EXHIBIT 10.12

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the
Effective Time of the Merger as stated in the Agreement and Plan of Merger dated
November 12, 2003 among CyberGuard Corporation, SnapGear Acquisition Corporation
and SnapGear Inc. (all as defined in the Agreement and Plan of Merger) (the
“Effective Date”) by and between SnapGear Pty Ltd., an Australian corporation
(the “Company”) and Peter Cronk (the “Employee”).

 

WHEREAS, the Company desires to retain the services of Employee, and Employee
desires to be retained by the Company, on the terms and conditions set forth in
this Agreement;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

1. Employment. The Company hereby employs Employee as an employee of the Company
and Employee hereby accepts employment, upon the terms of and subject to this
Agreement.

 

2. Term. The term (the “Term”) of this Agreement shall commence on the Effective
Date and shall continue for a period of two years in accordance with the terms
hereof. This Agreement may be renewed upon a written agreement signed by both
parties hereto.

 

3. Duties. The Employee’s position will be a Vice President. During his
employment hereunder, Employee will serve in such capacity and with such duties
as shall be assigned from time to time by the Chief Executive Officer of the
Company. Employee shall diligently perform such duties and shall devote the
substantial portion of his business time to his employment and his duties
hereunder and shall not during the Term, directly or indirectly, alone or as a
member of a partnership, or as an officer, director, employee or agent of any
other person, firm or business organization engage in any other business
activities or pursuits requiring his personal service that materially conflict
with his duties hereunder or the diligent performance of such duties, except as
may be permitted by paragraph 10 hereof.

 

4. Compensation.

 

  a. Salary. During his employment hereunder Employee shall be paid a salary of
one hundred twenty-four thousand five hundred Australian Dollars (A$124,500) per
year, payable in equal installments not less than monthly (“Base Salary”). The
Employee’s salary shall be reviewed at least annually by the Board of Directors
of the Company (the “Board”) or any committee of the Board delegated the
authority to review executive compensation.

 

  b. Bonus. In addition to salary, Employee shall, through June 30, 2004, be
entitled to be paid a performance bonus of twelve thousand eight hundred fifty
Australian dollars (A$12,850) per quarter, and an annual bonus payment of
$51,400 in the event the Company’s sales of the SnapGear Products reach the
targets set forth in the Bonus Scheme detailed in Exhibit A attached hereto.
After July 1, 2004, the Employee shall be entitled to participate in a new bonus
program with new targets, all as established by the Company.

 

  c. Options. The Employee will be proposed for a grant of 25,000 shares of
common stock of CyberGuard Corporation to be granted in calendar year 2003 with
the terms and conditions as set by the Board of Directors of CyberGuard
Corporation. In addition, while employed at the Company, the Employee shall be
entitled to participate in the CyberGuard Corporation’s Stock Option Plan.

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  d. Leave. Annual leave will be provided under applicable legislation of a
State or Territory of Australia. Paid sick leave will be provided, up to a
maximum of 10 days, subject to the Employee providing a certificate of ill
health or injury from a qualified medical practitioner if requested by the
Company to do so.

 

  e. Expense Reimbursement. Employee shall, upon submission of appropriate
supporting documentation, be entitled to reimbursement of reasonable
out-of-pocket expenses incurred in the performance of his duties hereunder in
accordance with policies established by the Company.

 

  f. Superannuation. The Company will make superannuation contributions on
behalf of the Employee to such fund as the employee nominates to it in writing
or, failing any nomination, to such fund or other entity as is specified by
applicable Australian legislation, at the rate necessary from time to time to
permit the Company to meet the requirements of that legislation.

 

  g. Moving Expenses. In the event that the Company requires the Employee to
relocate to the United States of America, the Company agrees to pay up to
A$20,000 in pre-approved moving expenses.

 

5. Grounds for Termination by the Company. The Company may terminate this
Agreement for Cause (as defined below) or, upon three (3) months prior written
notice, the Company may terminate this Agreement without Cause. In lieu of
giving such three (3) months prior written notice, the Company may make a lump
sum payment equal to three (3) months of Employee’s Base Salary upon
termination. As used herein, “Cause” shall mean any of the following: (i) an act
of willful misconduct or gross negligence by Employee in the performance of his
material duties or obligations to the Company; if such act is capable of cure,
Employee shall be given written notice and such act shall not be deemed a basis
for Cause if cured within 60 days after written notice is received by Employee
specifying the alleged failure in reasonable detail (and during such 60 day
period, Employee shall continue to be employed by the Company at full pay), or
(ii) conviction of Employee of a felony involving moral turpitude or (iii) a
material act of dishonesty or breach of trust on the part of Employee resulting
or intended to result directly or indirectly in personal gain or enrichment at
the expense of the Company.

