Exhibit 10.5
XOX CORPORATION
NON-COMPETITION AND
EMPLOYMENT AGREEMENT
This Non-Competition and Employment Agreement ("Agreement") is made
effective the 22nd day of August, 2000, by and between XOX Corporation
("Employer" or "Company") and Xxxx Xxxxxx ("Employee"). (The term "Employer"
includes any present or future related or affiliated companies.)
WHEREAS, Employer desires to employ Employee as its Chief Executive
Officer and Employee desires to be employed by Employer in such capacity.
WHEREAS, Employee and Employer recognize the importance to Employer of
protecting Employer's rights with customers' respect to its business information
and inventions, as well as its business relationships, goodwill and potential
competitors.
WHEREAS, Employer has advised Employee that it requires Employee to
execute this Agreement prior to Employee's commencement of employment as a
condition thereof, and Employee acknowledges receiving a photocopy of this
Agreement prior to Employee's employment with the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
1. EMPLOYMENT
(a) Duties. Employer agrees to employ Employee as its Chief Executive
Officer. In this capacity, he shall perform such executive and
managerial duties consistent with such position as the Company's Board
of Directors shall from time to time direct. The duties shall include,
but not be limited to, the following: responsibility for the overall
day-to-day operations of the Company, including sales and marketing
functions; restructuring, remarketing and repositioning the geoscience
business of the Company in the marketplace; directing the Company's
efforts to identify synergistic acquisition(s) and/or merger(s) to
advance the Company's business interests; and, further, to engage in
the normal and customary strategic operating duties that are consistent
with duties performed by a Chief Executive Officer. Employee shall
devote at least five (5) hours per day to the business of the Company
and the performance of his duties shall occur at such location as the
Company's Board of Directors reasonably requests. In connection with
his duties as Chief Executive Officer, Employee will be expected to
travel extensively and, in connection with such travel, he shall be
available to the Company for more than five (5) hours per day. Employee
accepts such employment and agrees, so long as he continues to be
employed by
Employer, to devote his full time efforts and skills to the conduct of
Employer's business operations, performing such duties as are
ordinarily performed by an employee in his position. Employee agrees to
serve Employer diligently and faithfully to advance its best interests.
Notwithstanding the foregoing, Employee is an employee at will, and
Employer and Employee each has the right to terminate Employee's
employment at any time, with or without Cause (as defined herein),
under this Agreement.
(b) Prohibition and Allowance of Other Activities. Employee will not,
without the express written permission of Employer, engage in any
substantial private business activities (whether or not entered into
for profit) outside, or separate from his employment with Employer
which would materially affect Employee's ability to perform his
obligations hereunder. Nothing in this Agreement prohibits Employee
from investing financial resources in a business enterprise or
continuing his involvement with Value Technologies Group, LLC d/b/a The
Value Group and Made In The Shades Optical, Inc., so long as such
investment or involvement does not violate Section 5 of this Agreement.
Further, (i) Employee shall not be in breach of the minimum five (5)
hour per day requirement if Employee, in his reasonable discretion,
deems it necessary to spend additional time on matters relating to Made
In The Shades Optical, Inc. and (ii) Employee may perform work for
Value Technologies Group, LLC while on the premises of Employer, so
long as such time and work described under (i) or (ii) does not
interfere with Employee's performance of his obligations and duties
hereunder.
2. COMPENSATION
(a) Salary. Upon execution of this Agreement, Employee shall receive a
monthly base salary (the "Base Salary"), paid according to the
Company's customary and usual payroll practices and subject to state
and federal taxes, social security and other applicable withholdings,
equal to Seven Thousand Five Hundred dollars ($7,500). Salary increases
and any other benefits, if any, are to be paid as determined by
Employer's Board of Directors, in its sole discretion.
(b) Bonus. Employee may be eligible to receive a bonus for performing
as Chief Executive Officer. Whether a bonus will be paid and the amount
of that bonus shall be within the sole discretion of the Company's
Board of Directors.
(c) Expenses. Upon receipt of documentation or receipts evidencing
expenditures by Employee, Employer will reimburse Employee for any
approved direct out-of-pocket expenses actually incurred in connection
with his relationship with Employer hereunder including, without
limitation, travel and hotel expenses.
(d) Vacations. In addition to any other compensation provided under
this Agreement, the Employee shall be entitled to vacation in
accordance with the Company's policies as in effect from time to time.
At a minimum, the Employee is entitled to two (2) weeks of paid
vacation after one (1) year of employment.
(e) Deductions and Withholding. All compensation and other benefits
payable to or on behalf of the Employee pursuant to this Agreement
shall be subject to such deductions and withholding as may be agreed to
by the Employee or required by applicable law.
