Exhibit 10.27
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
April 15, 2003 by and between Eric L. Pratt (the "Executive") and Avatech
Solutions, Inc., a Delaware corporation ("Avatech").
EXPLANATORY STATEMENT
Avatech desires to employ Executive, and Executive desires to enter into
employment with Avatech, as Avatech's President and Chief Operating Officer, and
to perform services for Avatech on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the Explanatory Statement, which is
incorporated by reference herein, the mutual covenants, agreements,
representations and warranties herein set forth, and other good and valuable
consideration, the adequacy and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
1. Employment and Duties. From and after April 15, 2003 (the "Commencement
Date"), Avatech shall employ Executive as the President and Chief Operating
Officer of Avatech. Executive shall perform such duties as may be assigned to
him from time to time by the Board of Directors of Avatech, and shall report
directly to the Chief Executive Officer. Executive shall use his best efforts on
a full time basis (at least 40 hours per week) in the performance of his duties
on behalf of Avatech.
2. Compensation and Benefits.
2.1. Salary. Executive's base annual salary ("Base Salary") shall be one
hundred and ninety-six thousand dollars ($196,000), payable in accordance with
Avatech's customary payroll policies in force at the time of payment.
2.2. Incentive Compensation and Bonuses. Prior to the end of each of
Avatech's fiscal years, Avatech's Chief Executive Officer and the Board of
Directors shall adopt annual performance measures, with quarterly targets, for
the Executive for the upcoming fiscal year (the "Performance Goals"). In the
event that the Executive's performance meets the Performance Goals, Avatech will
pay to Executive an annualized bonus of one hundred thousand dollars ($100,000)
(the "Incentive Compensation"), payable in quarterly installments in accordance
with Avatech's customary payroll policies in force at the time of payment. In
the event that Executive's performance exceeds the Performance Goals, the
Compensation Committee shall determine if amounts, in addition to the Incentive
Compensation, shall be paid to Executive, and if so, in what amounts. In the
event that Executive's performance does not meet the Performance Goals, the
Compensation Committee shall determine if any amounts in excess of the Base
Salary shall be paid to Executive, and if so, in what amounts. Such a
determinations by the Compensation Committee shall be made in its sole
discretion, in conjunction with its consideration of an overall incentive
compensation plan for senior management of Avatech. The Compensation Committee
may pay to Executive any or all of the following: incentive compensation based
on Executive's achievement of specific goals or objectives developed by the
Compensation Committee; a bonus based upon outstanding performance by the
Executive; awards of stock pursuant to the Avatech's Restricted Stock Award
Plan; and additional options to purchase Avatech's Common Stock under its
Incentive Stock Option plan or otherwise.
2.3. Annual Review. Commencing with the beginning of the fiscal year of
Avatech beginning July 1, 2003, and on each July 1 thereafter, the Board shall
conduct an annual performance review of Executive and, at that time, consider
increases in Executive's base compensation.
2.4. Stock Options. Avatech shall immediately grant to Executive options
to purchase 50,000 shares of Avatech's Common Stock under Avatech's Incentive
Stock Option Plan, with such terms and conditions as are customarily contained
in option agreements entered into by Avatech. The options shall have a term of
10 years, shall automatically convert to nonqualified options upon any cessation
of employment with
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Avatech by Executive (unless such cessation is the result of a Termination for
Cause, as described in Section 4.2 hereof, in which case all vested and unvested
options shall cease, terminate and be null and void), and shall have an exercise
price equal to the mean between the bid and asked prices of Avatech's Common
Stock on the OTC Bulletin Board at the close of trading on April 15, 2003. One
third of the options shall vest on each July 1 of 2003, 2004 and 2005.
2.5. Benefits. Executive shall be entitled to participate in Avatech's
standard benefits provided to other management level employees of Avatech, as
established or modified by Avatech from time to time, including but not limited
to life insurance, health insurance, and dental insurance, to the extent not
provided to Executive from another business or corporation.
2.6. Vacation. Executive shall be entitled to four calendar weeks of
vacation during each fiscal year of Avatech, which vacation weeks shall not
accrue if they are not used.
2.7. Business Expenses. Pursuant to Avatech's customary policies in
force at the time of payment, Executive shall be promptly reimbursed, against
presentation of vouchers or receipts, for all authorized expenses properly
incurred by him in the performance of his duties hereunder.
3. Term and Termination.
3.1. Term. This Agreement shall have a term beginning on the
Commencement Date and ending on the date of a Termination for Cause (as defined
in Section 3.2) or the date of a Termination Other than for Cause (as defined
and described in Section 3.3), whichever shall first occur.
