Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this XXst day
of April, 2003, by and between JAMES MCMURPHY, an individual resident of the
State of Georgia ("Employee"), and INNOTRAC CORPORATION, a Georgia corporation
(the "Employer").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into an agreement for the
Company's continued employment of Employee on the terms and conditions contained
herein;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms hereof, the Employer hereby employs Employee, and
Employee hereby accepts such employment. Employee will serve as Vice President
and Chief Information Office of the Employer or in such other executive capacity
as the Board of Directors of Employer (the "Board of Directors") may hereafter
from time to time determine. Employee agrees to devote his full business time
and best efforts to the performance of the duties that Employer may assign
Employee from time to time and provided further that the Employee may also serve
on boards of directors or trustees of other companies and organizations, as long
as such service does not materially interfere with the performance of his duties
hereunder.
Section 2. Term of Employment.
The term of Employee's employment (the "Term") shall continue from the date
hereof until the earlier of (a) December 31, 2005 or (b) the occurrence of any
of the following events:
(i) The death or total disability of Employee (total disability
meaning the failure to fully perform his normal required services hereunder
for a period of three (3) months during any consecutive twelve (12) month
period during the term hereof, as determined by the Board of Directors, by
reason of mental or physical disability);
(ii) The termination by Employer of Employee's employment hereunder,
upon prior written notice to Employee, for "good cause", as determined by
the Board of Directors. For purposes of this Agreement, "good cause" for
termination of Employee's employment shall exist (A) if Employee is
convicted of, pleads guilty to, or confesses to any felony or any act of
fraud, misappropriation or embezzlement, (B) if Employee fails to comply
with the terms of this Agreement, and, within thirty (30) days after
written notice from Employer of such failure, Employee has not corrected
such failure or, having once received such notice of failure and having so
corrected such failure, Employee at any time thereafter again so fails, (C)
if Employee violates any of the provisions contained in Section 4 of this
Agreement, or (D) if Employee tests positive for illegal drugs; or
(iii) The termination of this Agreement by either party upon
at least ninety (90) days prior written notice.
Section 3. Compensation.
3.1 Term of Employment. Employer will provide Employee with the following
salary, expense reimbursement and additional employee benefits during the term
of employment hereunder:
(a) Salary. Employee will be paid a salary (the "Salary") of no less
than Two Hundred Five Thousand ($205,000) per annum, less deductions and
withholdings required by applicable law. The Salary shall be paid to
Employee in equal monthly installments (or on such more frequent basis as
other executives of Employer are compensated). The Salary shall be reviewed
by the Board of Directors of Employer on at least an annual basis.
(b) Stock Options. Employee will be granted 50,000 stock options
priced at fair market value at date of grant, subject to the approval of
the Board of Directors.
(c) Bonus. Employee will be entitled to an annual bonus (the "Bonus")
of 50% of Salary at Plan (to be defined) with a 3-up-3-down formula. The
Bonus shall be paid promptly upon the availability of annual financial
results (which is expected to occur in early February of each year).
(d) Vacation. Employee shall receive four (4) weeks vacation time per
calendar year during the term of this Agreement. Any unused vacation days
in any calendar year may not be carried over to subsequent years.
(e) Expenses. Employer shall reimburse Employee for all reasonable
and necessary expenses incurred by Employee at the request of and on behalf
of Employer.
(f) Benefit Plans. Employee may participate in such medical, dental,
disability, hospitalization, life insurance and other benefit plans (such
as pension and profit sharing plans) as Employer maintains from time to
time for the benefit of other senior executives of Employer, on the terms
and subject to the conditions set forth in such plans.
