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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT ("Agreement") is made as of this 1st day of
May 1996 between NETGUARD TECHNOLOGIES, a California corporation, with its
principal office at 0000 Xxx Xxxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxxxxx
00000-0000 (hereinafter referred to as "Employer"), and E. XXXXXX XXXXXXXXX,
residing at 0000 Xx Xxxxx, Xxxx Xxxxx, Xxxxxxxxxx 00000 (hereinafter referred
to as "Employee").
SECTION 1.00 EMPLOYMENT DUTIES
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1.01 In consideration of the mutual promises and agreements herein
contained, Employer hereby employs Employee, and Employee hereby accepts
employment, upon the terms and conditions hereinafter set forth.
1.02 Employee shall serve as President, Chief Officer and Chief
Financial Officer of Employer under the supervision and direction of Employer's
Board of Directors.
1.03 The term of this Agreement shall commence as of the first day of
May 1996, and shall continue for a period of three (3) years thereafter,
subject to earlier termination as provided below:
A. This agreement shall immediately terminate on the
occurrence of any of the following events: (i) circumstances which make it
impossible or impracticable for the business of Employer to be carried on; (ii)
Employer becoming insolvent, filing a petition in bankruptcy or a similar
proceeding, having a receiver appointed, being reorganized or declared a
bankrupt, or making a general assignment for the benefit of creditors; or (iii)
the death of Employee.
B. Employer may at any time upon notice of termination to
Employee terminate this Agreement for cause. The term "cause" as used herein
shall mean willful and persistent inattention by Employee to the Employee's
duties hereunder or any act or acts by Employee amounting to gross negligence
to the substantial detriment of Employer; Employee intentionally engaging in
any activity which is in direct conflict with the business interests of
Employer; willful or serious misconduct on the part of Employee to the
substantial detriment of Employer; or any other substantial willful breach of
any term or provision of this Agreement by Employee.
C. In the event Employee becomes temporarily or permanently
disabled because of sickness, or physical or mental disability, or any other
reason, so that it reasonably appears that he will be unable to perform his
duties under this Agreement, Employer shall have the option to terminate this
Agreement by giving notice of termination to Employee; provided, however, that
any such termination shall not affect Employee's right to receive payments
under any insurance coverage provided by Employer pursuant to Section 3.05 and
6.08 hereof and Employee shall be entitled to full salary and other benefits
hereunder during the period of any physical or mental disability through the
termination date.
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1.04 Termination of this Agreement pursuant to any of the provisions
of Section 1.03 hereof shall be without prejudice to any right or remedy which
either party hereto may be entitled either at law, in equity, or under this
Agreement. Except as otherwise provided herein, in the event of termination of
this Agreement, the Employee shall be entitled to the compensation earned by
him prior to the date of termination as provided for in this Agreement computed
pro rata up to and including that date and Employee shall be entitled to no
further compensation as of the date of termination.
1.05 Employee agrees that to the best of his ability and experience he
will at all times loyally and conscientiously perform all duties and
obligations either expressly or implicitly required of him by the terms of this
Agreement and will devote to the performance of such duties full working time,
attention and energies.
1.06 Upon expiration or earlier termination of this Agreement for any
reason, including, without limitation, termination for "cause" as provided in
Section 1.03B hereof, Employer agrees to indemnify and hold harmless Employee
for and against all suits, claims, liabilities, losses, damages, costs and
expenses (including legal expenses) allege, charged or otherwise asserted
against or suffered or incurred by Employee in respect of any debts,
obligations, financial commitments or other liabilities of Employer or any of
its subsidiaries or affiliates which at the time of such expiration or
termination had been endorsed, guaranteed or secured by Employee, acting in his
personal capacity, or by any of Employee's personal assets.
SECTION 2.00 COMPENSATION
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2.01 As compensation for services rendered under this Agreement,
Employee shall be entitled to receive from Employer a salary of One Hundred
Fifty-Thousand Dollars ($150,000) per year payable in semi-monthly or other
convenient installments during the period of employment, prorated for any
partial employment period. Employee agrees that for the first six (6) months of
employment that Employer may accrue $4,000 a month of the Employee's salary.
This accrual will be paid to Employee starting in the seventh month and will be
paid in six monthly installments. In addition to the above salary, the employee
shall be paid two (2%) of the net sales of the company, paid quarterly, on such
further terms and conditions as Employer and Employee shall agree in writing
within thirty days of the date of this Agreement. The Employer agrees to
provide to Employee an Incentive Stock Option in the amount of 300,000 shares
of common stock, on such general terms and conditions as set forth herein and
such further terms and conditions as Employer and Employee shall agree in
writing within thirty days of the date of this Agreement. Said option will be a
six (6) year option exercisable at one dollar and fifty-cents ($1.50) per
share. If Employer has cumulative earnings (EBITDA) of $1,000,000 then the
Employee may exercise 100,000 shares. If Employer has cumulative earnings
(EBITDA) of $2,000,000 the employee may exercise an additional 100,000 shares
and if Employer has cumulative earnings (EBITDA) of $3,000,000 Employee may
exercise all options. The options will allow for customary provisions relating
to anti-dilution, piggy-back registration rights on Form S-8 for the underlying
shares.