3.2. Termination for Cause. Executive shall be entitled to payment of
his Base Salary earned, accrued bonus earned (if any), and benefits existing at
the time of termination of his employment if such termination is a Termination
for Cause. "Termination for Cause" means one or more of. (a) voluntary
termination of employment by Executive for any reason; (b) death of Executive;
(c) Executive having been unable to render services required of him hereunder
for a consecutive period of six months or for any period in the aggregate of six
months in any twelve month period because of a serious and continuing health
impairment, which impairment will most likely result in Executive's continued
inability to render the services required of him hereunder; (d) Executive"s
misappropriation of corporate funds; (e) Executive's conviction of a felony; (f)
Executive's conviction of any crime involving theft, dishonesty, or moral
turpitude; (g) Executive's failure to devote substantially his full business
time and attention to Avatech as provided in Section 1 hereof; (h) Executive's
willful violation of directions of the Board of Directors of Avatech which are
consistent with Executive's duties as President; (i) falsification of any
material representation made by Executive to Avatech; (j) verifiable evidence
that Executive has engaged in sexual harassment of a nature that could give rise
to liability on the part of Avatech; and (k) the commission by Executive of a
material breach of the terms of this Agreement.
3.3. Termination Other Than for Cause. If Executive's employment with
Avatech is terminated and such termination is not a Termination for Cause,
Executive shall be entitled to payment of his Base Salary and other benefits
existing at the time of such termination for a period of twelve months
thereafter, with all such payments to be made periodically pursuant to Avatech's
policies in force at the time of payment, provided, however, that Avatech shall
not be obligated to continue any benefit if the plan or policy under which such
benefit is provided limits the provision of the benefit to full-time employees
of Avatech, or if the validity of the plan or policy would be adversely impacted
by the continuation of the benefit.
3.4. Change in Control. If, upon a Change in Control, Executive is
either terminated or elects to resign, such termination shall be treated as a
termination under Section 3.3. As used in this Agreement, "Change in Control"
shall mean (a) a dissolution or liquidation of Avatech; (b) a merger of
consolidation in which Avatech is not the surviving corporation or the party to
the merger or consolidation whose shareholders do not own 50% or more of the
voting stock of the resulting corporation; or (c) the acquisition of more than
50% of the outstanding voting stock of Avatech by any person, or group of
persons acting in concert, in a single transaction or series of transactions.
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4. Confidential Information
4.1. Definition of Confidential Information. For purposes of this
Agreement, the term "Confidential Information" means that secret, proprietary
information of Avatech not otherwise publicly disclosed (whether or not
discovered or developed by Executive) and known by Executive as a consequence of
Executive's employment with Avatech or as a consequence of Executive's position
as a director of Avatech. Without limiting the generality of the foregoing, such
proprietary information shall include information not generally known in the
industry or related industries which concerns customer lists; computer programs
and routines; the identity of specialized consultants and contractors and
confidential information developed by them for Avatech; operating and other cost
data, including information regarding salaries and benefits of employees; cost
and pricing data; acquisition, expansion, marketing, financial, strategic, and
other business plans; Avatech manuals, files, records, memoranda, plans,
drawings and designs, specifications and computer programs and records; and all
information that is a "trade secret" as defined in the Uniform Trade Secrets
Act.
4.2. Confidential Information. During Executive's employment with
Avatech, Executive shall have access to and become familiar with Confidential
Information of Avatech. Executive acknowledges that such Confidential
Information is owned and shall continue to be owned solely by Avatech. During
the term of Executive's employment with Avatech and after termination of such
employment for any reason, Executive shall not use or divulge Confidential
Information to any person or entity other than Avatech, or persons to whom
Avatech has given its written consent, unless such information has become
publicly available and is not longer Confidential Information.
4.3. Return of Documents. Upon termination of Executive's employment
with Avatech for any reason, all procedural manuals, guides, specifications,
plans, drawings, designs, records, lists, notebooks, software, diskettes,
customer lists, pricing documentation and other property which is or contains
Confidential Information, including all copies thereof, in the possession or
control of Executive, whether prepared by Executive or others, shall be
forthwith delivered by Executive to Avatech.
5. Covenants Not to Compete
5.1. Restrictive Covenant. Avatech and Executive agree and acknowledge
that Avatech has legitimate business interests to support the restrictive
covenants set forth hereinafter, including, but not limited to, trade secrets,
Confidential Information that otherwise does not qualify as trade secrets, and
Executive's substantial relationships with prospective or existing customers.