3.2 Effect of Termination.
(a) Except as hereinafter provided, upon the termination of the
employment of Employee hereunder for any reason, Employee shall be entitled
to all compensation and benefits earned or accrued under Section 3.1 as of
the effective date of termination (the "Termination Date"), but from and
after the Termination Date no additional compensation or benefits shall be
earned by Employee hereunder. Employee shall be deemed to have earned any
Bonus payable with respect to the calendar year in which the
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Termination Date occurs on a prorated basis (based on the number of days in
such calendar year through and including the Termination Date divided by
365) based upon the year to date financials and performance of the Employer
and assuming performance at the target level for any individual
performance criteria. Any such Bonus shall be payable upon termination.
(b) If Employee's employment hereunder is terminated by Employer
pursuant to Section 2(b)(iii) hereof, then, in addition to any other amount
payable hereunder, Employer shall continue to pay Employee his normal
Salary pursuant to Section 3.1(a) for a three-month period (on the same
basis as if Employee continued to serve as an employee hereunder for such
applicable period). If Employee's employment is terminated pursuant to
Section 2(b)(i) hereof or if Employee's employment is terminated by
Employer pursuant to Section 2(b)(iii), all options to purchase stock of
the Company or an affiliate of the Company granted to Employee shall
immediately become exercisable upon such termination. In the case of a
termination pursuant to Section 2(b)(i) hereof, the options will expire in
accordance with their respective scheduled expiration dates. Except as
provided in Section 3.3, in the case of a termination by Employer pursuant
to Section 2(b)(iii) hereof, the options will expire on the first
anniversary after the effective date of the termination of Employee's
employment hereunder. Upon the death of Employee, any options that Employee
would otherwise be entitled to exercise hereunder may be exercised by his
personal representatives or heirs, as applicable. Except as provided in
Section 3.3, if Employee's employment is terminate by Employer pursuant to
Section 2(b)(ii) or by Employee pursuant to Section 2(b)(iii), those
options which are exercisable as of the date of such termination shall be
exercisable for a period of 90 days after such termination (and all other
options not then exercisable shall be forfeited as of such date), and after
such 90-day period, all unexercised options will expire. To the extent
necessary, this provision shall be deemed an amendment of any option
agreement between the Employee and the Employer or an affiliate of the
Employer.
3.3 Effect of Change in Control. Notwithstanding Section 3.2(b) above, if
there is a Change in Control (as defined below) of the Employer and the
Employee's employment is terminated within 18 months following the date of the
Change in Control, the following provisions shall apply.
(a) If Employee's employment hereunder is terminated by Employer
pursuant to Section 2(b)(iii) hereof or by Employee for "Good Reason" as
defined below, then, in addition to any other amount payable pursuant to
Section 3.2(a), the Employee shall be entitled to receive the compensation
and benefits set forth in subsections (i) through (iv) below:
(i) Base Salary. Employee will continue to receive his Salary as
then in effect (subject to withholding of all applicable taxes) for a
period of six (6) months from his date of termination in the same
manner as it was being paid as of the date of termination.
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(ii) Health, Dental and Life Insurance Coverage. The health,
dental and group term life insurance benefits coverage provided to
Employee at his date of termination shall be continued at the same
level and in the same manner as if his employment under this Agreement
had not terminated (subject to the customary changes in such coverages
if Employee retires, reaches age 65 or similar events), beginning on
the date of such termination and ending on the date six (6) months
from the date of such termination. Any additional coverages Employee
had at termination, including dependent coverage, will also be
continued for such period on the same terms, to the extent permitted
by the applicable policies or contracts. Any costs Employee was paying
for such coverages at the time of termination shall be paid by
Employee by separate check payable to the Company each month in
advance or by reduction of amounts owed to Employee by the Employer.
If the terms of any benefit plan referred to in this Section, or the
laws applicable to such plan, do not permit continued participation by
Employee, then the Company will arrange for other coverage at its
expense providing substantially similar benefits. The coverages
provided for in this paragraph shall be applied against and reduce the
period for which COBRA will be provided.