 

6. Termination by Employee. Employee may terminate this Agreement at anytime
with or without reason on 30 days’ prior written notice.

 

7. Payment and Other Provisions Upon Termination.

 

a. In the event Employee’s employment with the Company (including its
subsidiaries) is terminated by the Company for Cause as provided in Paragraph 5
of this Agreement, then, on or before Employee’s last day of employment with the
Company, the Company shall pay in a lump sum to Employee at the time of
Employee’s termination an amount equal the unpaid salary due to the Employee for
services performed prior to the date of termination of employment. Any and all
other rights granted to Employee under this Agreement shall terminate as of the
date of termination. This same provision shall apply if Employee terminates his
employment with the Company, with or without reason.

 

b. In the event that Employee’s employment with the Company is terminated by the
Employee for Good Reason (as defined below), Employee shall be entitled to a
lump sum payment equal to three (3) months of Employee’s Base Salary payable
within twenty (20) business days of such termination. As used herein, “Good
Reason” shall mean: (i) material diminution in the nature or scope of the
Employee’s responsibilities, duties or authority, but excluding for these
purposes an isolated and insubstantial action not taken in bad faith which is
remedied by Company promptly after receipt of notice thereof given by Employee
and actions taken by the Company related to Employee’s performance of assigned
duties; (ii) a material reduction in the compensation payable to the Employee;
and (iii) relocation of the Employee’s principal worksite more than 50 miles
from its current site, without Employee’s agreement in writing.

 

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c. Regardless of the circumstances of termination of employment, the Company
shall pay Employee the value of all accrued but unused vacation time.

 

8. Termination by Reason of Death. If Employee shall die while employed by the
Company during the Term, all Employee’s rights under this Agreement shall
terminate with the payment of such amounts of annual Base Salary as have accrued
but remain unpaid through the month in which his death occurs. Notwithstanding
the foregoing, upon the death of Employee, the Company shall pay Employee’s
estate the value of all accrued but unused vacation time.

 

9. Termination by Disability. Employee’s employment hereunder may be terminated
by the Company forthwith in the event of Disability (as defined below). In such
event, all Employee’s rights shall be governed by the applicable disability
policies of the Company as then in effect and all Employee’s rights under this
Agreement shall terminate. Notwithstanding the foregoing, upon the Disability of
Employee, the Company shall pay Employee’s estate the value of all accrued but
unused vacation time. For purposes of this Agreement, “Disability” shall mean
that, as a result of Employee’s incapacity due to physical or mental illness or
similar incapacity: (a) Employee shall have been absent from his duties
hereunder on a substantially full-time basis for six (6) consecutive months; and
(b) within thirty (30) days after the Company notifies Employee in writing that
it intends to replace him, Employee shall not have returned to the performance
of his duties hereunder on a full-time basis.

 

10. Non-competition.

 

a. At all times during Employee’s employment hereunder, and for a period equal
to the longer of (i) one (1) year after termination of employment with the
Company or (ii) three (3) years from the Effective Date, Employee shall not,
directly or indirectly, engage in any business, (except where approved by the
Company in writing in advance), whether as owner, operator, shareholder (except
as a holder of not more than five percent (5%) of the outstanding stock of any
company traded on a national securities exchange or actively traded in a
national over-the-counter market), director, partner, creditor, consultant,
agent, employee or in any other capacity whatsoever that manufactures products
or provides services that compete, in any material respect, directly with
products or services of the Company (its affiliates, parents, subsidiaries or
predecessors in interest) or markets such products anywhere in the world where
the Company (its affiliates, parents, subsidiaries or predecessors in interest)
(i) is engaged in business or (ii) has evidenced an intention of engaging in
business and for which the Company, its affiliates, parents, or its subsidiaries
prepared a business plan or study or committed resources of the Company to
investigate on or before the date of termination of Employee’s employment.
Employee acknowledges that he has read the foregoing and agrees that the nature
of the geographical restrictions are reasonable given the international nature
of the Company’s business.

 

In the event that these geographical or temporal restrictions are judicially
determined to be unreasonable, the parties agree that these restrictions shall
be judicially reformed to the maximum restrictions which are reasonable.