2.02 The basic salary provided in Section 2.01 hereof shall be
adjusted annually to
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reflect the increase, if any, in the cost of living by adding to such basic
salary an amount obtained by multiplying the basic salary by the percentage by
which the level of the Consumer Price Index for all Urban Consumers, Los
Angeles-Orange County Area. All items average (1996 = 1000 (or, if such Index
is not published, by an equivalent Index), as reported for the last day of the
applicable twelve (12) month period from the effective date of this Agreement
by the Bureau of Labor Statistics of the United States Department of Labor, has
increased over its level as of the day preceding the commencement of said
twelve (12) month period; but, in any event, no adjustment to the basic annual
salary shall be made unless such adjustment would equal to exceed fifteen
percent (15%).
2.03 Employee shall be paid such additional compensation, if any, from
Employer for services rendered hereunder as may be determined in the sole
discretion of Employer as and for bonuses and/or merit increases based on
Employer's evaluation of Employee's performance under this Agreement.
SECTION 3.00 BENEFITS
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3.01 Employee shall be entitled to a vacation of four (4) weeks with
full pay during each twelve (12) month period during the term hereof. Such
vacation shall be taken at a time selected by Employee, work permitting. In
addition, Employee shall be entitled to up to twenty (20) days during each
twelve (12) month period during the term hereof as sick leave with pay.
Additional sick leave with pay may be granted at the discretion of Employer.
Employee shall be further entitled to eleven (11) holidays during each twelve
(12) months period during the term hereof. Employer may select up to six (6)
fixed holidays and the rest may be taken by Employee at any time work
permitting.
3.02 If Employee for any reason whatsoever becomes temporarily or
permanently disabled, so that he is unable to perform his duties hereunder and
this Agreement is terminated by Employer as provided in Section 1.03C hereof,
Employer agrees to pay him one hundred percent (100%) of his annual salary and
fringe benefits hereunder, for a period of twelve (12) months, payable in the
same manner as his salary, and for an additional twelve (12) months, at fifty
percent (50%) of his annual salary and one hundred percent (100%) of fringe
benefits, payable in the same manner as his salary. After said period, he shall
be entitled to whatever disability income benefits are payable under Section
3.06 hereof, and said benefits under the policy shall be fully assigned to him
in the event of permanent disability. "Permanent disability" for this purpose
shall be as defined under the disability income policy provided for Employee by
Employer.
3.03 In the event that Employee shall die during the term hereof,
Employee agrees to immediately pay three (3) years' basic salary in effect at
the death of said Employee, payable in thirty-six (36) equal monthly
installments, to Employee's surviving spouse, provided they are legally
married and living together at the date of Employee's death. If Employee does
not have such a wife surviving, and sum shall be payable to his estate, or
otherwise if Employee in writing shall designate the person or persons to
receive same in a written instrument delivered to Employer prior to Employee's
death in such portions designated. If no such written
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designation shall be on file, the entire sum be payable to the Employee's
estate. Employer shall maintain a life insurance policy on Employee in such
amount as to provide Employer funds to meet its obligation under this Section
3.03.
3.04 Employer shall provide Employee with the use of a mutually
agreeable automobile with optional equipment of Employee's selection. Such
automobile shall at no time be older than two (2) years. Employer shall pay all
operating expenses of auto and shall procure and maintain an automobile
liability policy, with such coverage as Employer shall reasonably desire, for
personal liability and property damage.
3.05 Employer agrees to include Employee in the hospital, surgical,
and medical benefit plan adopted by Employer and agrees under a supplemental
medical reimbursement plan to reimburse Employee for all medial, dental and
hospital bills incurred by Employee for himself and for his wife and those of
his children qualifying as his dependents under the Internal Revenue Code of
1986, as amended, up to a total sum of Twenty-Five Thousand Dollars ($25,000)
per calendar year or pro rata portion thereof. Employer further agrees to pay
such bills directly, rather than to reimburse Employee for payment, on demand by
Employee but only if the bills are submitted in advance to Employer for its
approval; provided, however, that all such reimbursements or direct payments by
Employer shall be limited to the portion of such bills, if any, which will not
be paid by insurance under Employer's plan or covered by Employee under an
individual plan. However, if Employee has an individual plan and pays premiums
thereunder, he shall be entitled to reimbursement under this plan for such
premiums which shall be included in said maximum of Twenty-Five Thousand
Dollars ($25,000) per year. There shall be no carryover of amounts not
reimbursed to any subsequent year or years.