(iii) Stock Options. Notwithstanding any provision in any option
agreement, all outstanding stock options granted to Employee by
Employer or an affiliate of Employer shall become fully vested on the
date of Employee's termination of employment and shall remain
exercisable as provided in the applicable option agreement or, if
longer, for a period of three (3) years following the date of
termination of employment. To the extent necessary, this provision
shall be deemed an amendment of any option agreement between the
Employee and the Employer or an affiliate of the Employer.
(b) If Employee's employment hereunder is terminated by Employee
pursuant to Section 2(b)(iii) hereof other than for "Good Reason" as
defined below, then, in addition to any other amount payable pursuant to
Section 3.2(a), the Employee shall be entitled to receive the compensation
and benefits set forth in subsections (i) through (iii) of Subsection
3.3(a) above, provided, however, that a period of 3 months shall be
substituted for 6 months in subsections 3.3(a)(i), (ii).
3.4 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(a) "Change in Control" means any of the following events:
(i) The acquisition (other than from the Employer) by any person
of beneficial ownership of fifty percent (50%) or more of the combined
voting power of the Employer's then outstanding voting securities;
provided, however, that for purposes of this Section, person shall not
include any person who on the date hereof owns 25% or more of the
Employer's outstanding securities, and a Change in Control shall not
be deemed to occur solely because fifty percent
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(50%) or more of the combined voting power of the Employer's then
outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by
the Employer or any of its subsidiaries, or (ii) any corporation, which,
immediately prior to such acquisition, is owned directly or indirectly by
the shareholders of the Employer in the same proportion as their ownership
of stock in the Employer immediately prior to such acquisition.
(ii) Approval by shareholders of the Employer of (1) a merger or
consolidation involving the Employer if the shareholders of the Employer,
immediately before such merger or consolidation do not, as a result of such
merger or consolidation, own, directly or indirectly, more than fifty
percent (50%) of the combined voting power of the then outstanding voting
securities of the corporation resulting from such merger or consolidation
in substantially the same proportion as their ownership of the combined
voting power of the voting securities of the Employer outstanding
immediately before such merger or consolidation, or (2) a complete
liquidation or dissolution of the Employer, or (3) an agreement for the
sale or other disposition of all or substantially all of the assets of the
Employer.
(iii) A change in the composition of the Board such that the
individuals who, as of the date of this Agreement, constitute the Board
(such Board shall be hereinafter referred to as the "INCUMBENT BOARD")
cease for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this SECTION that any individual who
becomes a member of the Board subsequent to the Effective Date whose
election, or nomination for election by the Employer's shareholders, was
approved by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, including any successor to such Rule), or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board, shall not be so considered as a member of the
Incumbent Board.
(iv) The occurrence of any other event or circumstance which is not
covered by (i) through (iii) above which the Board determines affects
control of the Company and adopts a resolution that such event or
circumstance constitutes a Change in Control for the purposes of this
Agreement.
(b) A "Good Reason" for termination by Employee of Employee's employment
shall mean the occurrence (without the Employee's express written consent),
within the eighteen (18) month period following the date of a Change in Control,
of any one of the following acts by the Employer, or failures by the Employer to
act, unless, in the case of any act or failure to act described in paragraph (i)
or (iv) below, such act or
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failure to act is corrected within 30 days after notice by the Employee
to the Employer of the act or failure to act:
(i) the assignment to Employee of any duties inconsistent with
Employee's title and status set forth herein, or a substantial adverse
alteration in the nature or status of Employee's responsibilities at
the Employer from those in effect immediately prior to the Change in
Control;
(ii) a substantial reduction by the Employer in Employee's Base
Salary;
(iii) the failure by the Employer to continue in effect any
compensation or benefit plan or program in which Employee participates
immediately prior to the Change in Control, which is material to
Employee's total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Employer to continue
the Employee's participation in such plan (or in such substitute or
alternative plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of Employee's
participation relative to other participants, as existed at the time
of the Change in Control.
