Start Date: June 28, 2001
Xxxxx Xxxxxx
00 Xxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
RE: Letter Agreement of Employment
This will confirm our offer of employment and the terms of your employment by
Xxxxxxxx.xxx, Inc. (the "Company" or "Employer").
1. Position and Duties. You will be employed by the Company as an "at
will" employee, with the title of Chief Operating Officer. Your duties will be
as directed by the Chief Executive Officer, and you will report directly to the
Chief Executive Officer of the Company. You will devote your full business time
to your duties to the Company, provided, however, that you may devote time to
charitable and personal investment activities as well as to serving on corporate
boards of directors, as long as such activities are non-competitive to the
business of the Company, and do not interfere in the performance of your duties
to the Company. In addition, you must obtain prior written approval from the
Company before serving on corporate boards.
2. Base Salary. You will be paid a base salary at the annual rate of
$250,000, payable on a bi-weekly basis, less applicable withholdings, based upon
full time employment with the Company and commencing on the date you start your
full time employment.
3. Senior Executive Bonus. You will be eligible to receive an annual
senior executive bonus payable in February of each year based upon the Company's
performance against Company goals, as reasonably determined in good faith by the
Company, for the previous calendar year. Such goals shall be set no later than
the end of the first quarter of each calendar year during your employment after
2001. The value of the bonus for any particular year will be up to $150,000,
payable 50% in cash and 50% in fully-vested shares of common stock of the
Company which will be issued subject to the terms and conditions of a stock
issuance agreement which you must sign as a condition of receiving the shares.
The bonus to be paid in February of 2002, if any, will be pro-rated to reflect
the portion of service for calendar year 2001. For example, if you begin
employment on July 1, 2001, the maximum potential value of any bonus you may
receive for calendar year 2001 is $75,000. You must be actively employed by the
Company at such time to receive the senior executive bonus awarded to you. The
senior executive bonus is subject to applicable withholdings.
4. Review. You will be reviewed annually during January or February of
each year during your employment. Your base salary, senior executive bonus
potential and fringe benefits
shall not be reduced below the levels afforded to you at the start of your
employment unless all senior executives undergo substantially equivalent
reductions.
5. Vacation and Benefits Packages. You will be eligible to participate
in the Company's standard vacation and benefit packages and all subsequent
revisions thereto as in effect from time to time. In no event, however, shall
you receive less than three weeks of vacation for every year that you work.
Therefore, your vacation allowance will accrue at the rate of 1.25 days per
month.
6. Medical Insurance. You and your immediate family will be eligible to
participate in the firm's current medical insurance program immediately upon
your start date.
7. Stock Options. Subject to approval of the Compensation Committee of
the Board of Directors, you shall receive the right (the "Option") to purchase
350,000 shares of common stock of the Company (the "Option Shares") at the
closing price of the Company's common stock on NASDAQ on the day the
Compensation Committee approves the grant. The Option shall be granted under the
terms set forth in the Stock Option Agreement which shall be substantially in
the form attached hereto as Exhibit A. The Option shall not vest nor be
exercisable until six months from the date that you commence full time
employment with the Company (the "Blackout Period"). At the expiration of the
Blackout Period, the Option shall vest and become exercisable in forty two (42)
monthly installments, according to the following schedule: eight thousand three
hundred thirty four (8,334) of the Option Shares in each of the first forty one
(41) monthly installments, and eight thousand three hundred and six (8,306) of
the Option Shares in the final monthly installment, as long as you remain
employed by the Company on such vesting dates. The Option is subject to the
standard terms and conditions of the Company's 2000 Stock Incentive Plan;
however, you understand that a portion of your stock options will most likely be
treated as non-qualified stock options (NQSOs). In the event you are terminated
without Cause, as defined below, or resign with Good Reason, as defined below,
within one year following a Change in Control, as defined in the Stock Option
Agreement, the Option shall accelerate, vest and become exercisable as if you
had continued to be employed for a six-month period subsequent to the date of
such termination or resignation.
8. Restricted Stock Grant. Subject to approval of the Compensation
Committee of the Board of Directors, as of your start date you will be given the
opportunity to purchase, under our 2000 Stock Incentive Plan, a number of shares
of Company common stock equal to $200,000.00 divided by the closing price of our
stock on NASDAQ on your start date (the "Restricted Stock"). (The number of
shares will be rounded up, if necessary, to avoid the issuance of fractional
shares.) The purchase price will be equal to the par value of the shares. These
shares will be purchased subject to the Company's right to repurchase at the
purchase price which will expire on the third anniversary of your start date
assuming you are still employed by us on that date. This stock purchase will be
subject to the terms and conditions of a Stock Issuance Agreement, substantially
in the form attached hereto as Exhibit B, which you must sign as a condition of
receiving the shares. In exchange for an executed Promissory Note substantially
in the form attached hereto as Exhibit C, the Company will also loan you the
amount set forth in the Promissory Note, assuming you timely file an election
under Section 83(b) of the Internal Revenue Code in connection with the
Restricted Stock grant. The Company shall forgive the principal and interest due
under the Promissory Note in three equal annual
installments, commencing on the first anniversary of your start date, provided
you remain employed by the Company on such dates. The unpaid principal and
interest due under the Promissory Note shall be forgiven in full should your
employment be terminated by the Company without Cause, as defined below, or by
you with Good Reason, as defined below.
