EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this ____
day of February , 1999, between X.XXXX, Inc., (the "Company"), and Xxxxx Xxxxxx
(the "Executive").
WHEREAS, the Company desires to employ the Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. Term of Employment.
------------------
(a) Term. The Company hereby employs the Executive, and the Executive
----
hereby accepts employment with the Company for a period commencing on the
date of this Agreement and ending upon the later of (i) three years from
the date of this Agreement, or (ii) three years from the date of the
Company completing an initial public offering of its securities ("IPO"). As
used in this Agreement, the term IPO means the closing of a registered
public offering of securities in which the Company receives gross proceeds
of at least $5,000,000 or the closing of a merger or similar transaction
with a public company which is required to file reports with the Securities
and Exchange Commission.
(b) Continuing Effect. Notwithstanding any termination of this
-----------------
Agreement except for termination under Section 5(c), at the end of the Term
or otherwise, the provisions of Sections 6 and 7 shall remain in full force
and effect and the provisions of Section 7 shall be binding upon the legal
representatives, successors and assigns of the Executive.
2. Duties.
------
(a) General Duties. The Executive shall serve as chief financial
--------------
officer of the Company with duties and responsibilities that are customary
for such executives. The Executive will also perform services for such
subsidiaries as may be necessary. The Executive shall report directly to
the Company's President or such persons designated by the President. The
Executive shall use his best efforts to perform his duties and discharge
his responsibilities pursuant to this Agreement competently, carefully and
faithfully.
(b) Devotion of Time. Subject to the last sentence of this Section
----------------
2(b), the Executive shall devote all of his time, attention and energies
during normal business hours
1
(exclusive of periods of sickness and disability and of such normal holiday
and vacation periods as have been established by the Company) to the
affairs of the Company. The Executive shall not enter the employ of or
serve as a consultant to, or in any way perform any services with or
without compensation to, any other persons, business or organization
without the prior consent of the board of directors of the Company;
provided, that the Executive shall be permitted to devote a limited amount
of his time, without compensation, to professional, charitable or similar
organizations.
(c) Location. The services shall be rendered primarily in the
--------
Conshohocken, Pennsylvania area as long as the Company or any subsidiary
maintains an office in such area. Nothing contained in this Agreement shall
require the Company to maintain an office in the Conshohocken, Pennsylvania
area. Executive shall be required to travel as may be necessary in order to
carry out his duties.
(d) Adherence to Inside Information Policies. The Executive
----------------------------------------
acknowledges that the Company intends to effect a public offering and
become publicly-held and, as a result, has implemented inside information
policies designed to preclude its executives and those of its subsidiaries
from violating the federal securities laws by trading on material, non-
public information or passing such information on to others in breach of
any duty owed to the Company. The Executives shall promptly execute any
agreements generally distributed by the Company to its executives requiring
such executives to abide by its inside information policies.
3. Compensation and Expenses.
-------------------------
(a) Salary. For the services of the Executive to be rendered under
------
this Agreement, the Company shall pay the Executive an annual salary of
$95,000 (the "Base Salary") which Base Salary shall be increased each year
by an amount equal to the greater of (i) 3% in excess of the prior year's
Base Salary, or (ii) the cost of living increase based upon the Consumer
Price Index calculated upon the commencement of each year of the Agreement
using the prior month as the measuring month published by the Bureau of
Labor Statistics (or similar successor index). At such time as the Company
completes an IPO, the Base Salary shall be increased to $120,000 .The
Consumer Price Index increase calculation shall be calculated as follows:
Commencing with the one year anniversary of the commencement
of the term and the beginning of each year thereafter during
the term of this Agreement, the Executive's annual salary
shall be adjusted in accordance with the Consumer Price
Index, all Urban Consumers issued by the Bureau of Labor
Statistics of the U.S. Department of Labor using the years
1982-84 as a base of 100 (the "Index"). At the commencement
of the second year, and of each year thereafter, the
Executive's adjusted Base Salary shall be multiplied each
year by a
2
fraction, the numerator of which shall be the published
Index number for the month preceding the commencement of the
new year, i.e. November 1999, and the denominator of which
---
shall be the published Index number for the month of
November, 1998. The resulting increase to the Executive's
Base Salary shall be added to the prior year's Base Salary
and become a part thereof for the current year. In the event
that the Index herein referred to ceases to be published
during the term of this Agreement, or if a substantial
change is made in the method of establishing such Index,
then the determination of the adjustment in the Executive's
compensation shall be made with the use of such conversion
factor, formula or table as may be published by the Bureau
of Labor Statistics, or if none is available, the parties
shall accept comparable statistics on the cost of living in
the United States as shall then be computed and published by
an agency of the United States, or if not by a respected
financial periodical selected by the Company.