The Employee's right to terminate the Employee's employment for Good
Reason shall not be affected by the Employee's incapacity due to physical
or mental illness, except for a total disability as defined in Section 2
above. The Employee's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
Section 4. Partial Restraint on Post-termination Competition.
4.1 Definitions. For the purposes of this Section 4, the following
definitions shall apply:
(a) "Company Activities" means the business of selling caller ID
technology and hardware, fulfillment services, e-commerce fulfillment and
e-commerce return services as well as other similar services that Innotrac
or its subsidiaries is involved in at the date of this agreement.
(b) "Competitor" means any business, individual, partnership, joint
venture, association, firm, corporation or other entity, other than the
Employer or its affiliates or subsidiaries, engaged, wholly or partly, in
Company Activities.
(c) "Competitive Position" means (i) the direct or indirect
ownership or control of all or any portion of a Competitor; or (ii) any
employment or independent contractor arrangement with any Competitor
whereby Employee will serve such Competitor in any managerial capacity.
(d) "Confidential Information" means any confidential, proprietary
business information or data belonging to or pertaining to Employer that
does not constitute a
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"Trade Secret" (as hereinafter defined) and that is not generally known by or
available through legal means to the public, including, but not limited to,
information regarding Employer's customers or actively sought prospective
customers, suppliers, manufacturers and distributors gained by Employee as a
result of his employment with Employer.
(e) "Customer" means actual customers or actively sought prospective
customers of Employer during the Term.
(f) "Noncompete Period" or "Nonsolicitation Period" means the period
beginning the date hereof and ending on the first anniversary of the
termination of Employee's employment with Employer.
(g) "Territory" means the area within a thirty-five (35) mile radius of
any corporate office of Employer or any of its subsidiaries, affiliates or
divisions.
(h) "Trade Secrets" means information or data of or about Employer,
including but not limited to technical or non-technical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, products plans, or lists of actual
or potential customers, clients, distributees or licensees, information
concerning Employer's finances, services, staff, contemplated acquisitions,
marketing investigations and surveys, that (i) derive economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from their disclosure or use; and (ii) are the subject of efforts that are
reasonable under the circumstances to maintain their secrecy.
(i) "Work Product" means any and all work product, property, data
documentation or information of any kind, prepared, conceived, discovered,
developed or created by Employee for Employer or its affiliates, or any of
Employer's or its affiliates' clients or customers.
4.2 Trade Name and Confidential Information.
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(a) Employee hereby agrees that (i) with regard to each item constituting
all or any portion of the Trade Secrets, at all times during the Term and all
times during which such item continues to constitute a Trade Secret under
applicable law; and (ii) with regard to any Confidential Information, during
the Term and the Noncompete Period:
(i) Employee shall not, directly or by assisting others, own,
manage, operate, join, control or participate in the ownership,
management, operation or control of, or be connected in any manner
with, any business conducted under any corporate or trade name of
Employer or name similar thereto, without the prior written consent of
Employer;
(ii) Employee shall hold in confidence all Trade Secrets and all
Confidential Information and will not, either directly or indirectly,
use, sell, lend, lease, distribute, license, give, transfer, assign,
show, disclose, disseminate,
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reproduce, copy, appropriate or otherwise communicate any Trade
Secrets or Confidential Information, without the prior written consent
of Employer; and
(iii) Employee shall immediately notify Employer of any
unauthorized disclosure or use of any Trade Secrets or Confidential
Information of which Employee becomes aware. Employee shall assist
Employer, to the extent necessary, in the procurement or any
protection of Employer's rights to or in any of the Trade Secrets or
Confidential Information.
4.3 Noncompetition.
(a) The parties hereto acknowledge that Employee is conducting
Company Activities throughout the Territory. Employee acknowledges that to
protect adequately the interest of Employer in the business of Employer it
is essential that any noncompete covenant with respect thereto cover all
Company Activities and the entire Territory.