3.06 Employer, in recognition of the loyalty of Employee, agrees to
provide a disability income plan to purchase policy or policies of disability
of Employee beyond one (1) year, in the amount of Ten Thousand Dollars
($10,000) per month, with such exclusionary periods up to one (1) year as
Employer shall desire. In the event of permanent disability under the terms of
said policy or policies and the termination of this Agreement Employer shall
assign the policies and the benefits thereunder to Employee. Otherwise, the
benefits shall be payable to Employer to fund the temporary disability benefits
to Employee up to one (1) year under Section 3.02 hereof.
3.07 Employer, in recognition of the loyalty of Employee, agrees to
provide a Five Hundred Thousand Dollar ($500,000) whole life insurance policy,
to pay premiums on said policy, with the beneficiary being the designee of
Employee. In the event Employee leaves the Employer for any reason the policy
shall be fully paid for six (6) months from his termination date. Upon Employee
leaving the employ of Employer, Employer shall assign the policy and the
benefit thereunder to Employee.
3.08 Employer will promptly reimburse Employee for all reasonable
business expenses incurred by Employee in promoting the business of Employer,
including expenditures for entertainment, gifts, and travel, provided that: (i)
each such deduction is of the nature qualifying it as a proper deduction for
federal and state income tax returns of Employer; and (ii) Employee furnishes
Employer adequate records and other documentary evidence required by federal
and
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state statutes and regulations issued by appropriate taxing authorities for the
substantiation of each such expenditure as an income tax deduction.
Notwithstanding the above, Employer shall retain the right to establish its own
rules and regulations, from time to time, as to business expenses which are
reimbursable by Employer.
SECTION 4.00 PROPERTY RIGHTS OF THE PARTIES
4.01 Employee agrees: (i) to disclose promptly in writing and assign to
Employer all inventions, improvements, developments, and discoveries, whether or
not patentable or copyrightable, which he may make or conceive either solely or
jointly with others during the period of his employment with Employer,
(including but not limited to any period prior to the date of this Agreement),
whether or not made or conceived during his working hours, that will relate
directly or indirectly to any aspect of Employer's business, including but not
limited to any system, machine, process, device, composition of matter or
ornamental design which Employee now or hereafter during the period of his
employment may make, use or sell or which are made or conceived with the use of
Employer's time, materials or facilities; (ii) to execute and deliver such
documents and to take such action, during and subsequent to his employment by
Employer, at his expense but without charge by him to Employer, necessary to
assist Employer in every way to obtain and defend letters patent for said
inventions in any and all countries and to vest title thereto in Employer, and
its successors or assigns; (iii) that any invention which he may disclose to
anyone within six (6) months after the termination of his employment or for
which he may file application for letters patent within six (6) months after
termination of his employment shall be presumed to have been made or conceived
during the period of his employment hereunder; provided that if he, in fact,
makes or conceives any such invention subsequent to his employment, then such
invention shall belong to him and shall be his sole property. Employee assumes
the responsibility of establishing that he made or conceived any such invention
after the termination of his employment; (iv) in the event that he is assigned
by Employer to work for any other company or organization, such employment shall
be deemed to be employment by Employer for the purposes of this Agrement; (v) as
a matter of record, Employee has given on a separate sheet of paper a complete
list of all patentable inventions including a line of description thereof, which
he has made or conceived prior to this Agreement and which are not included in
this agreement; and (vi) render to Employer a true account of all business done
by him for Employer and of all moneys received by him on the account of Employer
and pay forthwith all moneys so received to Employer without deduction therefrom
except as authorized by Employer.
4.02 During the term of this Agreement and at all times thereafter,
Employee will keep confidential and will not directly or indirectly divulge to
anyone nor use or otherwise appropriate for Employee's own benefit, or on behalf
of any other person, firm, partnership or corporation by whom Employee might
subsequently be employed or otherwise associated or affiliated with, any and all
customer lists, arrangements with distributors, marketing information or
strategies, trade secrets or other confidential information of any kind, nature
or description concerning any matters affecting or relating to the business of
Employer, any affiliate of Employer or a customer of Employer.