 

b. Notwithstanding the provisions of the preceding Paragraph 10a., Employee may
accept employment with a company that would be deemed to be a competitor of the
Company (its affiliates, parents, subsidiaries or predecessors in interest) as
described in the previous sentence (“Competitor”), so long as (i) the Competitor
has had annual revenues of at least $1 billion in each of the prior two fiscal
years, (ii) the Competitor’s revenues for products and maintenance in direct
competition with the Company does not exceed 50% of its total revenues and (iii)
Employee’s responsibilities are solely for divisions or subsidiaries of the
Competitor that do not compete with the Company (its affiliates, subsidiaries or
predecessors in interest).

 

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11. Non-solicitation of Employees and Customers. At all times during Employee’s
employment hereunder and for a period equal to the longer of (i) one (1) year
after termination of employment with the Company or (ii) three (3) years from
the Effective Date, Employee shall not, directly or indirectly, for himself or
for any other person, firm, corporation, partnership, association or other
entity (a) attempt to employ, employ or enter into any contractual arrangement
with any employee or former employee of the Company, its affiliates, parents,
subsidiaries or predecessors in interest, unless such employee or former
employee has not been employed by the Company, its affiliates, parents,
subsidiaries or predecessors in interest during the twelve months prior to
Employee’s attempt to employ him, except that this paragraph 11 shall not apply
to (x) any family members of Employee or to (y) any real estate or similar
investment venture the Employee plans to undertake with Robert B. Waldie,
Richard S.J. Stevenson, Peter Cronk or Matthew Ramsay; provided, however, that
the Employee obtains a prior written approval from the Company, which will not
be unreasonably withheld or (b) call on or solicit any of the actual or targeted
prospective customers of the Company or its affiliates, subsidiaries or
predecessors in interest with respect to any matters related to or competitive
with the business of the Company.

 

12. Confidentiality.

 

  a. Nondisclosure. Employee acknowledges and agrees that the Confidential
Information (as defined below) is a valuable, special and unique asset of the
Company’s business. Accordingly, except in connection with the performance of
his duties hereunder, Employee shall not at any time during or subsequent to the
term of his employment hereunder disclose, directly or indirectly, to any
person, firm, corporation, partnership, association or other entity any
proprietary or confidential information relating to the Company or any
information concerning the Company’s financial condition, business line,
business strategy or prospects, the Company’s customers, the design, research,
development, manufacture, marketing or sale of the Company’s products, or the
Company’s methods of operating its business, or intellectual property of any
kind, which shall include, without limitation, inventions, improvements,
discoveries, creations, computer programs, computer hardware, design
specifications, concepts, formulas, trade secrets, ideas, processes, know-how,
methods, proprietary data, software code, source code, products, future
products, techniques, any and all derivative works therefrom and any and all
patents and copyrights therein or any improvements thereof (collectively
“Confidential Information”). Confidential Information shall not include
information which, at the time of disclosure, is known or available to the
general public by publication or otherwise through no act or failure to act on
the part of Employee.

 

  b. Return of Confidential Information. Upon termination of Employee’s
employment, for whatever reason and whether voluntary or involuntary, or at any
time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession or under the control of Employee to
the Company and shall not retain any copies or other reproductions or extracts
thereof. Employee shall at any time at the request of the Company destroy or
have destroyed all memoranda, notes, reports, and documents, whether in “hard
copy” form or as stored on magnetic or other media, and all copies and other
reproductions and extracts thereof, prepared by Employee and shall provide the
Company with a certificate that the foregoing materials have in fact been
returned or destroyed.

 

  c. Books and Records. All books, records and accounts whether prepared by
Employee or otherwise coming into Employee’s possession, shall be the exclusive
property of the Company and shall be returned immediately to the Company upon
termination of Employee’s employment hereunder or upon the Company’s request at
any time.

 

13. Injunction/Specific Performance Setoff. Employee acknowledges that a breach
of any of the provisions of Paragraphs 10, 11 and 12 hereof would result in
immediate and irreparable injury to the Company

 

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which cannot be adequately or reasonably compensated at law. Therefore, Employee
agrees that the Company shall be entitled, if any such breach shall occur or be
threatened or attempted, to a decree of specific performance and to a temporary
and permanent injunction, without the posting of a bond, enjoining and
restraining such breach by Employee or his agents, either directly or
indirectly, and that such right to injunction shall be cumulative to whatever
other remedies for actual damages to which the Company is entitled. Employee
further acknowledges that the Company may have additional remedies set forth in
other agreements that may be in effect between Employee and the Company that are
available to the Company in the event of a breach of any or all of the
provisions of Paragraphs 10, 11 and 12 hereof and that nothing herein shall be
deemed a waiver of such remedies set forth in such other agreements.

