EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the
8th day of April, 2000, by and between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (hereinafter
"Executive") and Mission Critical Software, Inc. ("Mission Critical" or
"Employer").
R E C I T A L S
WHEREAS, Mission Critical Software, Inc., and Net IQ Corporation (hereinafter
"Net IQ"), are presently completing a merger of their respective organizations
("The Transaction"), which will result in formation of a surviving corporate
entity to be known as Net IQ Corporation; and
WHEREAS, Employer agrees and acknowledges that, during the period immediately
following the Transaction, continued access to the experience, knowledge and
expertise possessed by Executive will be critical to the success of the
venture; and
WHEREAS, Employer wishes to retain the services of Executive for a period of
one year after the Transaction, and to induce Executive to agree to
modification of the vesting schedule for certain stock options granted to him
under Mission Critical's 1997 Stock Option Plan and in his prior employment
agreements with Mission Critical,
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the parties agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, Employer shall employ Executive, and Executive hereby accepts such
employment with Employer.
2. Duties of Executive.
(a) Executive shall serve in the capacity of Executive Chairman of the
Board of Net IQ, and shall be subject to supervision by the Board of Directors
of Net IQ ("The Board"). In such capacity, Executive shall have all necessary
powers to discharge his duties and responsibilities, which include general
oversight of the affairs of Net IQ; consultation as needed with officers,
managers, employees and other personnel of Net IQ; and such other duties as the
Board may reasonably assign, consistent with duties typically assigned to
employees who hold positions similar to that of Executive.
(b) During the term of this Agreement and except as provided below,
Executive shall perform to the best of his abilities the duties assigned to him
hereunder, shall devote his primary business time, attention and effort to the
affairs of Net IQ and shall use his reasonable best efforts to promote the
interests of Net IQ. Notwithstanding the foregoing or anything else in this
Agreement, Executive may engage in reasonable charitable, civic or community
activities and, with prior approval of the Board, may serve as a director of
any business corporation, partnership or other business entity, provided that
such activities or service do not interfere with his duties hereunder.
Executive's principal office for the performance of his duties under this
Agreement shall be located within the greater metropolitan areas of Austin,
Texas.
3. Term. . The term of this Agreement (the "Term") shall commence as of
___________ __, 2000 (the "Effective Date"), and shall continue for a period of
one year and one day from the date on which the
Transaction closes ("Closing Date"), at which time this Agreement expires
("Separation Date"), unless earlier terminated by either party in accordance
with the terms and conditions hereinafter set forth.
4. Salary. Commencing on the Effective Date and during the Term of this
Agreement, Employer shall pay Executive a minimum base salary of $250,000.00,
or $20,833.33 per month, which shall be payable in accordance with Employer's
standard payroll practice, but in any event, not less frequently than monthly.
Such base salary shall not include any other benefits made available to
Executive, or any contributions or payments made on his behalf pursuant to any
employee benefit plan or program of Employer, including health, disability or
life insurance plans or programs, 401(k) plans, cash bonus plans, stock option
plans, retirement plans, severance plans or any similar plans or programs of
any nature that may be offered at any time during the Term of this Agreement.
In the event that: (a) Employer chooses to terminate Executive's employment at
any time prior to the Separation Date set forth in Section 3 for any reason
other than Cause, as herein defined; or (b) a Change in Control of Net IQ, as
defined in Section 8, Executive shall be entitled to an immediate accelerated
payment of all salary owed to him under this Agreement, less all salary paid to
Executive as per this Section 4 prior to the date of said termination. For
example, if Employer terminates Executive after six months, Executive shall be
entitled to full and immediate payment of the remaining six months' salary that
he would have earned over the remaining Term of the Agreement. "Cause," for
purposes of this Section 4, shall be defined as (i) theft, destruction,
misappropriation of Employer's Company property; (ii) conviction of a felony;
(iii) willful and material disregard of reasonable directives from Net IQ's
Board of Directors, provided that the Board shall provide Executive with
written notice that such event shall have occurred ("Notice of Disregard") and
shall further allow Executive 30 days in which to cure such disregard, and
provided further that the Board shall provide an opportunity for the Executive
to be heard if there is no cure within 30 days of the Notice of Disregard; and
(iv) Breach of Fiduciary Duty, provided that the Board shall provide Executive
with written notice that such event shall have occurred ("Notice of Breach of
Fiduciary Duty") and shall further allow Executive 30 days in which to cure
such Breach of Fiduciary Duty, and provided further that the Board shall allow
an opportunity for Executive to be heard if there is no cure within 30 days of
the Notice of Breach of Fiduciary Duty.
