EXHIBIT 10.5
Employment Agreement
THIS AGREEMENT is entered into as of November 11, 1998, by and between
Xxxxxxx X. XXXXXXX (the "Employee") and PLANETRX, INC., a Delaware corporation
(the "Company").
1. Duties and Scope of Employment.
(a) Position. For the term of his employment under this Agreement
("Employment"), the Company agrees to employ the Employee in the position of
Chairman of the Company's Board of Directors and Chief Executive Officer. The
Employee shall report to the Company's Board of Directors (the "Board").
(b) Obligations to the Company. During the term of his Employment,
the Employee shall devote his full business efforts and time to the Company.
During the term of his Employment, without the prior written approval of the
Company's Board, the Employee shall not render services in any capacity to any
other person or entity and shall not act as a sole proprietor or partner of any
other person or entity or as a stockholder owning more than five percent of the
stock of any other corporation. The Employee shall comply with the Company's
policies and rules, as they may be in effect from time to time during the term
of his Employment.
(c) No Conflicting Obligations. The Employee represents and warrants
to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Employee represents and warrants that he will not use or
disclose, in connection with his Employment, any trade secrets or other
proprietary information or intellectual property in which the Employee or any
other person has any right, title or interest and that his Employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person. The Employee represents and warrants to the Company
that he has returned all property and confidential information belonging to any
prior employer.
(d) Commencement Date. The Employee shall commence full-time
Employment as soon as reasonably practicable and in no event later than November
15, 1998.
2. Cash and Incentive Compensation.
(a) Salary. The Company shall pay the Employee as compensation for
his services a base salary at a gross annual rate of not less than $160,000.
Such salary shall be payable in accordance with the Company's standard payroll
procedures. (The annual compensation specified in this Subsection (a), together
with any increases in such compensation that the Company may grant from time to
time, is referred to in this Agreement as "Base Compensation.")
(b) Incentive Bonuses. The Employee shall be eligible to receive a
guaranteed bonus ("Guaranteed Bonus") at a gross annual rate of $160,000 for
each of the first two years of Employment. The Guaranteed Bonus shall be payable
on a monthly basis. After the first two years of Employment, the Employee may be
considered for an annual incentive bonus. Such bonus (if any) shall be awarded
based on objective or subjective criteria established in advance by the
Company's Board. The determinations of the Board with respect to such bonus
shall be final and binding.
(c) Relocation. The Company shall reimburse the reasonable expenses
that the Employee incurs in moving himself, his family and his household from
the Memphis, Tennessee area to the Bay Area, including the commission and
closing costs related to the sale of the Employee's home, cost of transporting
all household items and travel expenses for the Employee and his family. In any
event, the Employee and his family and household must be relocated to the Bay
Area within one year following the Commencement Date set forth in Section 1(d).
The Company shall pay all expenses directly related to any traveling completed
by the Employee on behalf of the Company. To the extent that the Employee incurs
any taxes as a result of the Company's reimbursement of his relocation expenses,
a Tax Gross-Up shall be applied to such relocation expenses. A Tax Gross-Up
shall mean that the Company shall pay to the Employee such additional
compensation as is necessary (after taking into account all federal, state and
local income and payroll taxes payable by the Employee as a result of the
receipt of such additional compensation) to place the Employee in the same
after-tax position (including federal, state and local income and payroll taxes)
as the Employee would have been in had no such tax been paid or incurred.
(d) Stock and Stock Options. Subject to the approval of the Board,
the Company shall grant the Employee an option ("Option") to purchase 904,500
shares of the Company's Common Stock under the Company's 1998 Stock Plan (the
"Plan"). The exercise price of such Option shall be equal to the fair market
value of such stock on the later of (i) the date of grant or (ii) the first day
of the Employee's service with the Company. The term of this Option shall be 10
years, subject to earlier expiration in the event of the termination of the
Employee's Employment. Such Option shall be immediately exercisable, but the
purchased shares shall be subject to repurchase by the Company at the exercise
price in the event that the Employee's Employment terminates before he vests in
the shares. The Employee shall vest in 301,500 of the Option shares on the
vesting commencement date of the Option and the remaining 603,000 of the Option
shares shall vest in equal monthly installments upon the completion of each
continuous month of service for the Company over a 48-month period from the
vesting commencement date of the Option. It is anticipated that there will be an
exemption from registration available under the federal securities laws for the
Option shares. If an exemption is not available, the Company shall register the
Option shares, including any exercised shares, on a Form S-8 registration
statement to the extent that it is permissible under federal securities laws.
These same Form S-8 registration statement rights shall be available to any
future options granted to the Employee to the extent that it is permissible
under federal securities laws. Please see Section 5, Change in Control, and
Section 7, Termination Benefits, for additional terms related to the Option. The
grant of this Option shall otherwise be subject to the other terms and
conditions set forth in the Plan and in the Company's standard form of stock
option agreement. Any shares of the Company's Common Stock purchased by the
Employee, pursuant to the
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exercise of options or otherwise, shall be treated in the same manner as any
other shares of the Company's Common Stock issued by the Company.