(f) Stock Options. Employee is hereby granted a 10-year non-qualified
stock option pursuant to the Company's 1996 Stock Option Plan (the
"Option") to purchase one hundred twenty-five thousand (125,000) shares
of the Company's common stock pursuant to a stock option agreement (the
"Stock Option Agreement"). The exercise price per share shall be One
Dollar and Sixty-six Cents ($1.66), which price is not less than the
fair market value of the Company's Common Stock as of the date of this
Agreement. Subject to the terms of the Stock Option Agreement, so long
as Employee remains employed by Employer, the shares of stock subject
to the Option shall vest as follows:
(i) twelve thousand five hundred (12,500) shares will
vest upon completion of six (6) consecutive months of
employment assuming that the Board of Directors of the Company
determines, in its sole discretion, that Employee has devoted
his best efforts to the performance of his duties;
(ii) an additional twenty-five thousand (25,000)
shares shall vest upon the Company achieving sales revenue
from normal operations (the "Revenue") equal to or in excess
of Three Million Dollars ($3,000,000) during any four (4)
consecutive calendar quarters. The Revenue shall be determined
in accordance with generally accepted accounting principles
and shall only include amounts generated from ordinary course
sales of products and/or services by the Company. Proceeds
from short-term investment of reasonable working capital and
other proceeds of investments, proceeds from the sale, lease,
or other disposition of assets, including mergers and
acquisitions, not in the ordinary course of business, proceeds
from the sale or issuance of securities, and other
non-operating income shall all be specifically excluded from
the calculation of Revenue. The decision of the Company's
independent accountants as to what constitutes Revenue shall
be conclusive absent bad faith;
(iii) an additional fifty thousand (50,000) shares
shall vest upon the Company achieving Revenue equal to or in
excess of Four Million Dollars ($4,000,000) during any four
(4) consecutive quarter period;
(iv) an additional twenty-five thousand (25,000)
shares shall vest upon the Company achieving Revenue equal to
or in excess of Five Million Dollars ($5,000,000) during any
four (4) consecutive calendar quarters; and
(v) an additional twelve thousand five hundred
(12,500) shares shall vest upon the Company achieving Revenue
equal to or in excess of Six Million Dollars ($6,000,000)
during any four (4) consecutive calendar quarters.
For example, in the event that options referenced in Section 2(f)(i)
above have vested and
the Company's Revenue for the third quarter of 2000 equaled $500,000, for the
fourth quarter of 2000 equaled $750,000, for the first quarter of 2001 equaled
$1,000,000, for the second quarter of 2001 equaled $800,000, for the third
quarter of 2001 equaled $1,500,000, and for the fourth quarter of 2001 equaled
$2,800,000, a total of 37,500 shares would vest and be exercisable at the end of
the second quarter of 2001 (12,500 + 25,000), a total of 112,500 shares would
vest and be exercisable at the end of the third quarter of 2001 (12,500 + 25,000
+ 50,000 + 25,000), and all 125,000 shares would vest and be exercisable at the
end of the fourth quarter of 2001 (12,500 + 25,000 + 50,000 + 25,000 + 12,500)
(each example assumes the Board of Directors determined that Employee devoted
his best efforts to the performance of his duties).
In the event Employee ceases to be an employee with the Company at any
time prior to September 30, 2003, the Option shall no longer continue to vest
and any options not vested are null and void. In addition, as to any vested
stock options, Employee must exercise those options within one hundred twenty
(120) days of the date Employee ceases being an employee. Notwithstanding the
foregoing, in the event that Employee is terminated for Cause as defined in
Section 3(b)(1)(b)(i)-(vi), any previously vested options shall immediately
terminate and be null, void, and unexercisable thereafter.
3. TERM AND TERMINATION
(a) Term. Employee's employment hereunder is terminable at will by
Employer or Employee at any time. Accordingly, Employer or Employee may
terminate Employee's employment at any time with or without Cause, as
defined herein.
(b) Termination. Notwithstanding the foregoing, the following
provisions apply upon any termination (whether voluntary or
involuntary) of Employee's employment prior to September 30, 2003.
