EMPLOYMENT AGREEMENT
AGREEMENT dated as of March 17, 1997 between CIDCO Incorporated, a
Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Employee").
WHEREAS, the Employee has been hired as a key employee of the Company;
and
WHEREAS, the Company is engaged in a highly technical and competitive
business.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. Employment and Term.
The Company hereby agrees to employ the Employee during the period
commencing as of the date hereof and continuing until his employment is
terminated pursuant to the terms hereof, to serve as the Company's President and
Chief Executive Officer, officed at the Company's headquarters in Morgan Hill,
California, to perform such duties as are consistent with the usual duties of an
officer of this status and to report to the Company's Board of Directors. The
Employee hereby accepts such employment and agrees to devote his full business
time exclusively to the faithful and diligent performance of the duties provided
herein (it being understood and agreed by the parties that the Employee may,
however, devote such time as is reasonably necessary, in a manner that does not
interfere with the performance of his duties hereunder, to transitional matters
for his previous employer NAT Systems and to acting as a member of the Board of
Directors of SPL World Group) and agrees in connection with the performance of
such duties to act in a manner consistent with the primary objective of building
long-term shareholder value of the Company.
2. Compensation.
(a) Salary. The Company shall compensate the Employee with a base
salary of at least $375,000 per annum (representing the annualized rate of the
Employee's base salary during the remainder of 1997), subject to annual review
by the Compensation Committee of the Board.
(b) Benefits. The Employee shall be entitled to participate in such
pension plans, 401(k) plans, group health, accident or life insurance plans,
group medical and hospitalization plans, stock option plans, stock purchase
plans and other similar benefits, as may hereafter be available to the
executives of the Company. It is understood that, except as set forth herein,
the Company does not by reason of this Agreement obligate itself to make such
benefits available to its employees.
(c) Expenses. The Company shall pay or reimburse the Employee for all
expenses normally reimbursed by the Company and reasonably incurred by him in
furtherance of his duties hereunder including, without limitation, expenses for
traveling, meals, hotel accommodations and the like upon submission by him of
vouchers or an itemized list thereof prepared in compliance with such rules
relating thereto as the Board may, from time to time, adopt and as may be
required in order to permit such payments as proper deductions to the Company
under the Internal Revenue Code of 1986, as amended, and the rules and
regulations adopted pursuant thereto now or hereafter in effect.
(d) Vacations. During each year of employment (including the current
year ending December 31, 1997), the Employee shall be entitled to paid vacations
for an aggregate of the greater of (A) two weeks, or (B) such period as may be
provided from time to time in the Company's vacation policy. The Company shall
not pay the Employee any additional compensation for any vacation time not used
by the Employee.
(e)Bonuses. In addition to the Employee's base salary, for the calendar
year ending December 31, 1997 the Employee shall (if he remains employed by the
Company on December 31, 1997) be entitled to receive a minimum bonus of $98,960
payable at such time in 1998 as other employee bonuses for calendar year 1997
are paid by the Company (but in no event later than February 15, 1998). For
subsequent calendar years, the Employee will receive bonuses in such amounts, at
such times and upon such terms as the Compensation Committee of the Board may in
its sole discretion determine and award, provided, however, that the Executive's
"Target Award" under the Company's Annual Executive Incentive Plan shall not be
less than $125,000.
(f)Stock Option. Pursuant to a Stock Option Agreement in the form
attached hereto as Exhibit A, the Company shall grant the Employee an option
(the "Stock Option") to purchase 600,000 shares of the Company's common stock,
par value $.01 per share, at an exercise price of $14.25 per share. Such Stock
Option is to be a non-statutory stock option which is not intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended.
The Stock Option shall vest in 60 equal monthly installments beginning with the
installment vesting on April 1, 1997. 3. Termination.
(a)Employee's employment shall be terminated upon the occurrence of any
of the following events: (i) upon the death of the Employee; (ii) upon the
Permanent Disability (as such term is defined in Section 3(d) hereof) of the
Employee; (iii) upon written notice of termination of employment by the Company
for Cause or without Cause (as defined in Section 3(c) hereof); or (iv) upon
written notice of termination of employment by the Employee for Good Reason or
without Good Reason (as defined in Section 3(e) hereof).
