EMPLOYMENT AGREEMENT, dated as of December 15, 1999 (the "Agreement"),
between and among Netgateway, Inc., a corporation organized under the
laws of the State of Delaware (the "Company"), Netgateway, a
corporation organized under the laws of the State of Nevada and a
wholly owned subsidiary of the Company (the "Employer"), and Xxxx
Xxxxxxx Padwa (the "Executive").
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The Company and the Employer desires to retain the Executive to supply
services to the Company and the Employer, and the Executive desires to provide
the services to the Company and the Employer, on the terms and subject to the
conditions set forth in this Agreement.
In consideration of (i) the Executive's agreement to supply the
services under this Agreement and (ii) the mutual agreements set forth below,
the adequacy and sufficiency of which is hereby acknowledged, the Company, the
Employer and the Executive agree as follows:
1. Services; Term.
(a) The Employer hereby employs the Executive, and the Executive
hereby agrees to be employed by the Employer, as Executive Vice President, Sales
and Marketing, and the Executive will use her best efforts to perform services
for the Employer in accordance with directions given to Executive from time to
time by the Board of Directors of the Company (the "Board"). The Executive is
being retained by the Employer, among other things, to: (a) develop and
implement a marketing strategy; (b) develop and implement a distribution
strategy; (c) manage relationships with industry consultants; (d) manage all
sales efforts, including but not limited to, sales personnel, budgets,
operations, forecasting, channel development and the sales process; and (e)
develop and manage all marketing communications for internal and external
audiences.
(b) The Executive shall participate in the operation of the business
of the Employer (the "Business"), and assume and perform all duties and
responsibilities consistent with her title and position (the "Services") as from
time to time requested by the Employer.
(c) The Executive shall be employed for the period commencing on the
date of this Agreement (the "Effective Date") and ending on December 15, 2001,
unless sooner terminated pursuant to the provisions of this Agreement (such
period being referred to as the "Employment Period"); provided, however, that on
the second anniversary of the Effective Date, the Employment Period shall
automatically be extended by an additional year, unless the Company, the
Employer or the Executive shall give the other party(ies) at least 90 days'
notice of its intent not to extend the term of this Agreement for an additional
year.
2. Performance by Executive. During the Employment Period, the
Executive shall devote all of her business time, attention, knowledge and skills
to, and use her best efforts to perform, the Services and shall promote the
interests of the Employer in carrying out the Services. Other than the
restrictions contained in Sections 5 and 6 of this Agreement, nothing herein
shall be deemed to preclude the Executive from continuing to serve on the board
of directors of any business corporation or any charitable organization on which
she now serves or, subject to the prior approval of the Board, from accepting
appointment to additional boards of directors, provided that such activities do
not materially interfere with the performance of Executive's duties hereunder
and such activities are undertaken in compliance with the Company's Code of
Business Conduct.
3. Compensation and Benefits. During the Employment Period:
(a) Base Compensation. As compensation for the Services, the Company
shall pay Executive an annual base salary at the rate of $180,000 per year or
such higher amount as the Company's Compensation Committee (the "Committee") may
from time to time determine (the "Base Salary"), payable in accordance with the
Employer's payroll practices. The Base Salary shall be increased by no less than
$25,000 annually during the term of this Agreement, and subject to any
additional discretionary increase, as determined by an annual review by the
Committee on or prior to each anniversary of the Effective Date. The Employer
shall reimburse the Executive for all reasonable expenses incurred by her during
the term of this Agreement in accordance with the Employer's stated expense
reimbursement policy.
(b) Cash Bonus. (i) The Executive shall be entitled to a sign-on
bonus in the amount of $20,000 (less any applicable payroll and related taxes),
which shall be payable within the first payroll period after Executive has been
employed by the Company.
(ii) For each calendar year during the Employment Period
commencing on January 1, 2000, Executive shall be entitled to participate in any
annual bonus plan of the Company or the Employer and to receive an annual
performance bonus from the Company or the Employer in accordance with the terms
thereof.