5. Bonus Compensation. In addition to the Salary set forth above, Employer
shall pay Executive a quarterly incentive bonus targeted at $43,750.00 per
quarter, to be based upon achievement of corporate operating results,
consistent with operating targets established for other Company executives.
6. Stock Options. The parties agree and acknowledge that Executive retains,
through two prior grants dated April 13, 1998, and June 21, 1999 ("Prior Option
Grants"), a quantity of options to purchase Common Stock of the Employer and
that certain of the Prior Option Grants have not vested as of the closing of
the Transaction. The terms and conditions of these Prior Option Grants are
memorialized in two separate Stock Option Agreements (`Option Agreements"),
which are appended to this Agreement as Exhibit A and incorporated by reference
herein. These Option Agreements shall remain in full force and effect, subject
to the following amendment to the vesting schedules set forth therein:
(a) Fifty percent (50%) of all options conferred upon Executive in the
Prior Option Grants, but not yet vested, shall immediately vest at the Closing
Date.
(b) During each of the first six (6) months following the Effective
Date, fifty percent (50%) of all remaining options conferred upon Executive in
the Prior Option Grants, but not yet vested at the Closing Date, shall vest in
equal monthly shares of one-twelfth (1/12) per month, with each monthly share
vesting on the respective monthly anniversary of the Effective Date.
(c) On the six-month anniversary of the Effective Date, fifty percent
(50%) of all remaining options conferred upon Executive in the Prior Option
Grants, but not yet vested as of the six-month anniversary of the Effective
Date, shall vest immediately.
(d) During months seven through twelve of the Term, all remaining
options conferred upon Executive in the Prior Option Grants, but not yet vested
as of the six-month anniversary of the Effective Date, shall vest in equal
monthly shares at a rate of one-sixth (1/6) per month, with each monthly share
vesting on the respective monthly anniversary of the Effective Date.
(e) All options vesting under this Section 6 shall vest in the order
in which they were granted to Executive. All options conferred upon Executive
in the Prior Option Grant of April 13, 1998, shall vest before any options from
the Prior Option Grant of June 21, 1999, may vest. For example, insofar as
possible, all options vesting at the Closing Date, as described in Section
6(a), shall come first from those options conferred in the Prior Option Grant
of April 13, 1998. If any options from the April 13, 1998, Prior Option Grant
remain, they shall vest during the first six months of the Term, as described
in Section 6(b). When all options from the April 13, 1998, Prior Option Grant
have vested, those options from the Prior Option Grant of June 21, 1999, shall
begin to vest.
(f) In the event that Employer chooses for any reason to terminate
Executive's employment at any time prior to the Separation Date, all remaining
options conferred upon Executive in the Prior Option Grants, but not yet vested
at the time of said involuntary termination, shall immediately vest.
(g) All stock options vesting under this Section 6 shall be exercisable for
a period of two (2) years from the date on which they vest, and Employer agrees
to make any and all amendments to its Stock Option Plan that may be necessary
to effectuate this two-year exercise period.
7. Additional Grant of Stock Options. As consideration for the services
provided by Executive pursuant to this Agreement, Employer shall grant to
Executive a total of 100,000 stock options to purchase shares of Employer's
Common Stock ("Additional Option Grant"), such options to be issued on or
before the Closing Date. All 100,000 options conferred by the Additional Option
Grant shall vest on the one-year anniversary of the Effective Date of this
Agreement. The terms and conditions of this Additional Option Grant are set
forth in a Stock Option Agreement dated _______, 2000, and appended to this
Agreement as Exhibit B. In the event that Employer chooses to terminate
Executive's employment at any time prior to the Separation Date for any reason
other than Cause, as defined herein, all stock options granted under this
Section 7 shall immediately vest. "Cause," for purposes of this Section 7,
shall be defined as (i) theft, destruction, misappropriation of Employer's
Company property; (ii) conviction of a felony; (iii) willful and material
disregard of reasonable directives from Net IQ's Board of Directors, provided
that the Board shall provide Executive with written notice that such event
shall have occurred ("Notice of Disregard") and shall further allow Executive
30 days in which to cure such disregard, and provided further that the Board
shall provide an opportunity for the Executive to be heard if there is no cure
within 30 days of the Notice of Disregard; and (iv) Breach of Fiduciary Duty,
provided that the Board shall provide Executive with written notice that such
event shall have occurred ("Notice of Breach of Fiduciary Duty") and shall
further allow Executive 30 days in which to cure such Breach of Fiduciary Duty,
and provided further that the Board shall allow an opportunity for Executive to
be heard if there is no cure within 30 days of the Notice of Breach of
Fiduciary Duty.
