EXHIBIT 10.5
Exhibit A
ROCHESTER SOFTWARE CONNECTION, INC.
EMPLOYMENT AGREEMENT
WITH KEN HOLEC
THIS AGREEMENT is entered into effective as of the 22 day of November
1993, by and between ROCHESTER SOFTWARE CONNECTION, INC., a Minnesota
corporation (the "Company"), and Ken Holec, a Minnesota resident, ("Employee").
WHEREAS, the Company desires to engage Employee in the position of
President and Chief Executive Officer;
WHEREAS, Employee possesses certain unique skills, talents, contacts,
judgment and knowledge of the Company's businesses, strategies, ethics and
objectives; and
WHEREAS, Employee desires to be employed by the Company as its
President and Chief Executive Officer and to be assured of reasonable tenure and
terms and conditions of employment with the Company; and
WHEREAS, both parties recognize the critical importance to the
Company, its employees and investors, of preserving the confidentiality of the
Company's trade secrets and confidential information and of protecting the
Company against competition from former executives or other key employees of the
Company following their separation from the Company;
NOW, THEREFORE, in consideration of the foregoing premises and the
parties' mutual covenants and undertakings contained in this Agreement, the
sufficiency of which is hereby acknowledged, the Company and the Employee agree
as follows:
1. Employment and Term. Subject to the terms and conditions herein
provided, the Company hereby hires Employee, and Employee hereby accepts
employment by the Company for a term commencing as of the date hereof and
continuing for a minimum of one (1) year thereafter. The employment term shall
automatically extend for an additional one (1) year following the expiration of
each employment year (November 22 through November 21) unless, on or before
October 21 of each year, one party has notified the other party in writing that
this Agreement will not be extended for an additional year. In the event of such
a notification, the employment term of Employee will expire at the expiration of
the initial one (1) year employment term, or any extended term hereunder as the
case may be, without further obligation for either party, except as described
elsewhere in this agreement or in any stock option agreements then in effect
between the Company and Employee. In addition, the Company may terminate the
employment of Employee upon thirty (30) days notice, without cause, provided
Company pays Employee severance pay as described in paragraph 3(c) of this
Agreement.
Notwithstanding the foregoing, Company may terminate Employee's employment
for cause without notice and without further obligation of any kind to Employee.
For purpose of this Agreement, "cause" means (a) an act or acts of personal
dishonesty taken by Employee and intended to result in substantial personal
enrichment of Employee at the expense of the Company, (b) repeated violations by
Employee of his obligations which are demonstrably willful and deliberate on
Employee's part and which are not remedied within a reasonable period after
Employee's receipt of written notice of such violations from the Company, (c)
the willful engaging by Employee in illegal conduct that is materially and
demonstrably injurious to the Company, (d) sexual harassment by Employee of any
other employee of the Company, as determined by a court of competent
jurisdiction, or (e) excessive use of intoxicating beverages or chemical abuse,
following at least one written warning. No act, or failure to act, on
Executive's part shall be considered "dishonest", "willful" or "deliberate"
unless done, or omitted to be done, by Executive in bad faith and without
reasonable belief that Executive's action or omission was in the best interest
of the Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by Executive in good faith and in the best interests of the Company.
It is further agreed that the term of Employee's employment under this
Agreement shall automatically terminate in the event of Employee's death. In the
event Employee becomes mentally or physically disabled during the term of
employment hereunder, his employment under this Agreement shall terminate as of
the date such disability is established. As used in this subparagraph, the term
"disabled" means suffering from any mental or physical condition, other than the
use of alcohol or illegal use of narcotics, which renders Employee unable to
perform substantially all of Employee's duties and services under this Agreement
in a satisfactory manner (an "impaired condition") for a period of ninety (90)
consecutive days. The date that Employee's disability is established shall be
the ninety-first (91st) day upon which such impaired condition exists. Upon
termination for disability, Employee shall be entitled to receive continuation
of his base salary (as herein defined) for a period of one hundred eighty (180)
days after the date of such termination. If Company maintains a disability
policy covering Employee, then the amount of payments to be made by Company to
Employee pursuant to this provision shall be reduced by any amounts so paid to
Employee under any such insurance policy.
2. Duties and Representations of Employee. During Employee's employment
hereunder, he shall serve as Company's President and Chief Executive Officer and
will have the day-to-day responsibility for making decisions relating to all
aspects of the Company's affairs, including purchasing, marketing, sales and
service programs, and personnel assignment and management, and shall have
authority to and shall perform such functions and exercise such powers and
duties as are customary for such position, subject always to the control of the
Company's Board of Directors. Employee shall devote his full, time, attention,
knowledge and skill exclusively to the loyal service of Company and shall
perform all duties reasonably assigned to him by said Board of Directors.
