, and
enforceable provision which comes closest to the intent of the parties.
(f) This Agreement may be executed in any number of counterparts, each
of which shall constitute an original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as
of the day and year first above written.
CIC SYSTEMS, INC.
/s/ Samuel C. McElhaney
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By: Samuel C. McElhaney
Its: President
EXECUTIVE
/s/John Paget
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John Paget
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