8. Accelerated Vesting of Deferred Stock Options in Event of Change of
Control. If at any time subsequent to the Closing Date, there occurs a Change in
Control, as defined herein, of Net IQ ("the Corporation"), all stock options
previously conferred upon Executive in the Prior Option Grants, as referenced
in Section 6 of this Agreement, and all options conferred in the Additional
Option Grant, as
set forth in Section 7 of this Agreement, shall vest immediately. For
purposes of this Agreement, a "Change in Control" will be deemed to occur in
the following events:
(i) The acquisition in one or more transactions by any "Person"
(as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")), of "Beneficial Ownership" (within the meaning
of Rule 13d-3 promulgated under the ▇▇▇▇ ▇▇▇) of a majority
of the combined voting power of the Corporation's then
outstanding voting securities (the "Voting Securities").
(ii) Approval by stockholders of the Corporation of (A) a merger or
consolidation involving the Corporation if the stockholders of the
Corporation immediately before such merger or consolidation do not
own, directly or indirectly immediately following such merger or
consolidation, at least a majority of the combined voting power of
the outstanding voting securities of the corporation resulting from
such merger or consolidation in substantially the same proportion
as their ownership of the Voting Securities immediately before such
merger or consolidation or (B) a complete liquidation or
dissolution of the Corporation or an agreement for the sale or
other disposition of all or substantially all of the assets of the
Corporation.
(iii) Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because a majority or more of the then
outstanding Voting Securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit
plans maintained by the Corporation or any of its subsidiaries or
(ii) any corporation that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of the
Corporation in the same proportion as their ownership of stock in
the Corporation immediately prior to such acquisition.
9. Employee Benefits. During the term of this Agreement, Employer shall
provide Executive with all benefits made available from time to time by
Employer and/or its organizational predecessors to employees and/or officers
generally and to employees who hold positions similar to that of Executive
(including benefits granted to other officers and/or directors of Employer
and/or its organizational predecessors), as per company policy. Specifically,
Executive's benefits shall include, without limit, participation in any and all
Employer-sponsored medical, dental and vision plans or programs (providing
coverage for Executive's immediate family); disability insurance; life
insurance payable to Executive's designated beneficiary; participation in any
and all Employer-sponsored retirement plans and/or 401(k) plans; and paid
vacation (up to four weeks). In the event that Executive's employment with
Employer is for any reason involuntarily terminated by Employer, Employer
agrees to pay in full all premiums associated with Executive's election to
continue health benefits provided hereunder for a period of eighteen (18)
months following said termination.
10. Logistics and Support. The parties agree and acknowledge that, during the
Term of this Agreement, Executive shall reside in Austin, Texas, and shall
travel to Houston, Texas, and to Santa Clara, California, as necessary. In
order to facilitate the performance of Executive's duties as set forth in this
Agreement, Employer agrees to provide Executive with an office in Austin,
Texas; an automobile allowance and apartments for Executive's use while in
Houston, Texas, and/or Santa Clara, California. Employer further agrees to
employ Executive's Administrative Assistant in Austin, Texas, and to allow said
Administrative Assistant to participate in Employer's stock option plan under
normal Company guidelines. Employer further agrees to reimburse Executive for
all expenses actually and reasonably incurred by him in the business interests
of Employer.
11. Separation Payment. Independent of, and in addition to, the various
items of compensation and benefits set forth in Sections 4 through 10 of this
Agreement, Employer agrees to pay Executive an additional lump sum payment equal
to two-hundred thousand dollars ($200,000.00) ("Separation Payment"), payable at
the time of Executive's separation from employment with Employer:
(a) In the event that Employer chooses for any reason to terminate
Executive's employment prior to the Separation Date as set forth in Section 3,
this Separation Payment shall be due and payable in full as of the date of said
termination.
