Vice President of Finance Employment Agreement

EXHIBIT 10.4


EMPLOYMENT AGREEMENT
CHRISTOPHER E. SUE


This Agreement ("Agreement"), which includes Exhibits "A", "B", "C" and "D" hereto, which are incorporated herein by reference, is made as of May 22, 2000, by and between Osicom Technologies, Inc., a New Jersey Corporation (the "Company"), having a principal place of business at 2800 28th Street, Suite 100, Santa Monica, California 90405, and Christopher E. Sue (the "Employee"), having an address at _______________________________________.


W I T N E S S E T H


WHEREAS, the Employee possesses substantial knowledge with respect to the industry in which the Company conducts its business by reason of his employment and may acquire further knowledge of such business by reason of his employment as hereinafter provided; and


WHEREAS, it is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control or management. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Employee and can cause the Employee to consider alternative employment opportunities. The Board has determined that it is in the best interest of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a change of control or management of the Company.


WHEREAS, the Company desires to procure the services of the Employee, and to secure the Employee's agreement not to compete and to treat as confidential and as the property of the Company certain information gained in the course of the Employee's employment by the Company both before and after the effective date of this Agreement, as the case may be, and the Employee is willing to continue in the employment of and to so agree with the Company, all upon the terms and conditions hereinafter set forth.


NOW, THEREFORE, in consideration of the mutual promises contained herein, the Company and the Employee agree as follows:


1. EMPLOYMENT. The Company agrees to employ the Employee, and the Employee accepts the employment, on the terms and conditions hereinafter set forth. During the term of employment hereunder, the Employee shall serve in such capacity as may from time to time be determined by or pursuant to authority granted by the Board of Directors of the Company, and during such term of employment, the Employee shall devote his best efforts, knowledge and skill and full time as required to the Company's business and affairs. "Full time" means 40 hours per week. Subject to the authority of the Board of Directors of the Company, the Company will employ the Employee in the capacity of Vice President of Finance.


2. TERM OF EMPLOYMENT; TERMINATION.


2.1. The Employee agrees to work for the Company for a period of twenty-four (24) months commencing on the date of this Agreement. However, the Company may terminate the Employee's employment at any time, for any reason (or no reason), and with or Without Cause, by providing the Employee with seven (7) days' written notice. If employment continues following the end of the two (2)-year term of this Agreement (the "Term"), it will continue on an "at-will" basis, which means that either the Employee or the Company may terminate the Employee's employment at any time, for any reason (or no reason), and with or Without Cause, by providing the other party with seven (7) days' written notice.


2.2. If the Company terminates the Employee's employment Without Cause, or if the Employee resigns his employment for Good Reason, or if this Agreement terminates pursuant to paragraph 2.4


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below, prior to the end of the Term, the Employee, or his legal representatives, as the case may be, shall receive: (i) all salary earned by the Employee through the last day of his employment; (ii) continuation of the Employee's base salary for a period of two (2) years after the date of the termination of the Employee's employment; (iii) immediate vesting of all outstanding shares of the Employee's Company stock options, notwithstanding anything to the contrary in the agreement(s) granting such options; and (iv) the Company's right to repurchase shares, as provided in Section 4.6 of this Agreement, and cancel unexercised options, as provided in the attached Exhibit C-1, terminates. However, if: (i) the Employee resigns at any time Without Good Reason; (ii) the Company terminates the Employee's employment for Cause prior to the end of the Term; or (iii) the Company terminates the Employee's employment for any reason, with or Without Cause, or if the Employee resigns with or Without Good Reason, after the end of the Term, the Employee will only be entitled to all compensation earned by him through the last day of his employment.