(b)In the event that the Employee's employment with the Company is
terminated by the Company without Cause or as a result of Permanent Disability
or is terminated by the Employee for Good Reason, then the Employee shall,
within 30 days following the employment termination date, receive a lump sum
cash severance payment equal to one year of his then current base salary, Target
Award bonus amount and benefits value (which shall be a minimum cash payment of
$500,000 plus 12 months of benefits value) and the period for vesting and
exercisability of the Stock Option referenced herein shall be extended for one
additional year from the employment termination date
(c)For purposes hereof, "Cause" shall mean any of the following: (i)
the intentional failure, neglect or refusal of the Employee to substantially
fulfill his material duties as an employee; (ii) a material breach of any
fiduciary duty or other material dishonesty by the Employee with respect to the
Company or any affiliate thereof; or (iii) the conviction of the Employee for a
felony or crime involving moral turpitude.
(d)For purposes hereof, "Permanent Disability" shall mean the total
incapacitation of the Employee so as to preclude performance of the duties of
his employment hereunder for an aggregate period of four months in any twelve
month period.
(e)For purposes hereof, "Good Reason" shall exist if the Company (or
any successor resulting from a change of control of the Company) shall: (i) be
in breach of or default under any material provision of this Agreement and not
substantially cure such breach within 30 days of receiving notice of such breach
from the Employee; (ii) change the principal work location of the Employee to a
location which increases the Employee's one-way commute from his house in Los
Altos Hills, California without the consent of the Employee, which consent may
be withheld by the Employee for any reason; (iii) materially change the duties
of the Employee without the Employee's consent, which consent may be withheld by
the Employee for any reason; (iv) reduce the Employee's compensation in any way
without the Employee's consent, which consent may be withheld by the Employee
for any reason; or (v) become insolvent or bankrupt or file a voluntary or
involuntary petition in bankruptcy or make an assignment for the benefit of
creditors or consent to the appointment of a trustee or receiver.
(f)If any Change in Control Benefit (as hereinafter defined) payable to
the Employee (a "Benefit Payment") is or will be subject to the excise tax
imposed with respect to "excess parachute payments" under section 4999 of the
Code or any interest or penalties with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Employee will retain an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Benefit Payment. The Gross-Up Payment shall be payable to the
Employee in accordance with the following provisions:
(i)Whenever the Employee becomes entitled to receive any
Benefit Payment, the Company's independent auditors as designated by
the Company's Board of Directors prior to the occurrence of the change
in control giving rise to such Benefit Payment (the "Accounting Firm")
shall determine (i) whether such Benefit Payment is or will be subject
to Excise Tax; (ii) whether any Benefit Payments previously made to the
Employee ("Prior Benefit Payments") are or will be subject to Excise
Tax in an amount exceeding the amount taken into account in calculating
the Gross-Up Payment, if any, that was made to the Employee in respect
of such prior Benefit Payments; (iii) the amount of the Excise Tax
payable by the Employee with respect to such Benefit Payment and all
Prior Benefit Payments; and (iv) the amount of the Gross-Up Payment
payable to the Employee hereunder with respect to such Benefit Payment
and all Prior Benefit Payments, less the amount of any Gross-Up Payment
previously made to the Employee.
(ii) If the Accounting Firm determines that no Excise Tax is
payable by the Employee with respect to such Benefit Payment and all
Prior Benefit Payments, the Accounting Firm shall furnish the Employee
and the Company with a written statement certifying that the Accounting
Firm has determined that no Excise Tax is payable, setting forth the
reasons for its determination, and stating that the Employee has
substantial authority not to report any Excise Tax on his federal
income tax return.
(iii) If the Accounting Firm determines that a Gross-Up
Payment is payable to the Employee, it shall furnish the Employee and
the Company with a written statement of its determination, and all
accompanying calculations and other material supporting its
determination. The amount of the Gross-Up Payment so determined by the
Accounting Firm to be payable to the Employee shall be paid to the
Employee as soon as practicable after the Accounting Firm's
determination has been furnished to the Employee and the Company.