(b) Expenses. In addition to any compensation received pursuant to
--------
Section 3(a) and (c), the Company will reimburse or advance funds to the
Executive for all reasonable travel, entertainment and miscellaneous
expenses incurred in connection with the performance of his duties under
this Agreement, provided that the Executive properly accounts for such
expenses to the Company in accordance with the Company's practices. Such
reimbursement or advances will be made in accordance with policies and
procedures of the Company in effect from time to time relating to
reimbursement of or advances to executive officers.
(c) Bonus. During the term of this Agreement, the Board of Directors
-----
(the "Board") shall review the Executive's performance annually and have
the discretion to grant to Executive a management bonus based on any
criteria or factors the Board deems appropriate.
4. Benefits.
--------
(a) Vacation. For each 12-month period during the Term, the Executive
--------
will be entitled to three weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at
such times as the Executive may select and the affairs of the Company may
permit. Any unused vacation will be paid for by the Company in addition to
regular salary at the annual rate in effect during 12 month period.
(b) Employee Benefit Programs. The Executive is entitled to
-------------------------
participate in any pension, 401(k), insurance or other employee benefit
plan that is maintained by the Company for its executive officers,
including programs of life and medical insurance and reimbursement of
membership fees in civic, social and professional organization. Effective
with the closing of the IPO, the Company shall provide disability insurance
for the
3
Executive or reimburse the Executive for disability insurance covering the
Executive's disability which insurance shall have a 90-day waiting period.
(c) Insurance. The Company shall provide the Executive with medical
---------
and dental insurance and pay the premiums on policies covering Executive
and Executive's dependents upon closing of the Company's IPO. Until such
time, the Executive waives all coverage associated with such insurance.
5. Termination.
-----------
(a) Termination for Cause. The Company may terminate the Executive's
---------------------
employment pursuant to the terms of this Agreement at any time for cause by
giving written notice of termination. Such termination will become
effective upon the giving of such notice. Upon any such termination for
cause, the Executive shall have no right to compensation, bonus or
reimbursement under Section 3, or to participate in any employee benefit
programs under Section 4, except as provided by law, for any period
subsequent to the effective date of termination. For purposes of this
Section 5(a), "cause" shall mean: (i) the Executive is convicted of a
felony or misdemeanor or commits a criminal act; (ii) the Executive, in
carrying out his duties hereunder, has acted with ordinary negligence,
gross negligence or intentional misconduct resulting, in any case, in harm
to the Company; (iii) the Executive misappropriates Company funds or
otherwise defrauds the Company; (iv) the Executive breaches his fiduciary
duty to the Company resulting in profit to him, directly or indirectly; (v)
the Executive materially breaches any agreement with the Company; (vi) the
Executive breaches any provision of Section 6 or Section 7; (vii) the
Executive fails to competently perform his duties under Section 2 as
determined by a majority of the board of directors; (viii) the Executive
suffers from alcoholism or drug addiction or otherwise uses alcohol to
excess or uses drugs in any form except strictly in accordance with the
recommendation of a physician or dentist; or (ix) the Executive's license
as a certified public accountant is suspended or revoked.