For purposes of this Agreement "Cause" shall mean a good faith determination by the Board of Directors of the Company, following a reasonable factual investigation, of the occurrence of any one or more of the following events or circumstances: (i) Employee willfully engages in wrongful conduct that results in material damage to the Company; (ii) any willful and material failure to perform Employee's duties hereunder; (iii) Employee is convicted of a felony, including a plea of no contest, which is materially injurious to the Company (iv) Employee engages in fraud or one or more acts of dishonesty which materially damages the Company; or (v) Employee materially breaches this Agreement or the Proprietary Information and Invention Agreement, which material breach results in serious damage to the Company. Provided, in the case of items (i), (ii), and (v), such event or circumstance will not constitute Cause unless Employee has failed to cure such event or circumstance within 30 days after receipt by Employee of written notice thereof, such notice to be delivered to Employee within 90 days of such claimed act or breach specifically delineating each such claimed act or breach and setting forth the Company's intention to terminate the employment of the Employee if such breach is not remedied (the "Company Notice"); Provided, further, that if the specified breach cannot reasonably be remedied within such 30-day period and Employee commences reasonable steps within such 30-day period to remedy such breach, and diligently continues such steps thereafter until a remedy is effected, such breach shall not constitute "Cause" if such breach is remedied within 60 days after written notice from the Company. Further, no breach, act or failure to act on the Employee's part shall constitute "Cause" if such breach, act or failure to act resulted from the Employee's incapacity due to physical or mental illness or any such actual or anticipated breach, act or failure to act resulting from a resignation by the Employee for Good Reason. No act or failure to act on Employee's part shall be deemed "willful" unless it is done, or omitted to be done, by Employee not in good faith and such that a reasonable person would believe that the act, or failure to act, was not in the best interests of the Company. In determining whether the circumstances of Employee's termination was for "Cause", there shall be a presumption that it was not, and the burden of proving otherwise shall be on the Company.


For purposes under this Agreement, "Good Reason" for Employee's resignation will exist if Employee resigns within sixty days of any of the following: (i) any reduction in Employee's base salary or bonus, if any, or the failure of the Company to pay such amounts when due; (ii) any material reduction in Employee's benefits; (iii) a change in Employee's position with the Company or a successor company which materially reduces Employee's duties or level of responsibility; (iv) a change in the Employee's duties or level of responsibility which prevents Employee from performing his duties or meeting his responsibilities; (v) failure by the Company to reimburse temporary living or other reasonable expenses; or (vi) any requirement that Employee's relocate his place of employment by more than thirty-five (35) miles from his then current office, provided such reduction, change or relocation is effected by the Company without his written consent. A resignation by Employee under any other circumstances or for any other reasons will be a resignation "Without Good Reason."


2.3. If the Company terminates the Employee's employment Without Cause, or if the Employee resigns his employment for Good Reason, prior to the end of the Term of this Agreement, the attached Exhibit "A" will be executed by Employee and the Company within 5 business days following termination of Employee's employment.


2.4. This Agreement shall automatically terminate in the event of the Employee's death or Permanent Disability. "Permanent Disability" is defined as physical or mental incapacity rendering the Employee unable to perform substantially all of his duties for a period of at least four (4) consecutive months or an aggregate of at least six (6) months over any twelve (12) month period. All covenants, agreements, representations, warranties


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contained or made pursuant to this Agreement and Exhibits hereto shall survive the termination of this Agreement pursuant to this paragraph 2.4.


3. COMPENSATION.


3.1. Salary. As full compensation for the services to be rendered by the Employee hereunder and as consideration for the observance of the provisions of Section 4 hereof, the Company shall pay the Employee, and the Employee shall accept, a salary at the rate of One-Hundred Forty-Eight Thousand and Five Hundred Dollars ($148,500.00) per annum. Such salary shall be payable not less frequently than twice a month. In the event that the Employee's employment shall be terminated by death or Permanent Disability, the Employee, or his legal representatives, as the case may be, shall receive: (i) all salary earned by the Employee through the last day of his employment; (ii) a lump sum severance payment equal to two (2) years of his base salary; (iii) any outstanding temporary living, relocation and other expense reimbursements; and (iv) immediate vesting of all outstanding shares of the Employee's Company stock options, notwithstanding anything to the contrary in the agreement(s) granting such options; and (iv) the Company's right to repurchase shares, as provided in Section 4.6 of this Agreement, and cancel unexercised options, as provided in the attached Exhibit C-1, terminates.