Additionally, Employee shall do such traveling as may reasonably be required by
the Company in connection with the performance of his duties
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and responsibilities. Employee represents and warrants to the Company that (a)
his acceptance of employment under this Agreement and his performance of the
duties contemplated herein are not in conflict with any obligation, undertaking
or agreement between Employee and any third party including' without limitation,
any of Employee's former employers, and (b) he has not and will not, during the
course of his employment with the Company, disclose or utilize without
permission, any confidential or proprietary information, trade secrets,
materials, documents, or property owned by any third party including, without
limitation, any of Employee's former employers. The Company acknowledges the
existence and conditions of a December 4, 1986 Employee Invention, Nondisclosure
and Noncompetition Agreement between Employee, and a Covenant Not To Compete
clause contained in a March 24, 1986 Agreement for the Purchase of Capital Stock
of Lawson Associates, Inc.
3. Compensation. The Company shall pay to Employee the following
compensation beginning November 22, 1993:
a. Base Salary. The Company shall pay to Employee an annual base salary of
One Hundred Seventy-Five Thousand Dollars ($175,000.00) payable in periodic
installments in accordance with the standard payroll practices of Company in
effect from time to time. Employee's base salary shall be reviewed for potential
adjustment on the basis of performance from time to time.
b. Bonuses. Bonuses shall be paid to Employee as the Board of Directors of
the Company may determine in its discretion from time to time. For the Company's
1995 fiscal year, Employee's bonus target shall be 25% of base salary for such
year, but shall be tied to achievement of business plan and other objectives
established by the Company's Board of Directors.
c. Severance Pay. In the event the Company gives notice to the Employee
that this Agreement will not be extended or upon termination of the Employee's
employment by the Company, other than for cause as defined in paragraph 1, the
Employee shall be entitled to receive his then current base salary for an
additional six months following the date of termination, to be paid as though
the employee had remained in the employ of the Company. If, at the end of such
six month period, Employee is not employed on a full-time basis, the Company
will continue to pay Employee his monthly base salary until the earlier of
twelve months after the date of termination or the date that Employee commences
full-time employment. The severance pay shall be in lieu of any other
compensation of any other kind otherwise payable to the Employee under this
Agreement. Employee shall not be entitled to severance pay if the Employee
voluntarily terminates employment with the Company or gives notice of
non-renewal pursuant to paragraph 1 above; provided, however, that Employee
shall not be precluded from receiving severance pay pursuant to this paragraph
if he terminates his employment with the Company following a "change of control"
of the Company (defined to mean the acquisition by a person not currently a
shareholder of the Company of shares of Company stock representing more than
fifty percent (50%) of the voting power of the outstanding shares) which results
in a
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substantial change in the scope of Employee's employment responsibilities or job
relocation. Employee's entitlement to severance pay following six months after
the termination date shall be conditioned upon Employee making good faith
efforts to locate full-time employment at compensation and responsibility levels
consistent with his employment, with the Company.
d. Stock Option Plan. Employee and Company have entered into a separate
Incentive Stock Option Agreement dated November 22, 1993, whereby Employee is
granted an Incentive Stock Option to purchase shares of Company's common stock,
which Agreement is attached hereto as Exhibit "A" and by this reference
incorporated herein.
g. Advance Bonus. On the first day of his employment by the Company
pursuant to this Agreement, Employee shall be paid an advance bonus of
Twenty-Five Thousand Dollars ($25,000.00). As an additional advance bonus, the
Company will pay, up to a total of Four Thousand Two Hundred Dollars ($4,200),
the initiation fees for Employee to join the Rochester Country Club and
Employee's 1994 membership dues to such country club, so that such facility may
be available for employee and customer meetings and for customer and prospect
entertainment relating to the Company's business.
h. Relocation Expense Reimbursement. The Company will reimburse Employee
for up to $35,000 of out-of-pocket moving and relocation expenses relating to
the relocation of Employee's personal residence from Burnsville, Minnesota to
Rochester, Minnesota, including real estate brokers' fees, closing costs
relating to the purchase and sale of personal residences and house-hunting
expenses. In addition, the Company will reimburse Employee for any income tax
costs incurred by Employee as a result of the nondeductability of any of the
expenses for which he receives reimbursement from the Company pursuant to this
paragraph.
i. Bridge Loan. In the event that Employee's Burnsville residence is not
sold prior to the closing of the purchase by Employee of a new personal
residence in Rochester, the Company shall, at Employee's request, make a loan to
Employee in an amount necessary to find the down payment on the Rochester
residence. Any such loan will bear interest at prime rate, will be repaid in
full within ten days after the closing of the sale of Employee's Burnsville
residence and shall be secured by a mortgage on the Burnsville residence.