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4.03 During the term of this Employment Agreement, Employee agrees that
(i) he will not, directly or indirectly, own an interest in, operate, join,
control or participate in, or be connected as an officer, employee, agent,
independent contractor, partner, shareholder or principal of any corporation,
partnership, proprietorship, firm, association, person or other entity providing
services and/or products or a combination thereof which directly or indirectly
compete with Employer's business, and he will not undertake planning for or
organization of any business activity competitive with Employer's business or
combine or conspire with other employees or representatives of Employer's
business for the purpose of organizing any such competitive business activity,
except the purchase of less than ten percent (10%) of the stock of a publicly
traded company which is not affiliated with the Employer; (ii) he will not,
directly or indirectly, either for himself or for any other person, firm or
corporation, divert or take away or attempt to divert or take away (and after
the term of this Employment Agreement, call on or solicit or attempt to call on
or solicit) any of Employer's customers or distributors, including but not
limited to, those upon whom Employee called or whom Employee solicited or
serviced or with whom Employee became acquainted while engaged as an employee in
Employer's business; and (iii) he will not, directly or indirectly or by action
in concert with others, induce or influence, or seek to induce or influence,
(and after the term of this Employment Agreement, call on or solicit or attempt
to call on or solicit) any person who is engaged (as an employee, agent,
independent contractor or otherwise) by Employer to terminate his or her
employment or engagement.
4.04 Employee acknowledges that, as a key management employee, the
Employee will be involved, on a high level, in the development, implementation
and management of the business strategies and plans of Employer which shall also
consist of such other business, units, divisions, subsidiaries or other entities
of Employer as Employer shall determine in its sole discretion from time to time
(the "Business"). By virtue of the Employee's unique and sensitive position and
special background, employment of the Employee by a competitor of Employer
represents a serious competitive danger to Employer and the Business, and the
use of the Employee's talent and knowledge and information about Employer or the
Business can and would constitute a valuable competitive advantage over Employer
and the Business. In view of the foregoing, the Employee covenants and agrees
that, if the Employee's employment with Employer is terminated for any reason at
any time, for a period of three years after the date of such termination, the
Employee will not engage or be engaged, in any capacity, directly or indirectly,
including but not limited as employee, agent, consultant, manager, executive,
owner or stockholder (except as a passive investor holding less than a 1% equity
interest in any enterprise the securities of which are publicly traded) in any
business entity doing business in the United States engaged in competition with
any business conducted by Employer on the date of termination. This covenant not
to compete shall survive the termination or expiration of the other provisions
of this Employment agreement. if any court determines that this covenant not to
compete, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
SECTION 5.00 OBLIGATIONS OF EMPLOYER
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5.01 During the term of this Agreement, Employer shall furnish Employee
with all proper equipment, offices, stenographic help, and other usual
equipment and supplies necessary to perform his duties hereunder.
5.02 Employer shall indemnify Employee for losses sustained by Employee
in direct consequence of the good faith performance of his duties hereunder to
the extent permitted under the California General Corporation Law as said
statute may from time to time be amended.
SECTION 6.00 GENERAL PROVISIONS
6.01 Any notices to be given hereunder by either party to the other may
be effected either by personal delivery in writing or by mail, registered or
certified postage prepaid with return receipt requested. Mailed notices shall
be addressed to the parties at the addresses appearing in the introductory
paragraph of this Agreement, but each party may change his address by written
notice in accordance with this paragraph. Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of one day after mailing.
6.02 This Agreement supersedes any and all other agreements either oral
or in writing, between the parties hereto with respect to the employment of
Employee by Employer and contains all of the covenants and agreements between
the parties with respect to such employment in any manner whatsoever. Each
party to this Agreement acknowledged that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that
no other agreement, statement, or promise not contained in this Agreement shall
be valid or binding. Any modification of this Agreement will be effective only
if it is in writing signed by the party to be charged.
6.03 If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force without being impaired or invalidated
in any way.
6.04 This Agreement shall be governed by and construed in accordance
with the laws of the State of California.
6.05 If Employee dies prior to the expiration of the term of
employment, any moneys that may be due him from Employer under this Agreement
as of the date of his death shall be paid to his executors, administrators,
heirs, personal representative, successor and assigns, provided, however,
Employee may attach, as Exhibit "A" hereto, a Designated Survivor of said
benefits, and if a designated survivor is other than the surviving spouse, if
she survives Employee, then said designation shall be consented to in writing
by said spouse.
6.06 The failure by either party to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions
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hereof shall in no way be construed to be a waiver of such provisions or to
affect either the validity of this Agreement, or any part hereof, or the right
of either party thereafter to enforce each and every provision in accordance
with the terms of this Agreement.
6.07 The rights and obligations of Employer under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
Employer.
6.08 Employer may elect to purchase Key Man term insurance upon the
Employee in the amount of One Million Dollars ($1,000,000) with Employer as
beneficiary under such policy. Such insurance would not effect 6.05 hereinabove.
EMPLOYER: EMPLOYEE:
NETGUARD TECHNOLOGIES, INC.
By: /s/ XXXXXX XXXXXXXX /s/ E. XXXXXX XXXXXXXXX
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Xxxxxx Xxxxxxxx, Executive Vice President E. Xxxxxx Xxxxxxxxx
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