3.2. Benefits. Participation in group life, medical, pension, profit sharing and other employee benefit plans (collectively hereinafter referred to as "Fringe Benefit Plans"), and other provisions of the Employee's employment not herein specifically provided for shall be consistent with that provided to senior executives of the Company, and thereafter his benefits shall be consistent with those provided to the Company's senior executives. Until the second anniversary of this agreement, Employee will be covered by Company's expense under plans of the Company related to health, medical and life insurance, if permitted by law and the existing terms of such plans. In the event the terms of such plans do not provide for continuation of coverage through and including May 22, 2002, Company will provide, entirely at its expense, Employee (and for purposes of health care coverage, Employee's family members who are "qualified beneficiaries", as such is defined in the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")), with coverage comparable to the coverage provided to Employee as of the date of this Agreement.


3.3. Income Tax Indemnification. In the event that the Internal Revenue Service or other taxing authority determines that any amounts received by Employee constitute taxable income to the Employee rather than (i) expense reimbursements under an accountable reimbursement plan by the Company, or (ii) expense reimbursements for out of town travel, the Company will reimburse Employee, within 30 days of written notification from Employee of such determination and specification of the amounts due, the amount of any income tax and self-employment tax along with interest and penalties thereon required to be paid by the Employee. Such reimbursement will include the amounts of any incremental tax incurred as a result of the reimbursement. Employee agrees that he will take all reasonable steps necessary to prevent such a determination by the Internal Revenue Service or other taxing jurisdiction.


4. STOCK OPTIONS.


4.1. Upon execution of this Agreement, any options to acquire common stock of the Company or any subsidiary held by the Employee (the "Options"), to the extent not previously vested, shall immediately vest and be exercisable, without regard to any vesting terms to the contrary contained in any plan or agreement pursuant to which such Options were granted and the options identified in paragraph 4.6 of this Agreement will be subject to Exhibit "C" attached hereto, the Stock Purchase Agreement. A schedule of Options subject to this Section 4, is attached hereto as Exhibit "B".


4.2. The period for exercise of any Option shall not expire or terminate until the final expiration date set forth in the applicable plan or agreement pursuant to which any such Options were granted, regardless of Employee's change in status from officer, employee, consultant and/or director to consultant (full or part time), and regardless of any subsequent termination or expiration of this Agreement, the Exhibits hereto, or any option plans.


4.3. If any term or provision of any option plan, or agreement heretofore entered into between the parties pursuant to such plan, conflicts with the terms hereof, then such term or provision is hereby waived


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and/or modified, to the fullest extent required to effectuate the intent of this Section 4, to the extent permitted by law, and the Company shall take all such steps as are necessary to cause such conflicting term or provision to be waived, modified or amended in accordance herewith.


4.4. In connection with the exercise of any or all Options, the Company will lend the holder, upon request, up to 100% of the purchase price for the shares purchased, any interest, plus any taxes that the Company is required to withhold upon the exercise thereof at a rate no less than the minimum applicable federal rate under the Internal Revenue Code to avoid imputed income. In the event Employee is not subject to withholding upon the taxable gain at exercise, the Company will lend 39% of the taxable gain to Employee in order that Employee have funds sufficient to pay any income and self-employment taxes due on the exercise of the Options. Any loan will be evidenced by a promissory note payable with accrued interest in 24 months from the date of the loan, and a pledge of the shares purchased. Alternatively, if the Company then has in effect another program to facilitate exercise of outstanding options held by other persons, that program will also be available with respect to the Options.


4.5. Any existing or future programs that the Company develops for holders of outstanding options to reflect and adjust for corporate transactions, (including, without limitation, any and all dividends, distributions in cash, stock of other companies, property or grant and or forgiveness of loans or other obligations), will also be available with respect to the Options.