(c) Stock Options. (i) The Executive will be granted options
pursuant to the Company's 1998 Executive Stock Option Plan (the "Options") to
purchase up to 100,000 shares of the common stock, par value $.01 per share, of
the Company, on terms and conditions to be embodied in a separate option
agreement between the Employer and the Executive (the "Option Agreement"), which
is annexed hereto as Exhibit A.
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(ii) The Executive shall be entitled to additional option grants
as follows: (x) options to purchase 20,000 shares of the common stock of the
Company for each fiscal quarter during the term of this Agreement that the
Executive meets her sales quota goals (the "Sales Goals"), which Sales Goals
shall be mutually agreed upon by the parties hereto; and (y) options to purchase
20,000 shares of common stock of the Company for each year during the term of
this Agreement in which the Executive shall meet the Sales Goals for the entire
year. Options granted pursuant to this Section 3(c)(ii) shall vest monthly over
a two year period from the date of grant. The exercise price of the options
granted pursuant to this Section 3(c)(ii) shall be fixed at a purchase price
equal to the lower of: (i) the fair market value of such shares as of the close
of business on the date on which such options are granted; or (ii) the closing
price of such shares as of the date on which the Compensation Committee approves
the grant of such options. All option grants made pursuant to this Section
3(c)(ii) shall be governed by separate option agreement to be dated as of the
date of such grant.
(d) Benefit Plans. The Executive shall be entitled to receive
benefits from the Employer consistent with those in effect for the Employer's
senior executives, as those benefits are revised from time to time by the Board
of Directors of the Employer. Except as specifically provided in this Section 3,
nothing contained herein is intended to require the Employer to maintain any
existing benefits or create any new benefits.
(e) Vacations and Holidays. The Executive shall be entitled to
vacation and paid holidays in accordance with the Employer's stated policy. In
any case, the Executive shall immediately vest in all holiday and vacation time
as of the Effective Date.
(f) Insurance and Related Benefits. Health insurance, disability
insurance, life insurance and other related benefits (collectively, "Insurance
Benefits") made available by the Company to other executives of the Company
shall be made available to the Executive. Upon termination of the Executive,
regardless of the reason for termination, Insurance Benefits shall be continued
for Executive at the expense of the Company for a period of no less than six
months and for such additional period as may be required by applicable law at
the expense of the Executive.
4. Termination.
(a) Death or Disability. If the Executive dies during the Employment
Period, the Employment Period shall terminate as of the date of the Executive's
death. If the Executive becomes unable to perform the Services for 180
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Executive, or, if the Employer and the Executive cannot agree upon a
physician within 15 days, then by a physician selected by physicians designated
by each of the Employer and the Executive. The Executive's failure to submit to
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any physical examination by such physician after such physician has given
reasonable notice of the time and place of such examination shall be conclusive
evidence of the Executive's inability to perform her duties hereunder.
(b) Cause. The Company or the Employer, at its option, may terminate
the Employment Period and all of the obligations of the Company and the Employer
under this Agreement for Cause. The Employer shall have "Cause" to terminate the
Executive's employment hereunder in the event of (i) the Executive's conviction
of, or plea of guilty or nolo contendere to a felony, (ii) the Executive's gross
negligence in the performance of the Services, which is not corrected within 15
business days after written notice, (iii) the Executive's knowingly dishonest
act, or knowing bad faith or wilful misconduct in the performance of the
Services to the material detriment of the Company, which is not corrected within
15 business days after written notice or (iv) the Executive's other material
breach of her obligations under this Agreement, which is not corrected within a
reasonable period of time (determined in light of the cure appropriate to such
material breach, but in no event less than 15 business days) after written
notice.
(c) Without Cause. The Company or the Employer, at its option, may
terminate the Employment Period without Cause at any time upon 30 days advance
written notice.
(d) Termination by Executive for Good Reason. The Executive may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a substantial diminution in
benefits provided under this Agreement, (ii) a substantial diminution in status,
position and responsibilities of the Executive, (iii) the Employer requiring the
Executive to be based at any office or location that requires a relocation or
commute greater than 50 miles from the office or location to which the Executive
is currently assigned or (iv) the Employer's other material breach of its
obligations under this Agreement.