Executive covenants and agrees that during Executive's employment with Avatech
and for a period of one year following Executive's cessation of employment for
any reason, Executive shall not in any manner start or join any business which,
as of or after the date of this Agreement, enters into a line of business or is
engaged in a line of business that is a line of business conducted by Avatech.
This Section 5.1 shall prevent Executive, directly or indirectly, on
Executive's own behalf or as an executive, officer, employee, agent, director,
partner, consultant, lender, or advisor, from forming, owning, joining,
controlling, financing, or otherwise participating in the ownership or
management of or being otherwise affiliated with any person or entity engaged in
the type of business prohibited by this Section. Executive shall not permit any
person or entity (other than Avatech) of which Executive is a shareholder,
partner or director, or in which Executive has an ownership interest, to engage
in any type of business prohibited by this Section. Notwithstanding any other
provision herein to the contrary, the parties agree that Executive may invest
Executive's personal, private assets as a passive investor in not more than one
percent of the total outstanding shares of any publicly traded company engaged
in a competing business, so long as Executive does not participate in the
management or operations of such company.
5.2. Solicitation of Employees. During the one-year period following
Executive's cessation of employment for any reason, Executive shall not, without
the prior written approval of the Chairman of the Board of Directors of Avatech,
directly or indirectly solicit, raid, entice, or induce any person who is, or
was at any time within six months prior to such cessation, an employee of
Avatech, to become employed by any other person, firm, or corporation in any
business which is in any manner in competition with Avatech. Furthermore,
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Executive shall inform Avatech in writing if any other person employed by
Avatech contacts Executive for the purpose of seeking employment during such one
year period.
5.3. New Developments. Executive agrees that, with respect to his work
for Avatech, any developments made by Executive or under Executive's direction
in connection with the work of Avatech shall be the sole and absolute property
of Avatech, and that any and all copyrights, patent rights, and other
proprietary rights therein shall belong to Avatech. Executive shall cooperate
with Avatech and execute any documents prepared by Avatech to secure or protect
any such rights.
6. Representations of Executive. Executive hereby represents and warrants
that he has the unrestricted right to accept employment with Avatech on the
terms and conditions set forth herein and to execute and perform this Agreement
without being in conflict with any other agreement, obligation or understanding
with any third party. Executive represents that he is not bound by any agreement
or by any other existing or previous business relationship which conflicts with,
or may conflict with, the performance of his obligations hereunder, or prevent
the full performance of his duties and obligations hereunder.
7. Notices. Any notice permitted or required to be given under this
Agreement shall be sufficient if in writing and delivered personally or by
certified mail, return receipt requested, if to Executive, to Mr. Eric L. Pratt
at his residence address as reflected in Avatech's payroll records, and if to
Avatech, to the attention of the Chief Executive Officer at Avatech's principal
corporate office address. A party may change his or its address for receipt of
notices by complying with this Section.
8. Entire Agreement. This Agreement contains the entire understanding of
the parties in respect of its subject matter and supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
9. Amendment; Waiver. This Agreement may not be amended, supplemented,
canceled or discharged except by a written instrument executed by the party
affected thereby. No failure to exercise, and no delay in exercising, any right,
power or privilege hereunder shall operate as a waiver thereof. No waiver of any
breach of any provision of this Agreement shall be deemed to be a waiver of any
preceding or succeeding breach of the same or any other provision.
10. Binding Effect; Assignment. The rights and obligations set forth in
this Agreement shall bind and inure to the benefit of any successor of Avatech
by reorganization, merger or consolidation, or any assignee of all or
substantially all of Avatech's business and properties. Executive's rights or
obligations hereunder may not be assigned by Executive, except that upon
Executive's death, all rights to compensation hereunder shall pass to
Executive's executor or administrator.
11. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
12. Governing Law; Interpretation. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of Maryland and, to the
extent it involves any United States statute, by the laws of the United States.
13. Further Assurances. Each of the parties agrees to execute, acknowledge,
deliver and perform, or caused to be executed, acknowledged, delivered and
performed, at any time and from time to time, all such further acts, documents,
transfers, conveyances, or assurances as may be necessary or appropriate to
carry out the provisions or intent of this Agreement.
14. Severability. If any one or more of the terms, provisions, covenants,
or restriction contained in this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void, or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the day and year first above written.
AVATECH SOLUTIONS, INC.
By: _______________________________
Donald R. "Scotty" Walsh,
Chief Executive Officer
_______________________________
Eric L. Pratt
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