4.6. Option Grant. The Company has granted Employee options to purchase 50,000 shares of the Company's common stock with an exercise price of Forty-Nine Dollars and Twenty-Five Cents ($49.25) per share and 50,000 shares of the Company's common stock with an exercise price of Twenty-One Dollars and Eighty Cents ($21.80) per share. The term of such options are 10 years. Such option is immediately exercisable, but the purchased shares shall be subject to repurchase by the Company at the exercise price paid per share in the event that Employee's status with the Company changes prior to the term as defined in Section 2 of this agreement. The Employee shall vest, and the Company's repurchase right shall accordingly lapse, in the option shares in two successive equal annual installments upon completion of each year of service measured over the two-year period from February 1, 2000, the vesting commencement date for such options.


4.7. Exercise of Option. The option grants made pursuant to Section 4.6 above is subject to the Company's standard form of Stock Option Agreement (together with Notice of Grant), a copy of which is attached hereto as an exhibit, and which notice must be executed as a condition of the grant. Employee shall have the right to exercise his option while he remains employed by the Company by delivering a full recourse promissory note secured by a pledge of the shares purchased thereunder. If required under the laws of the Company's state of incorporation, Employee shall pay cash for the par value of the exercised option shares. Interest on the promissory note shall accrue at a rate no less than the minimum applicable federal rate under the Internal Revenue Code to avoid imputed income. The principal balance and interest shall be due in full on the earlier of (a) the second anniversary of the date the promissory note is executed or (b) twelve (12) months after the termination of Employee's employment, whichever first occurs. The note shall be subject to such other terms and conditions as may be agreed to by the Company and Employee. The principal balance of the note shall not exceed the aggregate option price payable for the purchased shares and any taxes due upon the exercise of the options.


4.8. Registration of Shares. The Company will take all reasonable steps at its sole cost and expense to register on Form S-8 Employee's stock if acquired via exercise so that Employee can sell any vested shares of stock if he so chooses following the expiration of any applicable lock-up period. Nothing herein will be interpreted as requiring the Company to breach any rights regarding the registration of securities under the Securities Act of 1933.


5. EFFECT OF CHANGE IN CONTROL.


5.1 If a "Change in Control" takes place during the Term of this Agreement, the options shall automatically accelerate and immediately vest in full, whether or not the option is assumed as a result of the Change in Control and, notwithstanding anything to the contrary in the agreements granting such option. In addition, the Company's right to repurchase shares underlying exercised options and cancel unexercised options as provided in the attached Exhibit C-1 will lapse.


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5.2 In the event that the acceleration of the vesting provided for and benefits otherwise payable to Employee under this Agreement constitute "excess parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, (the "Code"), or any comparable successor provision, or any applicable state income or franchise provision, the Company shall make an additional "gross up" payment to Employee, in an amount such that Employee will be left in the same economic position after imposition of such excise tax (and any income or self-employment tax imposed on the gross-up payment) as he would have been had such excise tax not been imposed.


6. CHANGE IN CONTROL. As used in this Agreement, "Change in Control" shall mean: (a) a merger or consolidation in which securities possessing at least fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; (b) the sale, transfer or other disposition of all or substantially all of the Company's assets in complete liquidation or dissolution of the Company; (c) the individuals who, as of the date of this Agreement, are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least fifty percent (50%) of the members of the Board; provided, however, that if the election or nomination for election by the Company's shareholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or contests by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; (d) by a reverse merger in which the Company is the surviving corporation but the shares of its common stock immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (e) by a reorganization of the business of the Company which results in a material change in the business plan or business model or operations of the Company.


7. NO SOLICITATIONS. The Employee agrees that for a period of one (1) year following the termination of the Employee's employment for any reason, the Employee shall not directly or indirectly, personally or through others, solicit or attempt to solicit (on the Employee's behalf or on behalf of any other person or entity) for hire any employee or consultant of the Company.