9. Employment Relationship. This Is Not A Contract of Employment for a
Specified Term. Notwithstanding any provision of this letter agreement, either
you or the Company can terminate our employment relationship at any time with or
without cause. Advance notice by either party is to be given to the other party
according to the following schedule:
During the first three (3) months
of your employment Fifteen (15) days
After three (3) months of employment Thirty (30) days
provided, however, the Company shall not be required to provide any prior notice
where your employment is being terminated for "Cause." In the event your
employment terminates pursuant to this section, the Company may elect to pay you
your salary and benefits in lieu of all or part of actual notice. For purposes
of this letter agreement, "Cause" is defined as (i) your material breach of the
terms of this letter agreement or your Proprietary Information, Inventions and
Non-Solicitation Agreement; (ii) your commission of any felony or conviction of
any crime not a felony involving moral turpitude, provided that commission of a
crime not a felony involving moral turpitude shall constitute Cause if the act
or acts committed cause material injury to the Company; (iii) your breach of a
fiduciary duty or material policy of the Company; (iv) your commission of a
dishonest act or common law fraud against the Company; (v) gross negligence or
willful misconduct in connection with your position, (vi) your continual failure
or refusal to perform any duties reasonably required in the course of your
employment as Chief Operating Officer (and/or President and/or Chief Executive
Officer); (vii) your refusal to take or fail to satisfactorily to complete any
screening test for illegal drugs and controlled substances that may be
administered; or (viii) your engagement in misconduct in bad faith which is
materially injurious to the Company. The Company will give you thirty (30) days'
written notice and opportunity to cure on one occasion prior to any termination
for Cause for grounds specified in (vi) above.
10. Severance. Notwithstanding that your status would be as an at-will
employee, in the event the Company terminates your employment without Cause, or
you resign for "Good Reason" as defined below, at any time following the start
date of your employment, and contingent upon your executing and delivering to
the Company a general waiver and release, (a) the Company's right to repurchase
the Restricted Stock shall lapse as to a certain number of shares of Restricted
Stock, calculated as follows (the number of shares will be rounded up, if
necessary, to avoid determinations involving fractional shares): (i) if such
termination without Cause or resignation with Good Reason occurs during the
first six months of your employment, it shall lapse as to the total number of
shares of Restricted Stock multiplied by a number equal to the sum of the number
of full months you have been employed plus six divided by 36; (ii) if such
termination without Cause or resignation with Good Reason occurs between six and
twelve months after your start date, it shall lapse as to one-third of the total
number of shares of Restricted Stock; and (iii) if such termination without
Cause or resignation with Good Reason occurs on or after the first anniversary
of your start date, it shall lapse as to the total number of shares of
Restricted Stock multiplied by a number equal to the number of full months you
have been employed divided by 36; and (b) you will be eligible to receive the
base salary in effect at the time of such termination or resignation for a
period of six (6) months from the effective date of such termination or
resignation according to the Company's normal payroll schedule. For the purposes
of this letter agreement, "Good Reason" is defined as (i) a change in your
reporting relationship so that you are required to report to anyone other than
the Chief Executive Officer, the Company's Board of Directors and/or a committee
thereof; (ii) a change in your title to other than President and/or Chief
Executive Officer; (iii) a relocation of your worksite to a location 50 miles or
more from its current location; (iv) a reduction in your base salary, bonus
potential or benefits, unless all other senior executives undergo substantially
equivalent reductions; or (v) the Company does not grant you the Option or the
Restricted Stock within 30 days of the start of your employment hereunder. You
must give the Company thirty (30) days' written notice and opportunity to cure
prior to any resignation for Good Reason for grounds specified in (i) through
(iv) above.
11. PINN Agreement. Your employment is contingent upon your signing a
counterpart of this letter agreement and executing and delivering the
Proprietary Information, Inventions and Non-Solicitation Agreement in the form
attached hereto as Exhibit D.
12. Governing Law. This letter agreement will be governed by the laws
of the State of New York, without reference to any conflicts of law principles,
and any action, suit or proceeding arising under or out of this agreement or any
of the transactions or relationships contemplated hereby will be resolved solely
in the state or federal courts located in New York County in the State of New
York. We both hereby submit to the jurisdiction of such court for such purpose.
13. Complete Understanding. This letter represents your complete
understanding of the terms of employment that have been offered to you and you
are not relying on any discussions or agreements outside of this letter, other
than as indicated above. In addition, to the extent that any of the terms in the
Stock Issuance Agreement, Stock Option Agreement or Promissory Note are
inconsistent with the terms of this letter, the terms of this letter shall
control. Changes in the terms of your employment may be accomplished only
through a document signed by you and the Chief Executive Officer.
14. Duration of Offer. The offer outlined herein expires if not
accepted in writing by countersignature below and delivery to the Company on or
prior to 9 A.M. Eastern Standard Time on June 11, 2001.
15. If the above accurately reflects our agreement, kindly so signify
by signing the enclosed copy of this letter in the space provided below and
returning it to the undersigned.
Xxxxx Xxxxxx Xxxxxxxx.xxx, Inc.
/s/ Xxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