(b) In the event of a Change in Control, as defined in Section 8, this
Separation Payment shall become immediately due and payable in full.
(c) In the event that Executive performs his duties for the entire one-year
duration of this Agreement, this Separation Payment shall be due and payable in
full as of the Termination Date.
12. Death or Disability. In the event that Executive dies or becomes unable to
perform his duties and responsibilities under this Agreement as a result of an
illness, injury or impairment that continues for 90 consecutive days or more
("Disability"):
(a) All stock options conferred upon Executive by Employer in the Prior
Option Grants or the Additional Option Grant, as referenced in Sections 6 and 7
of this Agreement, shall immediately vest and may be exercised either by
Executive or his estate; and
(b) Employer shall pay to Executive (or his estate, heirs and/or assigns,
as appropriate) all salary owed to Executive by Employer pursuant to Section 4
of this Agreement; any bonus owed to Executive as of the date of said death or
Disability, pursuant to Section 5 of this Agreement; and the Separation Payment
referenced in Section 10 of this Agreement.
(c) Employer shall, for a period of 18 months after such Death or
Disability, pay all costs associated with continuation of medical and dental
coverage for Executive's dependents, pursuant to Section 8 of this Agreement.
13. Early Termination Upon Executive Termination Event.
(a) Executive may terminate his employment under this Agreement upon the
occurrence of an Executive Termination Event. In the event of such termination,
other than a termination under Section 13(b)(vii), Executive shall be entitled
to immediate payment of all salary owed to Executive by Employer pursuant to
Section 4 of this Agreement; any bonus owed to Executive as of the date of said
termination, pursuant to Section 5 of this Agreement; the Separation Payment
referenced in Section 11 of this Agreement; and payment of all costs associated
with continuation of medical and dental benefits, pursuant to Section 8 of this
Agreement. Executive shall also be entitled to immediate vesting of all stock
options conferred upon Executive by Employer in the Prior Option Grants and/or
the Additional Option Grant, as referenced in Sections 6 and 7 of this
Agreement.
(b) For purposes of this Section 13, "Executive Termination Event" shall be
defined as: (i) a significant reduction in the duties or responsibilities of
Executive from those set forth in this Agreement; (ii) a change in job title of
Executive that is reflective of a reduction in duties, responsibilities and/or
stature; (iii) a change or reduction in Executive's total remuneration
(including salary, bonus, qualified retirement benefits, welfare benefits,
stock option benefits and any other employee benefits) from that provided in
this Agreement; (iv) a change in Executive's direct reporting relationship such
that Executive
is no longer reporting directly to the Board; (v) a change by Employer in the
location of Executive's principal place of employment, which moves said
principal place of business more than 35 miles from the location specified in
this Agreement; (vi) failure by Employer to provide directors and officers
liability insurance covering Executive; and (vii) a Material Disagreement, as
hereinafter defined.
14. Early Termination by Executive Due to Material Disagreement. The parties
agree and acknowledge that the composition of Employer's Board of Directors may
be subject to change precipitated by the removal or resignation of one or more
of the current Directors ("Change in Composition"); and that such Change in
Composition may adversely affect or otherwise alter Executive's relationship
with the Board and/or the Chief Executive Officer ("CEO") such that Executive
and the Board and/or CEO are no longer able to agree as to the proper course or
direction of Employer's business ("Material Disagreement"). If, as a result of
any Change in Composition of Employer's Board, Executive, in his sole
discretion and acting in good faith, determines that there is a Material
Disagreement between Executive and the Board and/or the CEO, and that such
Material Disagreement may result in denigration of the value of Executive's
equity holding in Employer, Executive shall provide a written Notice of
Material Disagreement to the Board, and shall be allowed to accelerate vesting
of all stock options conferred upon him by Employer in the Prior Option Grants,
as referenced in Sections 6 of this Agreement, and to accelerated vesting of
pro-rata portion of those options conferred in the Additional Option Grant, as
referenced in Section 7 of this Agreement, based on the Effective Date, date of
termination date under this section and the Separation Date. (For example, in
the event of a Notice of Material Disagreement after Executive has fulfilled
six months of his obligation under this Agreement, one-half of the shares
conferred in the Additional Option Grant shall vest). All shares subject to
accelerated vesting under this Section 14 shall vest fully and become subject
to immediate exercise as of the date of the Notice of Material Disagreement.