8. CORPORATE OPPORTUNITIES. The Employee agrees that during his employment hereunder he will not take any action which might divert from the Company or any subsidiary or affiliate of the Company any opportunity which would be within the scope of any of the present or future businesses thereof.


9. NONDISCLOSURE OF CONFIDENTIAL INFORMATION; NONCOMPETITION.


9.1. The Employee shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order the Employee to divulge, disclose or make accessible such information. For purposes of this Agreement, "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development, proprietary product data, customer lists, technology (whether or not patented or copyrighted), marketing plans and other non-public, proprietary and confidential information of the Company and its affiliates and customers that, in any case, is not otherwise available to the public.


9.2. Given the Employee's role in the Company, during the period of the Employee's employment, whether pursuant to this Agreement or otherwise, the Employee agrees that, without the prior written consent of the Company, he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in, or have any financial interest in any business in the United States which is in competition with the business of the Company or any of its subsidiaries or affiliates; provided that the foregoing shall not prevent the Employee from being a


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stockholder of less than five percent (5%) of the issued and outstanding securities of any class of a corporation listed on a national securities exchange or designated as national market system securities on an interdealer quotation system by the National Association of Securities Dealers, Inc.


9.3. The Employee and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to modify such provision or provisions of this covenant to the extent the court determines such restraint is not reasonable and to enforce the covenant as so amended.


9.4. The Employee and the Company agree that any breach of the covenants contained in this Section 8 would irreparably injure the Employee or the Company. Accordingly, the Employee and the Company mutually agree that either party may, in addition to pursuing any other remedies it may have in law or in equity, obtain an injunction against the other from any court having jurisdiction over the matter restraining any violation of Section 6 this Agreement by either party.


9.5 As a condition of employment, Employee will execute the Company's standard Proprietary Information and Invention Agreement, a copy of which is attached.


10. INDEMNIFICATION. The Company agrees to indemnify Employee as per the terms set forth in an Indemnification Agreement attached hereto as Exhibit "D".


11. MISCELLANEOUS.


11.1. Legal Advice and Construction of Agreement. Both the Company and Employee have received (or have voluntarily and knowingly elected not to receive) independent legal advice with respect to the advisability or entering into this Agreement with respect to all matters covered by this Agreement and neither has been entitled to rely upon or has in fact relied upon the legal or other advice of the other party or such other party's counsel (or employees) in entering into this Agreement.


11.2. Parties' Understanding. Company and Employee state that each has carefully read this Agreement, that is has been fully explained to it/him by its/his attorney (or that it/he has voluntarily and knowingly elected not to receive such explanation), that it/he fully understands its final and binding effect, that the only promises made to it/him to sign the Agreement are those stated herein, and the Exhibits attached hereto, and that it/he is signing the agreement voluntarily.


11.3. Recitals and Section Headings. Each term of this Agreement is contractual and not merely a recital. All recitals are incorporated by reference into this Agreement. Captions and sections headings are used herein for convenience only, are not part of this Agreement, and shall not be used in interpreting or construing it.


11.4. Entire Agreement. This Agreement and Exhibits thereto constitutes a single integrated contract expressing the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior contemporaneous oral and written agreements and discussions with respect to the subject matter hereof. Notwithstanding the foregoing, nothing in this Agreement shall be deemed to waive or supercede any provision in any other plan or agreement, the terms of which are more beneficial or favorable to the Employee than those set forth herein.


11.5. Force Majeure. Neither the Company nor the Employee shall be deemed in default if its/his performance of obligations hereunder is delayed or become impossible or impracticable by reason of any act of God, war, fire, earthquake, strike, civil commotion, epidemic, or any other cause beyond such party's reasonable control.


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11.6. Successors. This Agreement shall inure to the benefit of, and be binding upon, the parties and their respective successors and assigns; provided, however, that this Agreement may not be assigned by Employee, nor may any of Employee's duties hereunder be delegated, without the prior written consent of Company, which consent may be given or withheld by Company in its sole discretion. The rights of Company under this Agreement may not be assigned without the consent of Employee, which consent may be given or ...