(b) Death or Disability. Except as otherwise provided in this
-------------------
Agreement, it shall terminate upon the death, or disability of the
Executive. For purposes of this Section 5(b), "disability" shall mean that
for a period of four consecutive months in any 12-month period the
Executive is incapable of substantially fulfilling the duties set forth in
Section 2 because of physical, mental or emotional incapacity resulting
from injury, sickness or disease. In the event of death of the Executive,
the Executive's estate shall receive the Executive's compensation and
benefits for the remainder of the term of this Agreement or 24 months
whichever is greater.
(c) Special Termination. any entity or person not now an executive
-------------------
officer or director (or spouse) of the Company becomes either individually
or as part of a group the beneficial owner of 30% or more of the Company's
common stock, in any such event the Executive, by written notice to the
Company, may elect to deem the Executive's
4
employment hereunder to have been terminated by the Company without cause,
in which event the Executive shall be entitled at the time of termination
to be paid an amount equal to three years compensation and benefits as
defined under this Agreement pursuant to Sections 3 and 4 herein for such
three-year period and all of Executive's remaining unvested options shall
vest immediately upon such termination. In such event, the Executive, by
written notice to the Company, may elect to refuse all further obligations
of the Company under Sections 3 and 4 and to release the Company with
respect thereto, in which event the Company shall release the Executive
from the provisions of Section 6.
6. Non-Competition Agreement.
-------------------------
(a) Competition with the Company. Until termination of his employment
----------------------------
and for a period of 12 months commencing on the date of termination, the
Executive, directly or indirectly, in association with or as a stockholder,
director, officer, consultant, employee, partner, joint venturer, member or
otherwise of or through any person, firm, corporation, partnership,
association or other entity, will not compete with the Company or any of
its affiliates in the offer, sale or marketing of products or services that
are competitive with the products or services offered by the Company,
within any metropolitan area in the United States or elsewhere in which the
Company is then engaged in the offer and sale of competitive products or
services; provided, however, the foregoing shall not prevent Executive from
accepting employment with an enterprise engaged in two or more lines of
business, one of which is the same or similar to the Company's business
(the "Prohibited Business") if Executive's employment is totally unrelated
to the Prohibited Business; provided, further, the foregoing shall not
prohibit Executive from owning up to 5% of the securities of any publicly-
traded enterprise provided Executive is not an employee, director, officer,
consultant to such enterprise or otherwise reimbursed for services rendered
to such enterprise.
(b) Solicitation of Customers. During the periods in which the
-------------------------
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company,
refer Prohibited Business from any Customer to any enterprise or business
other than the Company or receive commissions based on sales or otherwise
relating to the Prohibited Business from any Customer, or any enterprise or
business other than the Company. For purposes of this Section 6(b), the
term "Customer" means any person, firm, corporation, partnership,
association or other entity to which the Company or any of its affiliates
sold or provided goods or services during the 24-month period prior to the
time at which any determination is required to be made as to whether any
such person, firm, corporation, partnership, association or other entity is
a Customer.
5
(c) No Payment. The Executive acknowledges and agrees that no
----------
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
7. Non-Disclosure of Confidential Information.
------------------------------------------
(a) Confidential Information. Confidential Information includes, but
------------------------
is not limited to, trade secrets as defined by the common law in
Pennsylvania or any future Pennsylvania statute, processes, policies,
procedures, techniques, designs, drawings, know-how, show-how, technical
information, specifications, computer software (including, but not limited
to, computer programs developed, improved or modified by the Company for or
on behalf of the Company for use in the Company's business, and source
code), information and data relating to the development, research, testing,
manufacturing, costs, marketing and uses of the Products (as defined
herein), the Company's budgets and strategic plans, and the identity and
special needs of customers for the Products, databases, data, all
technology relating to the Company's college and university directory and
Internet businesses, systems, methods of operation, customer lists,
customer information, solicitation leads, marketing and advertising
materials, methods and manuals and forms, all of which pertain to the
activities or operations of the Company, names, home addresses and all
telephone numbers and e-mail addresses of the Company's employees and
former employees. Confidential Information also includes, without
limitation, Confidential Information received from the Company's
subsidiaries and affiliates. For purposes of this Agreement, the following
will not constitute Confidential Information (i) information which is or
subsequently becomes generally available to the public through no act of
the Executive, (ii) information set forth in the written records of the
Executive prior to disclosure to the Executive by or on behalf of the
Company, and (iii) information which is lawfully obtained by the Executive
in writing from a third party (excluding any affiliates of the Executive)
who did not acquire such confidential information or trade secret, directly
or indirectly, from Executive or the Company. As used herein, the term
"Products" shall include all computer software researched, developed,
tested, manufactured, sold, licensed, leased or otherwise distributed or
put in to use by the Company, together with all services provided by the
Company during the term of Executive's employment.