(1) Termination by Employer for Cause. The Company
may terminate Employee for Cause immediately upon delivery of
written notice of such termination for Cause. In the event
that Employee's employment hereunder is terminated by Employer
for Cause (as defined below):
a. Employer shall pay to Employee only the
Base Salary previously approved by the Board of
Directors and earned on or prior to the date of
termination. Options shall be exercisable only as
provided elsewhere in this Agreement.
b. For purposes of this Agreement, "Cause"
will mean Employee's (i) habitual use or abuse of
illegal drugs and/or alcohol during working hours or
materially affecting performance during working
hours; (ii) commission of a misdemeanor involving
fraud or moral turpitude or any felony; (iii) the
commission of any act or omission involving
dishonesty, disloyalty or fraud with respect to
Employer; (iv) conduct that is reasonably determined
to bring Employer or any of its affiliates into
substantial public disgrace or disrepute; (v)
misappropriation of any of Employer's assets; (vi)
failure of Employee to comply with the provisions of
Section 5 of this Agreement; (vii) substantial and
repeated failure of Employee to perform its duties as
reasonably directed by Employee's Board of Directors
which is not immediately remedied after Employee's
receipt of written notice of such violation from
Employer; (viii) negligence or misconduct with
respect to Employer which is not immediately remedied
after Employee's receipt of written notice of such
violation from Employer; or (ix) substantial and
repeated failure to follow lawful written directions
of the Company's Board of Directors or Executive
Committee which is not immediately remedied after
Employee's receipt of written notice from Employer.
As used herein, "immediately remedied" shall mean the
cure by Employee of the Cause described in the notice
within one (1) business day after receipt of such
written notice thereof.
(2) Termination By Employer Without Cause. The Company may
terminate Employee at any time without Cause upon thirty (30)
days prior written notice to Employee. In the event that
Employee's employment hereunder is terminated by Employer
without Cause:
a. Employer shall, in consideration of the
release contained in Section 3(b)(4) below and any
other separation agreement, if any, executed between
the parties, continue to pay to Employee all of the
Base Salary that Employee would have otherwise been
entitled to hereunder had Employee still been
employed by Employer for a period of six (6) months
from the date of such termination without Cause (the
"Severance Payment"). Payment of the Severance
Payment shall be made in accordance with Employer's
regular payroll practices and schedule, or as
otherwise mutually determined by Employer and
Employee. No Severance Payment shall be made if (i)
Employer terminates Employee's employment for Cause,
(ii) Employee voluntarily terminates his employment
with Employer or (iii) Employee's termination of
employment is due to Employee's death or disability.
(3) Termination by Employee. Employee may terminate his
employment at any time and for any reason by providing one
hundred and eighty (180) days prior written notice to
Employer.
a. In the event Employee fails to provide
such required notice of termination, the Option
described in Section 2(f) above shall immediately
terminate, be null and void, and shall not be
exercisable by Employee, regardless of whether it has
vested.
b. In the event that Employee gives prior
written notice so that his
employment would terminate with the Company (for any
reason other than Employee's death or Disability)
within one (1) year of the date of this Agreement,
Employee shall pay to the Company, within thirty (30)
days of such termination, the sum of Thirty Seven
Thousand Five Hundred Dollars ($37,500) (the
"Liquidated Damages"). In addition, notwithstanding
anything in this Agreement, the Options shall become
null and void, and shall not be exercisable after
such termination. Employer shall be entitled to
offset from any amounts owed to Employee as of the
date of such termination by Employee the Liquidated
Damages. Employee recognizes that the Company will
expend significant amounts of time, effort and money
to find a suitable replacement. The amount of time,
effort and money that may be extended is not
reasonably susceptible of accurate calculation.
Accordingly, the Liquidated Damages is intended by
the parties to compensate the Company for this time,
effort and expense and shall be considered as
liquidated damages.
(4) No Further Liability: Release. Payment made and
performance by Employer in accordance with this Section shall
operate to fully discharge and release each party and their
respective directors, officers, employees, subsidiaries,
affiliates, stockholders, successors, assigns, agents and
representatives from any further obligation or liability with
respect to Employee's employment and termination of
employment. Employer shall have the right to condition the
Severance Payment or other amounts pursuant hereto upon the
delivery by Employee to Employer of a release in form and
substance satisfactory to Employer of any and all claims each
party has or may have against the other party and all and each
of their past and present parent, subsidiary, and affiliated
entities; and all and each of the past and present officers,
directors, employees, stockholders, successors, assigns,
agents, insurers, and representatives of the foregoing
entities arising out of or related to Employee's employment by
Employer and other relationships with Employer and termination
of such employment and other relationships.
4. CONFIDENTIAL INFORMATION ASSIGNMENT OF INVENTIONS
(a) "Confidential Information" means information, not generally known,
and proprietary to Employer or to a third party for whom Employer is
performing work, including, without limitation, patent or trade secret
information, about Employer's processes and products, information
relating to research, development, manufacture, purchasing, accounting,
engineering, marketing, customer lists, merchandising, selling,
leasing, servicing, finance and business systems and techniques. All
information disclosed to Employee, or to which Employee obtains access,
whether originated by Employee or by others, during the period of his
employment, which he has reasonable basis to believe to be Confidential
Information, or which is treated by Employer as being Confidential
Information, shall be presumed to be Confidential Information.