(e) Without Good Reason. The Executive, at her option, may terminate
the Employment Period without Good Reason at any time upon 30 days advance
written notice.
(f) Payments in the Event of Termination. Upon the termination of
the Employment Period for death, disability, by the Executive without Good
Reason, or by the Employer for Cause, the Employer shall pay to the Executive,
or her estate, as the case may be, the Base Salary and Performance Bonus earned
to the date of death or termination for disability or Cause, as the case may be.
In addition, all vested and unexercised Options shall remain exercisable by the
Executive for a period of 365 days. Upon the termination of the Employment
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Period by the Employer without Cause or by the Executive for Good Reason, the
Employer shall pay to the Executive (A) the Base Salary and Performance Bonus
earned to the date of such termination, and (B) an additional amount in a lump
sum in cash equal to the Base Salary at the time of termination for a period
beginning on the date of such termination, and ending on the date that the
Employment Period would have ended pursuant to this Agreement had there been no
termination of Executive's employment; provided, however, that such period shall
be calculated without taking into account any extensions as provided in Section
1.c; and provided, further, that in no event shall such period be less than
twelve months. In addition, all vested and unexercised Options shall become and
remain exercisable by the Executive until the expiration date of the Options
pursuant to the Option Agreement.
(g) Termination following a Change in Control. If, within the two
year period following a Change in Control (as defined below), (X) Executive's
employment is terminated by the Company or by the Employer for any reason other
than Executive's death or disability or for Cause, or (Y) Executive terminates
her employment for Good Reason, (i) the Company or the Employer shall pay
Executive as severance a lump sum amount equal to (A) two times the sum of (1)
Executive's then Base Salary plus (2) Executive's highest annual Performance
Bonus in the three year period immediately preceding such Change in Control and
(B) the present value of all other benefits otherwise payable through the then
remaining Employment Period under Sections 3(d) and 3(f) of this Agreement, and
(ii) all outstanding equity incentive awards shall immediately vest, and
Executive shall be entitled to receive a lump sum amount equal to the "spread"
on any then outstanding stock options or similar awards held by Executive in
exchange for the surrender and cancellation of such awards. "Spread" shall be
determined by the difference between the option price and the closing price of
the Company's stock on the day the Executive elects to surrender or cancel such
options. A Change in Control shall be deemed to have occurred if any of the
following conditions shall have been satisfied: (i) any "person" as such term is
used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company; any trustee or other
fiduciary holding securities under an employee benefit plan of the Company; or
any company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership at such time of stock of
the Company), is or becomes after the Effective Date the "beneficial owner" (as
defined in Rules 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not included in the securities beneficially owned by
such person any securities acquired directly from the Company) representing 35%
or more of the combined voting power of the Company's then outstanding
securities, (ii) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board of Directors, and any new director (other than a
director designated by a person who has entered into an agreement with the
Company to effect a transaction described within this definition of Change in
Control) whose election by the Board of Directors or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds of the
Board of Directors then still in office who either were members of the Board of
Directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
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a majority thereof, (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other entity and, in connection with such
merger or consolidation, individuals who constitute the Board of Directors
immediately prior to the time any agreement to effect such merger or
consolidation is entered into fail for any reason to constitute at least a
majority of the board of directors of the surviving corporation following the
consummation of such merger or consolidation, or (iv) the stockholders of the
Company approve (a) a plan of complete liquidation of the Company or (b) an
agreement for the sale or disposition by the Company of all or substantially all
the Company's assets.
(h) Excise Tax Gross Up. In the event any of the payments hereunder
shall become subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar or
successor provision of federal, state or local law, the Company or the Employer
shall pay to Executive such additional amounts as may be necessary to offset
fully the tax effects of such excise tax or taxes, in accordance with the
procedures set forth in Exhibit B hereto.