(b) Legitimate Business Interests. The Executive recognizes that the
-----------------------------
Company has legitimate business interests to protect and as a consequence,
the Executive agrees to the restrictions contained in this Agreement
because they further the Company's legitimate business interests. These
legitimate business interests include, but are not limited to (i) trade
secrets as defined in Section 7(b), (ii) valuable confidential business or
professional information that otherwise does not qualify as trade secrets
including all Confidential Information; (iii) substantial relationships
with specific prospective or existing customers or clients; (iv) customer
or client goodwill associated with the Company's business; and (v)
specialized training relating to the Company's technology, methods and
procedures.
6
(c) Confidentiality. For a period of five years, the Confidential
---------------
Information shall be held by the Executive in the strictest confidence and
shall not, without the prior written consent of the Company, be disclosed
to any person other than in connection with Executive's employment by the
Company. The Executive further acknowledges that such Confidential
Information as is acquired and used by the Company or its affiliates is a
special, valuable and unique asset. The Executive shall exercise all due
and diligence precautions to protect the integrity of the Company's
Confidential Information and to keep it confidential whether it is in
written form, on electronic media or oral. The Executive shall not copy any
Confidential Information except to the extent necessary to his employment
nor remove any Confidential Information or copies thereof from the
Company's premises except to the extent necessary to his employment and
then only with the authorization of an officer of the Company. All records,
files, materials and other Confidential Information obtained by the
Executive in the course of his employment with the Company are confidential
and proprietary and shall remain the exclusive property of the Company or
its customers, as the case may be. The Executive shall not, except in
connection with and as required by his performance of his duties under this
Agreement, for any reason use for his own benefit or the benefit of any
person or entity with which he may be associated or disclose any such
Confidential Information to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever without the prior written
consent of an executive officer of the Company (excluding the Executive, if
applicable).
8. Equitable Relief.
----------------
(a) The Company and the Executive recognize that the services to be
rendered under this Agreement by the Executive are special, unique and of
extraordinary character, and that in the event of the breach by the
Executive of the terms and conditions of this Agreement or if the
Executive, without the prior consent of the board of directors of the
Company, shall leave his employment for any reason and take any action in
violation of Section 6 or Section 7, the Company will be entitled to
institute and prosecute proceedings in any court of competent jurisdiction
referred to in Section 8(b) below, to enjoin the Executive from breaching
the provisions of Section 6 or Section 7. In such action, the Company will
not be required to plead or prove irreparable harm or lack of an adequate
remedy at law. Nothing contained in this Section 8 shall be construed to
prevent the Company from seeking such other remedy in arbitration in case
of any breach of this Agreement by the Executive, as the Company may elect.
(b) Any proceeding or action must be commenced in Pennsylvania. The
Executive and the Company irrevocably and unconditionally submit to the
exclusive jurisdiction of such courts and agree to take any and all future
action necessary to submit to the jurisdiction of such courts. The
Executive and the Company irrevocably waive any objection that they now
have or hereafter irrevocably waive any objection that they now have or
hereafter may have to the laying of venue of any suit, action or proceeding
brought in any such court and further irrevocably waive any claim that any
such suit, action or
7
proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment against the Executive or the Company in any such
suit shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment, a certified or true copy of which shall be conclusive
evidence of the fact and the amount of any liability of the Executive or
the Company therein described, or by appropriate proceedings under any
applicable treaty or otherwise.