(b) "Inventions" means discoveries, improvements and ideas (whether or
not shown or described in writing or reduced to practice) and works of
authorship, whether or not patentable or copyrightable, (1) which
relate directly to the business of Employer, or (2) which relate to
Employer's actual or demonstrably anticipated research or development,
or (3) which result from any work performed by Employee for Employer,
(4) for which equipment, supplies, facility or trade secret information
of Employer is used, or (5) which is developed on any Employer time.
(c) With respect to Inventions made, authored or conceived by Employer,
either solely or jointly with others during his employment, whether or
not during normal working hours or whether or not at Employer's
premises, Employee will:
(1) Keep accurate, complete and timely records of such
Inventions, which records shall be Employer property and be
retained on Employer's premises.
(2) Promptly and fully disclose and describe such Inventions
in writing to Employer.
(3) Assign to Employer all of his rights to such Inventions,
and to applications for letters patent and/or copyright in all
countries and to letters patent and/or copyrights granted upon
such Inventions in all countries.
(4) Acknowledge and deliver promptly to Employer (without
charge to Employer but at the expense of Employer) such
written instruments and to do such other acts as may be
necessary in the opinion of Employer to preserve property
rights against forfeiture, abandonment or loss and to obtain
and maintain letters patent and/or copyrights and to vest the
entire right and title thereto in Employer.
(d) The above provision of this Agreement does not apply to an
Invention for which no equipment, supplies, facility or trade secret
information of Employer was used and which was developed entirely on
Employee's own time, and (1) which does not relate (a) directly to the
business of Employer or (b) to Employer's actual or demonstrably
anticipated research or development, or (2) which does not result from
any work performed by Employee for Employer.
(e) Except as required in Employee's duties to Employer, Employee will
never, either during his employment by Employer or thereafter, use or
disclose any Confidential Information as defined herein.
(f) Upon termination of his employment with Employer, all records and
any compositions, articles, devices, and other items which disclose or
embody Confidential Information, including all copies or specimens
thereof in Employee's possession, whether prepared or made by Employee
or others, will be returned by Employer to Employee.
5. COVENANT NOT TO COMPETE
During the term of this Agreement and for a period which is the longer
of three (3) years from the date of this Agreement or one (1) year from the
termination of the Employee's employment with Employer:
(a) Employee will inform any new employer, before accepting employment,
of the existence of this Agreement and give such employer a copy of
this Section 5, Covenant Not to Compete.
(b) Employee will not, anywhere within the world, directly or
indirectly, compete in any way with the business of Employer including,
but not limited to, researching, developing, manufacturing,
distributing, selling, or attempting to do any of the foregoing, to any
customer, client or account or any prospective customer, client or
account of Employer; provided, however, that the foregoing limitation
shall only apply to activities which involve a Competing Product. As
used herein, a Competing Product is a product similar to or in
competition with any product, or planned product of which Employee is
aware, of the Employer as of the date Employee's employment is
terminated and includes (i) the development and/or sale of software for
geometric computing and solid modeling, including but not limited to
software modeling kernels for sale or license to other software
developers; or (ii) any other business or product which accounts for,
or is reasonably anticipated to account for, at least 5% of the
Company's consolidated gross revenues.
(c) Employee will not, anywhere within the world, directly or
indirectly, cause or attempt to cause any customer, client or account
or any prospective customer, client or account, to divert, terminate,
limit or in any manner modify or fail to enter into any actual or
potential business relationship with Employer.
(d) Employee will not, directly or indirectly, divert, solicit, or
employ, or attempt to divert, solicit, or employ any employees of
Employer.
(e) Employee will not, anywhere within the world, directly or
indirectly, work for a competitor of Employer which is engaged in the
manufacturing, development, and marketing of a Competing Product or
Products (a "Competitive Entity"); provided, however, that a unit,
division or entity of a related group of entities that includes a
Competitive Entity shall not be deemed a competitor unless it
manufactures, develops or markets a Competing Product.
(f) The phrase "directly or indirectly" shall encompass: (A) all of the
Employee's activities whether on his own account or as an employee,
director, officer, agent, consultant, independent contractor, or
partner of or in any person, firm or corporation (other than the
Company and its subsidiaries), or (B) the Employee's ownership of more
than 2% of the voting stock of the corporation, 5% or more of the gross
income of which is derived from any business or businesses in which the
Employee may not engage.