(iv) If in connection with any audit of the Employee's federal
income tax returns it is determined that the Employee is liable for
Excise Tax with respect to any Benefit Payments in an amount in excess
of the amount taken into account in any determination previously made
by the Accounting Firm under subparagraph (f)(i), the Employee may, by
written notice to the Company, request that a Gross-Up Payment be made
to the Employee with respect to such additional Excise Tax amount.
Promptly after receipt of such notice, the Company shall cause the
Accounting Firm to review the Employee's request and to determine the
amount, if any, of the Gross-Up Payment to which the Employee is
entitled with respect to such additional Excise Tax amount. The
Employee shall furnish the Accounting Firm with such information and
documents as the Accounting Firm may reasonably request to enable it to
make a determination as to the Employee's request. The Accounting Firm
shall furnish the Employee and the Company with a written statement of
its determination as to the Employee's request, and all accompanying
calculations and other material supporting its determination. The
Gross-Up Payment, if any, determined by the Accounting Firm to be
payable to the Employee shall be paid to the Employee as soon as
practicable after the Accounting Firm has made its determination.
(g) For purposes hereof the following terms shall have the
following meanings:
(i) "Change in Control Benefit" means any payment or other
benefit that the Employee may be entitled to receive under any Change
in Control Plan upon a change in control (as defined in such Plan) or
upon the Employee's involuntary termination (as defined in such Plan)
following such change in control; and
(ii) "Change in Control Plan" means any plan, program, policy,
or agreement (including, without limitation, this Agreement and the
Non-Qualified Stock Option Agreement issued to the Employee on March
12, 1997) or resolution of the Board of Directors of the Company under
which a Change in Control Benefit may be provided to the Employee
4. Noncompetition and Nonintervention.
(a) While in the employ of the Company, the Employee agrees to devote
substantially all of his work time, attention and energies to the performance of
the business of the Company and the Employee shall not, directly or indirectly,
alone or as a member of any partnership or other business organization, or as a
partner, officer, director, employee, stockholder, consultant or agent of any
other corporation, partnership or other business organization, be actively
engaged in or concerned with any other duties or pursuits which interfere with
the performance of his duties as an employee of the Company, or which, even if
noninterfering, may be contrary to the best interests of the Company.
(b) For a period of one year after the termination or cessation of the
Employee's employment with the Company for any reason (including termination of
employment by the Company without Cause), the Employee shall not, directly or
indirectly, alone or as a member of any partnership or other business
organization, or as a partner, officer, director, employee, stockholder,
consultant or agent of any corporation, partnership or business organization,
engage in any business activity which is directly or indirectly in competition
with the products or services being developed, manufactured, marketed, provided
or sold by the Company or which is directly or indirectly detrimental to the
business of the Company. For a period of one year after the termination or
cessation of the Employee's employment with the Company for any reason
(including termination of employment by the Company without Cause) the Employee
shall not, directly or indirectly, alone or as a member of any partnership or
other business organization, or as a partner, officer, director, employee,
stockholder, consultant or agent of any corporation, partnership or business
organization (i) request or cause any customer of the Company to cancel or
terminate any business relationship with the Company, or (ii) solicit or
otherwise cause any employee of the Company to terminate such employee's
relationship with the Company. For the purposes of this Section 4(b), a business
shall be deemed to be in competition with the Company only if the products or
services of such business are substantially similar in function or capability to
the products or services then being developed, manufactured, marketed, provided
or sold by the Company, and are marketed to substantially the same type of user
as that to which the products and services of the Company are marketed or
proposed to be marketed.
5. Confidential Information.
(a) The Employee will not at any time, whether during or after the
termination or cessation of his employment, reveal to any person, association or
company any of the trade secrets or confidential information concerning the
organization, business or finances of the Company so far as they have come or
may come to his knowledge, except as may be required in the ordinary course of
performing his duties as an employee of the Company or except as may be in the
public domain through no fault of the Employee, and the Employee shall keep
secret all matters entrusted to him and shall not use or attempt to use any such
information in any manner which may injure or cause loss or may be calculated to
injure or cause loss whether directly or indirectly to the Company.