9. Assignability. The rights and obligations of the Company under this
-------------
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the securities or assets and business of the Company.
The Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
10. Severability.
------------
(a) The Executive expressly agrees that the character, duration and
geographical scope of the non-competition provisions set forth in this
Agreement are reasonable in light of the circumstances as they exist on the
date hereof. Should a decision, however, be made at a later date by a
court of competent jurisdiction that the character, duration or
geographical scope of such provisions is unreasonable, then it is the
intention and the agreement of the Executive and the Company that this
Agreement shall be construed by the court in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in
the light of the circumstances and as are necessary to assure to the
Company the benefits of this Agreement. If, in any judicial proceeding, a
court shall refuse to enforce all of the separate covenants deemed included
herein because taken together they are more extensive than necessary to
assure to the Company the intended benefits of this Agreement, it is
expressly understood and agreed by the parties hereto that the provisions
of this Agreement that, if eliminated, would permit the remaining separate
provisions to be enforced in such proceeding shall be deemed eliminated,
for the purposes of such proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be
considered divisible as to such provision and such provision shall be
inoperative in such state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other. The remaining
provisions of this Agreement shall be valid and binding and of like effect
as though such provision were not included.
11. Notices and Addresses. All notices, offers, acceptance and any other
---------------------
acts under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by Federal Express
or similar receipted delivery, by facsimile delivery or, if mailed, postage
prepaid, by certified mail, return receipt requested, as follows:
8
To the Company: X.XXXX, Inc.
0000 Xxxxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000)000-0000
With a Copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx Xxxxxx, P.A.
0000 Xxxx Xxxxx Xxxxx, Xxxx.
Xxxxx 000
Xxxx Xxxx Xxxxx, XX 00000
Facsimile (000)000-0000
With a Copy to: Xxxx Xxxxx, Esquire
Xxxxx & Xxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Facsimile (000)000-0000
To the Executive: Mr. Xxxxx Xxxxxx
X.XXXX, INC.
0000 Xxxxxxxxxxxx Xxxx, 0xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000)000-0000
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
12. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
13. Arbitration. Except for a claim for equitable relief, any controversy,
-----------
dispute or claim arising out of or relating to this Agreement, or its
interpretation, application, implementation, breach or enforcement which the
parties are unable to resolve by mutual agreement, shall be settled by
submission by either party of the controversy, claim or dispute to binding
arbitration in Philadelphia, Pennsylvania the parties agree in writing to a
different location, before three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. In any such arbitration
proceeding, the parties agree to provide all discovery deemed necessary by the
arbitrators. The decision and award made by the arbitrators shall be final,
binding and conclusive on
9
all parties hereto for all purposes, and judgment may be entered thereon in any
court having jurisdiction thereof.
14. Attorney's Fees. In the event that there is any controversy or claim
---------------
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding is commenced to enforce the
provisions of this Agreement, the prevailing party shall be entitled to a
reasonable attorney's fee, costs and expenses.
15. Governing Law. This Agreement and any dispute, disagreement, or issue
-------------
of construction or interpretation arising hereunder whether relating to its
execution, its validity, the obligations provided therein or performance shall
be governed or interpreted according to the internal laws of the State of
Pennsylvania without regard to choice of law considerations.
16. Entire Agreement. This Agreement constitutes the entire Agreement
----------------
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
17. Additional Documents. The parties hereto shall execute such additional
--------------------
instruments as may be reasonably required by their counsel in order to carry out
the purpose and intent of this Agreement and to fulfill the obligations of the
parties hereunder.
18. Section and Paragraph Headings. The section and paragraph headings in
------------------------------
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
Witnesses: X.XXXX, Inc.
/s/ Xxxx X. Xxxxxxxxx
________________________ By:____________________________________
Xxxx X. Xxxxxxxxx, President and Chief
Operating Officer
________________________
/s/ Xxxxx Xxxxxx
________________________ _______________________________________
Xxxxx Xxxxxx
10
________________________
11