(i) Termination of Obligations. In the event of termination of the
Employment Period in accordance with this Section 4, all obligations of the
Employer and the Executive under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Sections 4(f), 4(g)
and 4(h) of this Agreement; provided, however, that notwithstanding anything to
the contrary in this Agreement, the provisions of Section 5 and Section 6 shall
survive such termination in accordance with their respective terms, and the
relevant provisions of Section 7 shall survive such termination indefinitely. In
the event of termination of the Employment Period in accordance with this
Section 4, the Executive agrees to cooperate with the Employer in order to
ensure an orderly transfer of the Executive's duties and responsibilities.
5. Confidentiality; Non-Disclosure.
(a) Except as provided in this Section 5(a), the Executive shall not
disclose any confidential or proprietary information of the Company and the
Employer or of their affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Company, the Employer,
their subsidiaries, officers or executives, attorneys, accountants, bank
lenders, agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Company or the Employer has received assurances that the confidential
or proprietary information shall be kept confidential), nor shall the Executive
make use of any such confidential or proprietary information for her own
purposes or for the benefit of any person, firm, corporation or other entity,
except the Company and the Employer. As used in this Section 5(a), the term
"confidential or proprietary information" means all information which is or
becomes known to the Executive and relates to matters such as trade secrets,
research and development activities, new or prospective lines of business
(including analysis and market research relating to potential expansion of the
business), books and records, financial data, customer lists, marketing
techniques, financing, credit policies, vendor lists, suppliers, purchases,
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potential business combinations, services procedures, pricing information and
private processes as they may exist from time to time; provided that the term
"confidential or proprietary information" shall not include information that is
or become generally available to the public (other than as a result of a
disclosure in violation of this Agreement by the Executive or by a person who
received such information from the Executive in violation of this Agreement).
(b) If the Executive is requested or (in the opinion of her counsel)
required by law or judicial order to disclose any confidential or proprietary
information, the Executive shall provide the Company or the Employer with prompt
notice of any such request or requirement so that the Company or the Employer
may seek an appropriate protective order or waiver of the Executive's compliance
with the provisions of Section 5(a). The Executive will not oppose any
reasonable action by, and will cooperate with, the Employer to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the confidential or proprietary information. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
she is, in the opinion of her counsel, compelled by law to disclose a portion of
the confidential or proprietary information, the Executive may disclose to the
relevant tribunal without liability hereunder only that portion of the
confidential or proprietary information which counsel advises the Executive she
is legally required to disclose, and each of the parties hereto agrees to
exercise such party's best efforts to obtain assurance that confidential
treatment will be accorded such confidential or proprietary information. During
the Employment Period, and for matters arising from events or circumstances
occurring during the Employment Period, the Company and the Employer will
provide for the defense of matters arising under this provision.
6. Non-Solicitation. The Executive agrees that she will not, during and
for the period commencing on the Effective Date and ending on the date that is
one year after the termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder,
partner, agent or principal of another business firm, induce any executive or
employee of the Company, the Employer or any of their affiliates or subsidiaries
to terminate such person's employment with the Company, the Employer or such
affiliate or subsidiary or hire any executive or employee of the Company, the
Employer or any of their affiliates to work with any business affiliated with
the Executive; provided, however, that the provisions of this Section 6 shall
not apply in the event that the Company or the Employer materially breaches its
obligations under this Agreement.
7. General Provisions
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the
Executive, the Company and the Employer consider the restrictions contained in
this Agreement to be reasonable for the purpose of preserving the Employer's
goodwill and proprietary right, if any particular provision of this Agreement
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shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. It
is expressly understood and agreed that although the Company, the Employer and
the Executive consider the restrictions contained in Section 6 to be reasonable,
if a final determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is
unenforceable against the Executive, the provisions of this Agreement shall be
deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable.
(b) Remedies. The parties acknowledge that the Company's and the
Employer's damages at law would be an inadequate remedy for the breach by the
Executive of any provision of Section 5 or Section 6, and agree in the event of
such breach that the Company or the Employer may obtain temporary and permanent
injunctive relief restraining the Executive from such breach and, to the extent
permissible under the applicable statutes and rules of procedure, a temporary
injunction may be granted immediately upon the commencement of any such suit.