(b) Employee hereby agrees that, during the Term and the Noncompete
Period, Employee will not, in the Territory, either directly or indirectly,
alone or in conjunction with any other party, accept, enter into or take
any action in conjunction with or in furtherance of a Competitive Position.
Employee shall notify Employer promptly in writing if Employee receives an
offer of a Competitive Position during the Noncompete Term, and such notice
shall describe all material terms of such offer.
Nothing contained in this Section 4 shall prohibit Employee from acquiring
not more than five percent (5%) of any company whose common stock is publicly
traded on a national securities exchange or in the over-the-counter market.
4.4 Nonsolicitation During Employment Term. Employee hereby agrees that
Employee will not, during the Term, either directly or indirectly, alone or in
conjunction with any other party solicit, divert or appropriate or attempt to
solicit, divert or appropriate, any Customer for the purpose of providing the
Customer with services or products competitive with those offered by Employer
during the Term.
4.5 Nonsolicitation During Nonsolicitation Period. Employee hereby agrees
that Employee will not, during the Nonsolicitation Period, either directly or
indirectly, alone or in conjunction with any other party solicit, divert or
appropriate or attempt to solicit, divert or appropriate, any Customer for the
purpose of providing the Customer with services or products competitive with
those offered by Employer during the Term; provided, however, that the covenant
in this clause shall limit Employee's conduct only with respect to those
Customers with whom Employee had substantial contact (through direct or
supervisory interaction with the Customer or the Customer's account) during a
period of time up to but no greater than two (2) years prior to the last day of
the Term.
Section 5. Miscellaneous.
5.1 Severability. The covenants in this Agreement shall be construed as
covenants independent of one another and as obligations distinct from any other
contract between
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Employee and Employer. Any claim that Employee may have against Employer shall
not constitute a defense to enforcement by Employer of this Agreement.
5.2 Survival of Obligations. The covenants in Section 4 of this
Agreement shall survive termination of Employee's employment, regardless of who
causes the termination and under what circumstances.
5.3 Notices. Any notice or other document to be given hereunder by any
party hereto to any other party hereto shall be in writing and delivered in
person or by courier, by telecopy transmission or sent by any express mail
service, postage or fees prepaid at the following addresses:
EMPLOYER
Innotrac Corporation
6655 Sugarloaf Parkway
Duluth, GA 30097
Attention: Mr. Scott Dorfman
Chief Executive Officer
Telephone No.: (678) 584-4000
EMPLOYEE
Mr. James McMurphy
[Address to be forwarded within 120 days of signing this agreement]
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party or its agent.
5.4 Binding Effect. This Agreement inures to the benefit of, and is
binding upon, Employer and their respective successors and assigns, and
Employee, together with Employee's executor, administrator, personal
representative, heirs, and legatees.
5.5 Entire Agreement. This Agreement is intended by the parties hereto to
be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof,
notwithstanding any representations, statements or agreements to the contrary
heretofore made. This Agreement may be modified only by a written instrument
signed by all of the parties hereto.
5.6 Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed, and governed by and in accordance
with, the laws of the State of Georgia. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority or by any board of
arbitrators by reason of such party or its counsel having or being deemed to
have structured or drafted such provision.
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5.7 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.8 Specific Performance. Each party hereto hereby agrees that any remedy
at law for any breach of the provisions contained in this Agreement shall be
inadequate and that the other parties hereto shall be entitled to specific
performance and any other appropriate injunctive relief in addition to any other
remedy such party might have under this Agreement or at law or in equity.
5.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
5.10 Public Announcement. Neither party shall disclose that this Agreement
has been executed until such time as both parties mutually agree to such
disclosure.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INNOTRAC CORPORATION
By: /s/ Scott D. Dorfman
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Scott D. Dorfman
Chief Executive Officer
EMPLOYEE
/s/ James McMurphy
--------------------------------
James McMurphy
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