 

14. Copyright and Other Intellectual Property. All works, designs, written
material, ideas, inventions and the like produced or developed by the Employee
in the course of the employment remain the property of the Company.

 

15. Severability. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

16. Successors. This Agreement shall inure to the benefit of the Company and any
permitted successor of the Company. Neither this Agreement nor any rights
arising hereunder may be assigned or pledged by: Employee or anyone claiming
through Employee; or by the Company, except to any corporation which is the
successor in interest to the Company by reason of a merger, consolidation, share
exchange or sale of substantially all of the assets of the Company.

 

17. Notices. Any notice required or permitted to be given hereunder shall be
written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:

 

To the Company:

 

    SnapGear Pty Ltd.

   

    c/o CyberGuard Corporation

   

    2000 West Commercial Boulevard

   

    Fort Lauderdale, Florida 33309

   

    Attention: Chief Executive Officer

To Employee:

 

    To the address listed for

   

    Employee in the records of the Company

 

18. Survivability. Notwithstanding the provisions of Paragraph 2, the provisions
of Paragraphs 10, 11, 12 and 13 shall survive the expiration or early
termination of this Agreement.

 

19. Miscellaneous. This Agreement constitutes the entire agreement between the
parties hereto on the subject matter hereof and may not be modified without the
written agreement of both parties hereto. A waiver by any party of any of the
terms and conditions hereof shall not be construed as a general waiver by such
party. This Agreement may be executed in counterparts, each of which shall be
deemed an original and both of which together shall constitute a single
agreement. This Agreement shall in all respects be governed by, and construed in
accordance with the laws of Australia and the State or Territory where the
Company is located. In the event of a conflict between the provisions of this
Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee’s termination, the rights and duties set
forth in this Agreement shall control.

 

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IN WITNESS WHEREOF, this Employment Agreement has been executed by the parties
as of the date first above written.

 

COMPANY   EMPLOYEE

By:

 

 

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Print:

 

 

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Print:

 

 

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Exhibit A

 

Bonus Scheme

 

Fiscal Year 2004 Bonus Scheme

 

Performance Bonus

 

On a quarterly basis, if the sales of SnapGear Products reach the base quarterly
sales numbers shown below, then the Employee will receive his quarterly bonus
amount.

 

     2003/04

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   2003/4

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     Q1

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   Q2

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   Q3

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   Q4

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SnapGear Product Sales

   $ 2,335,016    $ 2,672,516    $ 2,458,516    $ 2,905,016    $ 10,371,062

 

Annual Bonus

 

In addition to the base quarterly bonus, the Employee will be paid an additional
bonus payment at the end of financial year (6/30/2004) if the sales of SnapGear
Products achieve the overall target results for that fiscal year 2004 (as shown
below), thus,if sales of SnapGear Products for 2003-04 exceed $13.43M then the
Employee receive a further 100% of their bonus payment.

 

    

2003/4

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Target SnapGear Product Sales

   $13,434,262

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EMPLOYMENT AGREEMENT AMENDMENT

 

This Amendment (“Amendment”) effective as of January 1, 2004, is entered into by
and between CyberGuard Corporation (“CyberGuard”), SnapGear Pty Ltd.
(“Subsidiary”) and Peter Cronk, an employee (“Employee”).

 

WHEREAS, the Employee and the Subsidiary are parties to an Employment Agreement
dated November 12, 2003 (“Agreement”);

 

WHEREAS, the Employee, the Subsidiary and CyberGuard wish to for the Employee to
become an employee of CyberGuard in the United States of America; and

 

WHEREAS, the Employee, the Subsidiary and CyberGuard desire to amend the
Agreement in connection with the Employee’s appointment to the Senior Vice
President of Worldwide Sales position at CyberGuard.

 

NOW THEREFORE, in consideration of mutual promises contained herein, and
intending to be legally bound hereby, the Subsidiary, CyberGuard and the
Employee agree to amend the Agreement as follows:

 

  1. All references in the Agreement to the “Company” shall mean “CyberGuard
Corporation”.

 

  2. Section 2 of the Agreement shall be deleted and the following shall be
inserted in its place: “Term. The term (“Term”) of this Agreement shall commence
on the Effective Date of the Agreement and shall continue until otherwise
terminated in accordance with the terms of this Agreement.”