4. Additional Benefits. Employee shall be entitled to those additional
Company benefits and perquisites which may be customarily made available to
other executive employees of the Company. Without limiting the foregoing,
Employee shall be eligible to participate in any executive bonus plan which may
be offered, pension plan, or group life, health or accident insurance, or any
other such plan or policy which may presently be in effect or which may
hereafter be adopted by Company for the benefit of its executive employees and
corporate officers generally. Furthermore, Employee shall be entitled to the
following additional benefits:
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a. Expense Reimbursement. During the term of Employee's employment under
this Agreement, the Company shall bear reasonable and ordinary business expenses
incurred by Employee in performing his duties, including travel and living
expenses while away from home on business in the service of the Company, long
distance home telephone expenses, provided that Employee accounts promptly for
such expenses to the Company in the manner reasonably prescribed from time to
time by the Company.
b. Vacation. During the term of Employee's employment under this Agreement,
Employee shall be entitled to take up to two (2) weeks of vacation per year with
pay, at such times as shall be mutually convenient to Company and Employee.
Vacation time must be used within the applicable employment year and may not be
accumulated.
c. Professional and Personal Development. During the term of the Employee's
employment under this Agreement, Employee shall be entitled to take two weeks
per year to attend seminars, professional meetings, conventions, personal
development, and educational or recreational courses as he may in his sole
discretion elect to utilize. The Company shall pay for that portion of the
expenses for such seminars or meetings which are allocable to Company purposes,
if any.
5. Confidentiality. Employee hereby agrees to sign the Company's
Confidentiality and Inventions Agreement, a copy of which is attached hereto as
Exhibit "B" and by this reference incorporated herein. All of Company's trade
secrets, and all other confidential information, including, but not limited to,
any patents, copyrights, processes, technology, machines, equipment, material,
ideas, concepts, techniques, conditions of operation, or customer lists,
relating to the business of Company shall be the sole property of Company, and
Company shall have exclusive rights to such property, and the Employee
acknowledges and agrees that any information or data Employee has received
concerning such trade secrets and/or confidential information was received by
Employee in confidence and as a fiduciary of Company. Employee shall not divulge
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, or use in any manner, directly or indirectly, for any
purpose whatsoever, any of the trade secrets or confidential information of
Company, except in Company's best interest. In addition, Employee will use
reasonable and prudent care to safeguard, protect and prevent the unauthorized
use and disclosure of confidential information. The obligations contained in
this paragraph will survive for as long as the Company in its sole judgment
considers the information to be confidential information.
6. Return of Proprietary Property. Employee agrees that all property in
Employee's possession belonging to Company, including without limitation, all
documents, reports, manuals, memoranda, computer print-outs, customer lists,
credit cards, keys, identification, products, access cards and all other
property relating in any way to the business of the Company are the exclusive
property of the Company, even if Employee authored, created or assisted in
authoring or creating such property. Employee shall return to the Company all
such
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documents and property immediately upon termination of employment or at such
earlier time as the Company may reasonably request.
7. Key-Man Insurance. Employee agrees that Company may add additional
"Key-Man" life and/or disability insurance on his life. Company will pay
premiums and be the beneficiary. In addition, Employee agrees to submit to the
usual and customary medical examination and otherwise to cooperate with Company
in connection with the procurement of any such insurance, and any claims
thereunder. The Key-Man life insurance policy upon the life of Employee to be
procured by the Company shall provide for a Two Hundred Fifty Thousand Dollar
($250,000.00) benefit payable to beneficiaries designated by Employee, with all
additional benefits thereunder payable to the Company.
8. Restrictive Covenant. Employee acknowledges that the Company needs to be
protected against the potential for unfair competition and impairment of the
Company's goodwill by Employee's use of the Company's training, assistance,
confidential information and trade secrets in direct competition with the
Company. Employee therefore agrees that for the greater of (a) six months, or
(b) the period of time that Employee is entitled to receive severance pay from
the Company pursuant to paragraph 3(c) of this Agreement, Employee shall not
operate, join, control, be employed by or participate in ownership, management,
operation or control of, or be connected in any manner as an independent
contractor, consultant or otherwise, with any person or organization engaged in
any business activity which is the same as, similar to, or competitive with any
business of the Company or any successor of the Company as of the expiration or
termination date within the states of the United States of America. Employee
expressly agrees the provisions of this paragraph 8 shall survive the expiration
or the termination of this Agreement, whether such termination be voluntary or
involuntary or with or without cause. In the event Company maintains an action,
either at law, equity, or both, to enforce this non-competition covenant against
Employee, Employee waives any right to maintain any of the following defenses:
(a) That this restrictive covenant is not necessary for the protection of
the business or the goodwill of Company;
(b) That this restrictive covenant is unreasonable, unconscionable,
illegal, in restraint of trade, or in violation of any right granted
by the state or federal constitution;
(c) That there has been no damage to Company;
(d) That Company has an adequate remedy at law; or
(e) That this restrictive covenant is not supported by adequate
consideration.