(b) The Employee agrees that during his employment he shall not make,
use or permit to be used any notes, memoranda, drawings, specifications,
programs, data or other materials of any nature relating to any matter within
the scope of the business of the Company or concerning any of its dealings or
affairs otherwise than for the benefit of the Company. The Employee shall not,
after the termination or cessation of his employment, use or permit to be used
any such notes, memoranda, drawings, specifications, programs, data or other
materials, it being agreed that any of the foregoing shall be and remain the
sole and exclusive property of the Company and that immediately upon the
termination or cessation of his employment the Employee shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.
6. Patent and Copyright Assignment.
The Employee agrees to assign and transfer to the Company or its
designee, without any separate remuneration or compensation, his entire right,
title and interest in and to all Inventions and Works in the Field (as
hereinafter defined), together with all United States and foreign rights with
respect thereto, and at the Company's expenses to execute and deliver all
appropriate patent and copyright applications for securing United States and
foreign patents and copyrights on such Inventions and Works, and to perform all
lawful acts, including giving testimony, and to execute and deliver all such
instruments, that may be necessary or proper to vest all such Inventions and
Works in the Field and patents and copyrights with respect thereto in the
Company, and to assist the Company in the prosecution or defense of any
interference which may be declared involving any said patent applications or
patents or copyright applications or copyrights. For the purposes of this
Agreement, the words "Inventions and Works" shall include any discovery,
process, design, development, improvement, application, technique, program or
invention, whether practice or not, conceived or made by the Employee,
individually or jointly with others (whether on or off the Company's premises or
during or after normal working hours), on or after July 15, 1996 while in the
employ of the Company, provided, however, that no discovery, process, design,
development, improvement, application, technique, program or invention reduced
to practice or conceived by the Employee off the Company's premises and after
normal working hours shall be deemed to be included in the term "Inventions and
Works" unless directly or indirectly related to the business then being
conducted by the Company or any business which the Company is then actively
exploring (collectively, the "Field").
7. Binding Effect.
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and the Company's successors or assigns (whether resulting
from any reorganization, consolidation or merger of the Company or any business
to which all or substantially all of the assets of the Company are sold) and the
Employee's heirs, executors and legal representatives.
8. Entire Agreement.
This Agreement contains the entire agreement and understanding of the
parties with respect to the subject matter hereof, supersedes all prior
agreements and understandings with respect thereto and cannot be modified,
amended, waived or terminated, in whole or in part, except in writing signed by
both parties.
9. Right to Injunction.
The Employee acknowledges and agrees that the services rendered and to
be rendered to the Company by him are of a specialized and unique character and
that irreparable and immediate damage will result to the Company if Employee
fails to, refuses to or neglects to perform his agreements and obligations
hereunder. In the event of such a failure, refusal or neglect by the Employee,
the Company shall be entitled to injunctive relief or any other legal or
equitable remedies including the recovery, by appropriate action, of the amount
of the actual damage caused by the Company by any such failure, refusal or
neglect by the Employee. The remedies provided in this Agreement shall be deemed
cumulative and the exercise of one shall not preclude the exercise of any other
remedy at law or in equity for the same event or any other event.
10. Miscellaneous.
(a) Amendments. No amendment, modification or waiver of any of
the terms of this Agreement shall be valid unless made in writing and signed by
the Employee and the Company.
(b) Successors in Interest. All provisions of this Agreement
shall survive the termination or cessation of the Employee's employment with the
Company and shall be binding upon and inure to the benefit of and be enforceable
by and against the respective heirs, executors, administrators, personal
representatives, successors and assigns of either of the parties to this
Agreement.
(c) Waiver. The waiver by the Company of a breach of this
Agreement by one party shall not operate or be construed as a waiver of any
subsequent breach by either party.
(d) Severability. If any provision of this Agreement shall
contravene any law or any particular state where the Employee shall perform
services for the Company, then this Agreement shall be first construed to be
limited in scope and duration so as to be enforceable in that state, and if
still unenforceable, shall then be construed as if such provision is not
contained herein.
(e) Governing Law. This Agreement shall be governed by the
laws of the State of California without regard to the conflict of laws
principles thereof.
(f) Counterparts. This Agreement may be executed in two or
more counterparts, and by each party on separate counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
CIDCO INCORPORATED
By: /s/Xxxx X.Xxxxxxx
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Xxxx X. Xxxxxxx
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Co-Chairman of the Board
/s/Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