 

  3. Section 3 of the Agreement is hereby amended to delete the title “Vice
President” and replace it with “Senior Vice President of Worldwide Sales”.

 

  4. Section 4.a. of the Agreement is hereby amended to provide for base salary
of U.S. $150,000 per year.

 

  5. Section 4.b. of the Agreement is hereby deleted in its entirety and the
following shall be inserted in its place: “Bonus. In addition, Employee shall
participate in the management bonus program established by CyberGuard with an
initial annual targeted bonus equal up to U.S. $150,000 per year (“Management
Bonus Program”).”

 

  6. Section 4.d. of the Agreement is hereby deleted in its entirety and the
following shall be inserted in its place: “Vacation. Employee shall be entitled
to four weeks’ vacation leave (in addition to holidays) in each calendar year
during the Term accrued in accordance with CyberGuard’s policy. Except with
respect to vacation time unused as the result of a request by the Company to
postpone a vacation, any unused vacation from one calendar year shall not
carry-over to any subsequent calendar year.”

 

  7. Section 4.f. of the Agreement is hereby deleted in its entirety and the
following shall be inserted in its place: “Other Benefits. During his employment
hereunder, Employee shall be entitled to all such other benefits, if any, that
CyberGuard may offer to other executive employees of the Company from time to
time.”

 

  8. In Section 19 of the Agreement, the fourth sentence shall be deleted and
the following shall be inserted in its place: “This Agreement shall in all
respects be governed by, and construed in accordance with the laws of the United
States of America and the laws of the State of Florida, without reference to
conflict of laws principles.”

 

  9. All of the above modifications shall be effective as of January 1, 2004.

 

  10. Nothing herein shall limit or restrict CyberGuard’s rights to terminate
the Employee’s employment in accordance with the Agreement.

 

  11. This Amendment shall supersede any provisions of the Agreement to the
extent that this Amendment conflicts with, modifies, or amends any provision of
the Agreement. In all other respects the Agreement shall remain in full force
and effect.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Agreement as of the date above first written.

 

CYBERGUARD CORPORATION   EMPLOYEE

By:

 

 

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    Patrick J. Clawson, Chief Executive Officer  

Peter Cronk

SNAPGEAR PTY LTD.     By:  

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Patrick J. Clawson, Chief Executive Officer

   

 

 

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EMPLOYMENT AGREEMENT AMENDMENT #2

 

This Amendment #2 (“Amendment”) effective as of August 20, 2004, is entered into
by and between CyberGuard Corporation (“CyberGuard”) and Peter Cronk, an
employee (“Employee”).

 

WHEREAS, the Employee and CyberGuard are parties to an Employment Agreement
dated November 12, 2003 (“Agreement”) and amended as of January 1, 2004;

 

WHEREAS, the Employee and CyberGuard wish to modify the Agreement in connection
with the Employee’s appointment to the Sr. VP, SnapGear Sales position at
CyberGuard.

 

NOW THEREFORE, in consideration of mutual promises contained herein, and
intending to be legally bound hereby, CyberGuard and the Employee agree to amend
the Agreement as follows:

 

  12. Section 3 of the Agreement is hereby amended to delete the title “Senior
Vice President of Worldwide Sales” and replace it with “Senior Vice President,
SnapGear Sales”.

 

  13. Section 4.b. of the Agreement is hereby deleted in its entirety and the
following shall be inserted in its place: “Commissions. The Employee shall be
eligible to earn commissions on the sales of SG products in the amount of
$130,000 at 100% of the FY05 plan, subject to the terms and conditions of a
separate sales incentive compensation plan between the Employee and CyberGuard.”

 

  14. All of the above modifications shall be effective as of August 20, 2004.

 

  15. Nothing herein shall limit or restrict CyberGuard’s rights to terminate
the Employee’s employment in accordance with the Agreement.

 

  16. This Amendment shall supersede any provisions of the Agreement to the
extent that this Amendment conflicts with, modifies, or amends any provision of
the Agreement. In all other respects the Agreement shall remain in full force
and effect.

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Agreement as of the date above first written.

 

CYBERGUARD CORPORATION   EMPLOYEE

By:

 

 

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Patrick J. Clawson, Chief Executive Officer

 

Peter Cronk