Nothing contained herein shall be construed as prohibiting the Company or the
Employer from pursuing any other remedies available at law or equity for such
breach or threatened breach of Section 5 or Section 6 of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from any
compensation or other benefits referred to herein as payable to the Executive on
account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Assignment; Benefit. This Agreement is personal in its nature
and the parties hereto shall not, without the written consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided that the provisions hereof shall inure to the benefit of, and be
binding upon, each successor of the Company and the Employer, whether by merger,
consolidation, transfer of all or substantially all of its assets, or otherwise.
(e) Indemnity. The Company and the Employer hereby agree to
indemnify and hold the Executive harmless consistent with the Company's and the
Employer's policy against any and all liabilities, expenses (including
reasonable attorneys' fees and costs), claims, judgements, fines, and amounts
paid in settlement actually and reasonably incurred in connection with any
proceeding arising out of the Executive's employment with the Employer (whether
civil, criminal, administrative or investigative, other than proceedings by or
in the right of the Company or the Employer), if, with respect to the actions at
issue in the proceeding, the Executive acted in good faith and in a manner
Executive reasonably believed to be in, or not opposed to, the best interests of
the Company and the Employer, and (with respect to any criminal action)
Executive had no reason to believe Executive's conduct was unlawful. Said
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indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Executive which have taken
place during any period in which she was employed by the Employer, irrespective
of the date of this Agreement or the term hereof, including, but not limited to,
any and all qualifying acts as an officer and/or director of any affiliate while
the Executive is employed by the Employer and (iii) be subject to any
limitations imposed from time to time under applicable law.
(f) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
Netgateway
000 Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile: 000-000-0000
With a copy to
Netgateway, Inc.
000 Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile: 000-000-0000
If to the Executive:
Xxxx Xxxxxxx Padwa
00 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
(g) Dispute Resolution; Attorneys' Fees. The Company, the Employer
and the Executive agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before a private
judge to be determined by mutually agreeable means. In such event, each of the
Company, the Employer and the Executive shall have the right to full discovery.
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The Executive shall have the right, in addition to any other relief granted by
such arbitrator, to reasonable attorneys' fees in the event that a claim brought
by the Executive is decided in the Executive's favor (with the amount of such
fees being limited to those expended defending or in connection with the claim
or claims decided in favor of the Executive). Any judgment by such arbitrator
may be entered into any court with jurisdiction over the dispute.
(h) Acknowledgement. Executive acknowledges that she has been
advised by Employer to seek the advice of independent counsel prior to reaching
agreement with Employer on any of the terms of this Agreement.
(i) Amendments and Waivers. No modification, amendment or waiver of
any provision of, or consent required by, this Agreement, nor any consent to any
departure herefrom, shall be effective unless it is in writing and signed by the
parties hereto. Such modification, amendment, waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
(k) Counterparts; Entire Agreement. This Agreement may be executed
in any number of counterparts, and each such counterpart hereof shall be deemed
to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Option Agreement contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Option Agreement and supersede all prior agreements or
understandings among the parties with respect to the Executive's employment by
the Employer.
(l) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(m) CONSENT TO JURISDICTION. EACH OF THE COMPANY, THE EMPLOYER AND
THE EXECUTIVE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT LOCATED IN LOS ANGELES COUNTY
FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE EXECUTIVE AGREES NOT
TO COMMENCE ANY LEGAL PROCEEDING RELATING THERETO EXCEPT IN SUCH COURT. EACH OF
THE COMPANY, THE EMPLOYER AND THE EXECUTIVE IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH HE MAY NOW OR HEREAFTER HAVE TO THE
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LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
NETGATEWAY, INC.
By:_________________________________
Name:
Title:
NETGATEWAY
By:_________________________________
Name:
Title:
____________________________________
Xxxx Xxxxxxx Padwa
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