(g) The phrase "Competing Product" shall mean: (A) the development
and/or sale of software for geometric computing and solid modeling,
including but not limited to software modeling kernels for sale or
license to other software developers; or (B) any other business which
accounts for, or is reasonably anticipated to account for, at least 5%
of the Company's consolidated gross revenues.
6. GENERAL PROVISIONS
(a) INJUNCTIVE RELIEF. In recognition of the irreparable harm that
violation of the covenants contained herein would cause Employer,
Employee agrees that, in addition to any relief afforded by law, an
injunction against such violation or violations may be issued against
him and every other person concerned thereby. The parties understand
that both damages and an injunction shall be proper modes of relief and
are not to be considered alternative remedies.
(b) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
(c) NO STRICT CONSTRUCTION. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction shall be
applied against any person.
(d) NOTICES. All notices, requests and other communications from any of
the parties hereto to another shall be in writing and shall be
personally served or sent by registered or certified mail, return
receipt requested, and shall be deemed to have been given on the day
when deposited in the United States mails addressed to the other party
as follows, provided that either party may from time to time change the
address to which notices to it are to be sent by giving written notice
to the other in accordance herewith. Notices to Employer shall be given
to Employer at its principal office which, as of the date of this
Agreement, is 0000 Xxxx 00xx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
Notices to Employee shall be addressed to Employee at Employee's
residence address as the same appears on Employer's records.
(e) ENTIRETY OF AGREEMENT. This Agreement constitutes the final
expression of the parties' agreement, and it is a complete and
exclusive statement of the terms of that agreement. There are no
agreements or understandings between Employer and Employee with respect
to the subject matter hereof except as expressly herein stated. This
Agreement supersedes and replaces any prior employment agreement
between the parties, whether oral or written, relating generally to the
same subject matter. Except as expressly provided herein, so long as
Employee is employed by Employer, Employee will continue to be subject
to Employer's written policies and procedures as may be amended from
time to time and of which Employee receives a copy.
(f) AMENDMENTS. This Agreement may be modified or rescinded only by an
instrument in writing signed by Employer and Employee. No amendment,
alteration or modification of
the express terms of this Agreement shall be binding unless set forth
in an instrument in writing signed by Employer and Employee.
(g) WAIVER. Waiver by either Employer or Employee of a breach of any
provision, term or condition hereof shall not be deemed or construed as
a further or continuing waiver thereof or a waiver of any breach of any
other provision, term or condition of this Agreement.
(h) ASSIGNMENT. The rights and obligations of Employer hereunder may be
transferred or assigned to any successor, representative or assign of
Employer. No assignment of this Agreement shall be made by Employee,
and any purported assignment shall be null and void. All obligations of
Employer and Employee arising out of this Agreement shall be binding
upon their heirs, spouses, legal representatives, successors and
permitted assigns. Notwithstanding anything to the contrary herein, the
assignment of this Agreement by Employer to a third party shall not
expand or broaden the scope of the non-competition obligations under
Section 5.
(i) SEVERABILITY. All provisions of this Agreement shall be deemed
severable. The enforceability, illegality or invalidity of any
provision herein or portion thereof shall not affect the
enforceability, legality or validity of any other, further or
additional provision hereof, all of which shall remain valid, binding
and enforceable in accordance with their terms. Should any provision,
term or condition of this Agreement be held unenforceable, illegal or
invalid as being too broad with respect to duration, scope or subject
matter, such provision, term or condition shall be deemed and construed
to be reduced to the maximum duration, scope or subject matter
allowable under applicable law.
(j) AT-WILL EMPLOYMENT. No provision of this Agreement shall be
construed as giving Employee any right of continuing employment with
Employer, it being understood that this Agreement and the employment
relationship between Employer and Employee are terminable at will by
Employer, with or without cause or reason.
(k) SURVIVAL OF OBLIGATIONS. Employee's obligations under Paragraphs 4
and 5 shall survive the termination of this Agreement and Employee's
employment with Employer.
(l) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
(m) CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any
terms or provisions.
(n) CONSIDERATION; REASONABLE AND NECESSARY PROVISIONS. The parties
agree that the provisions of this Agreement are reasonable and
necessary for the protection of Employer and constitute consideration
for Employee agreeing to be bound by the terms and conditions of this
Agreement.
EMPLOYER XOX CORPORATION
DATE: August 22, 2000 By /s/ Xxxxxx Xxxxxxxxxxx
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Its Chairman of the Board of Directors
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EMPLOYEE
DATE: August 22, 2000 /s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