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Employee agrees that in addition, but not to the exclusion of any other
available remedy, Company shall have the right to enforce the provisions of this
non-competition agreement by applying for and obtaining temporary and permanent
restraining orders or injunctions from a court of competent jurisdiction without
the necessity of filing a bond therefor. In any such court action, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
costs from the other party.
9. Covenant Not to Recruit. Employee recognizes that Company's work force
constitutes an important and vital aspect of its business. Employee agrees that
for a period of two (2) years following the expiration or termination of this
Agreement for any reason whatsoever, he shall not solicit, or assist anyone else
in the solicitation of, any of the Company's then current employees to terminate
their employment with the Company, and to become employed by any business
enterprise with which the Employee may then be associated or connected, whether
as an owner, employee, partner, agent, investor, consultant, contractor or
otherwise.
10. 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 Employee may not assign this Agreement nor any
rights hereunder. Any purported or attempted assignment or transfer by Employee
of this Agreement or any of Employee's duties, responsibilities or obligations
hereunder shall be void.
11. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing, shall be deemed to have been duly given on
the date of service if personally served on the parties to whom notice is to be
given, or on the second day after mailing if mailed to the parties to whom
notice is given, by first class mail, postage prepaid, and properly addressed as
follows:
To Company at: Rochester Software Connection, Inc.
4909 Highway 52 North
Rochester, Minnesota 55901
To Employee at: 14009 Frontier Lane
Burnsville, Minnesota 55337
Any party may change the address for the purpose of this paragraph by
giving the other written notice of the new address in the manner set forth
above.
12. Construction and Severability. The validity, interpretation,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Minnesota. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, said illegality or invalidity shall not
in any way affect the legality or validity of any other provision
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hereof. It is the intention of the parties hereto that Company be given the
broadest possible protection respecting its confidential information and trade
secrets and respecting competition by Employee following his separation from the
Company.
13. Arbitration. Except as provided in sub-paragraph b below, any claims or
disputes of any nature between the parties arising from or related to the
performance, breach, termination, expiration, application or meaning of this
Agreement shall be resolved exclusively by arbitration before the American
Arbitration Association in Rochester, Minnesota pursuant to the Association's
rules for commercial arbitration.
a. The decision of the arbitrator(s) shall be final and binding upon both
parties. Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof. In the event of submission of any dispute to
arbitration, each party shall, not later than thirty (30) days prior to the date
set for hearing, provide to the other party and to the arbitrator(s) a copy of
all exhibits upon which the party intends to rely at the hearing and a list of
all persons whom each party intends to call as witnesses at the hearing.
b. This section shall have no application to claims by the Company
asserting violation of or seeking to enforce, by injunction or otherwise, the
terms of paragraphs 5, 6, 8 and 9 above. Such claims may be maintained by the
Company in a lawsuit subject to the terms of paragraph 14 below.
14. Venue. Any action at law, suit in equity or judicial proceeding arising
directly, indirectly or otherwise in connection with, out of, related to or from
this Agreement or any provision hereof shall be litigated only in the courts of
the State of Minnesota, County of Olmsted. Employee waives any right Employee
may have to transfer or change the venue of any litigation brought against
Employee by the Company.
15. Entire Agreement. This Agreement sets forth the entire agreement
between Company and Employee with respect to his employment by the Company and
there are no undertakings, covenants or commitments other than as set forth
herein. This Agreement may not be altered or amended, except by a writing
executed by the party against whom such alteration or amendment is to be
enforced. This Employment Agreement supersedes any and all prior understandings
or agreements between the parties.
16. Counterparts. This Agreement may be simultaneously executed in any
number of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one in the same instrument.
17. Captions and Headings. The captions and paragraph headings used in this
Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
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18. Survival. The parties expressly acknowledge and agree that the
provisions of this Agreement which by their express or implied terms extend
beyond the expiration of this Agreement or the termination of Employee's
employment hereunder, shall continue in full force and effect, notwithstanding
Employee's termination of employment hereunder or the expiration of this
Agreement.
19. Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by any related document or by law.
20. Reliance by Third Parties. This Agreement is intended for the sole and
exclusive benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns, and
no other person or entity shall have any right to rely on this Agreement or to
claim or derive any benefit therefrom absent the express written consent of the
party to be charged with such reliance or benefit.
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed
and the Employee has hereunto set his name as of the day and year first above
written.
EMPLOYEE ROCHESTER SOFTWARE
CONNECTION, INC.
- ----------------------------------- By
Ken Holec -------------------------------
Its
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