Further, in the event of a termination under this Section 14, Executive shall
be entitled to any bonus owed to Executive as of the date of said termination,
pursuant to Section 5 of this Agreement; the Separation Payment referenced in
Section 11 of this Agreement; and payment of all costs associated with
continuation of medical and dental benefits, pursuant to Section 8 of this
Agreement. Executive and Employer agree that appointment or election of a ninth
independent Director, as currently contemplated by the parties, shall not
constitute a Change in Composition for purposes of this Section 14. Executive
and Employer further agree that a reduction in the size of the Board, in
accordance with Employer's Corporate By-Laws, such that one Director appointed
by Mission Critical and one Director appointed by Net IQ are removed at the
same time ("Symmetrical Reduction") shall not constitute a Change in
Composition for purposes of this Section 14. Notwithstanding the above, in the
event that the Board acts to appoint one or more replacement directors to the
Board in accordance with NetIQ's Bylaws, and Executive consents to the Board's
choice of a replacement, this appointment shall not constitute a Change in
Composition for purposes of this Sec. 14.
15. Early Termination by Executive for Other Than a Termination Event. In the
event that Executive chooses, prior to the Separation Date, to terminate his
employment with Employer under circumstances other than a Termination Event, as
herein defined, Employer shall pay to Executive all salary and bonus owed to
Executive as of the date of such termination; the full Separation Payment
referenced in Section 11 of this Agreement; and shall allow Executive to
exercise all stock option shares vested as of the date of such termination.
Executive shall not be entitled to any further or additional benefits or
vesting of stock options.
16. Notice Provision. Any notice, demand or request required or permitted to be
given or made under this Agreement shall be in writing and shall be deemed
given or made when delivered in person, when sent by United States registered
or certified mail, or postage prepaid, or when telecopied to a party at its
address or telecopy number specified below:
If to Employer:
Net IQ.
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Telecopy number: (___) ___-____
If to Executive:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy number: (512) ___-____
The parties to this Agreement may change their addresses for notice by
notifying the other parties in the manner provided in this Section 16.
17. Headings Non-Binding. All section titles and captions in this Agreement are
for convenience only, shall not be deemed part of this Agreement, and in no way
shall define, limit, extend or describe the scope or intent of any provisions
hereof.
18. Words to have Contextual Meaning. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. Additionally, the words "and" and "or"
shall be given their contextual meaning and not be interpreted blindly as being
solely conjunctive or disjunctive, as the case may be.
19. Execution of Agreement. The parties shall execute all documents, provide
all information and take or refrain from taking all actions as may be
reasonably necessary or appropriate to achieve the purposes of this Agreement.
20. Limitation of Benefits Clause. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditors of the parties,
except as otherwise expressly provided herein.
21. Non-waiver Provision. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
22. Multiple Originals. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.
23. CHOICE OF LAWS. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAW.
24. Severability and Reformation. If any provision of this Agreement is
declared or found to be illegal, unenforceable, or void, in whole or in part,
then the parties shall be relieved of all obligations arising under such
provision, but only to the extent that it is illegal, unenforceable or void, it
being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to make it
legal and enforceable while preserving its intent or, if that is not possible,
by substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
25. Entire Agreement. This Agreement, and the agreements in the forms of
exhibits attached hereto, constitute the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related in any manner to the
subject matter hereof.
26. Written Amendments Provision. No supplement, modification or amendment of
this agreement or waiver of any provision of this Agreement shall be binding
unless executed in writing by all parties to this Agreement. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision of this Agreement (regardless of whether
similar), nor shall any such waiver constitute a continuing wavier unless
otherwise expressly provided.
27. Written Consent for Assignment. No party may assign this Agreement or any
rights or benefits thereunder without the written consent of the other parties
to this Agreement.
28. Choice of Forum. Any action arising and initiated pursuant to this
Agreement must proceed in a Texas District Court in ▇▇▇▇▇▇ County, Texas. If
such an action cannot proceed in District Court due to jurisdictional
limitations, then it shall proceed in any State or County court of competent
jurisdiction in ▇▇▇▇▇▇ County, Texas.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
EXECUTED as of the date first above written.
MISSION CRITICAL SOFTWARE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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and
EXECUTIVE
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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