3. Vacation and Employee Benefits. During the term of his Employment,
the Employee shall be eligible for paid vacations in accordance with the
Company's standard policy for similarly situated employees, as it may be amended
from time to time. During the term of his Employment, the Employee shall be
eligible to participate in any employee benefit plans maintained by the Company
for similarly situated employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.
4. Business Expenses. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. Change in Control.
(a) Subject to Section 5(c), in the event of a Change in Control (as
defined in the Plan) that occurs before the Employee's Employment terminates,
all options granted to the Employee, including the Option and any shares
obtained from the exercise of granted options, shall become fully vested.
(b) Subject to Section 5(c), in the event of a Change in Control (as
defined in the Plan) that occurs before the Employee's Employment terminates,
the Employee shall receive an amount equal to (i) the Employee's Base Salary for
a one-year period and (ii) a bonus equal to the Employee's most recently paid
bonus (collectively, "Change in Control Payment"), which Change in Control
Payment shall be payable in the Employee's discretion in a lump sum payment or
in twelve equal monthly installments.
(c) In the event that the Employee is retained by the successor
corporation in the Change in Control (as defined in the Plan), in substantially
the same position, with substantially the same job responsibilities, title,
compensation package, option package and location, as determined by the Board,
then the Employee hereby agrees to serve for a one-year period with the
successor corporation following the Change in Control (as defined in the Plan)
and the Change in Control Payment set forth in Section 5(b) above shall not be
paid during such employment with the successor corporation and the vesting
acceleration described in Section 5(a) will not occur. However, if the
Employee's employment with the successor corporation is not consistent with the
previous sentence or terminates for any reason before the completion of the one-
year period with the successor corporation, then the Company shall pay the
Employee an amount equal to the Change in Control Payment less any salary and
bonus amounts already paid during the period he was employed by the successor
corporation and the vesting acceleration described in Section 5(a) will occur.
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6. Term of Employment.
(a) Basic Rule. The Company agrees to continue the Employee's
Employment, and the Employee agrees to remain in Employment with the Company,
from the commencement date set forth in Section 1(d) until the date when the
Employee's Employment terminates pursuant to Subsection (b) or (c) below. The
Employee's Employment with the Company shall be "at will." Any contrary
representations which may have been made to the Employee shall be superseded by
this Agreement. This Agreement shall constitute the full and complete agreement
between the Employee and the Company on the "at will" nature of the Employee's
Employment, which may only be changed in an express written agreement signed by
the Employee and a duly authorized officer of the Company.
(b) Termination. The Company may terminate the Employee's Employment
at any time and for any reason (or no reason), and with or without Cause, by
giving the Employee notice in writing. The Employee may terminate his Employment
by giving the Company 14 days' advance notice in writing. The Employee's
Employment shall terminate automatically in the event of his death.
(c) Permanent Disability. The Company may terminate the Employee's
active Employment due to Permanent Disability by giving the Employee 30 days'
advance notice in writing. For all purposes under this Agreement, "Permanent
Disability" shall mean that the Employee, at the time notice is given, has
failed to perform his duties under this Agreement for a period of not less than
90 consecutive days as the result of his incapacity due to physical or mental
injury, disability or illness. In the event that the Employee satisfactorily
resumes the performance of substantially all of his duties hereunder before the
termination of his active Employment under this Subsection (c) becomes
effective, the notice of termination shall automatically be deemed to have been
revoked.
(d) Rights Upon Termination. Except as expressly provided in
Sections 5 and 7, upon the termination of the Employee's Employment pursuant to
this Section 6, the Employee shall only be entitled to the compensation,
benefits and reimbursements described in Sections 2, 3 and 4 for the period
preceding the effective date of the termination. The payments under this
Agreement shall fully discharge all responsibilities of the Company to the
Employee.
(e) Termination of Agreement. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Section 8.
7. Termination Benefits.
(a) General Release. Any other provision of this Agreement
notwithstanding, Subsection (b) below shall not apply unless the Employee (i)
has executed a general release (in a form prescribed by the Company) of all
known and unknown claims that he may then have against the Company or persons
affiliated with the Company and (ii) has agreed not to prosecute any legal
action or other proceeding based upon any of such claims.
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(b) Stock and Stock Options. If, during the term of this Agreement,
the Company terminates the Employee's Employment for any reason other than
Cause, then the vesting of outstanding options granted to the Employee by the
Company, including the Option and any shares of Company securities acquired
pursuant to the exercise of options, shall accelerate such that an additional
25% of such unvested, outstanding options and shares acquired pursuant to the
exercise of options, shall become vested.
(c) Definition of "Cause." For all purposes under this Agreement,
"Cause" shall mean:
(i) Unauthorized use or disclosure of the confidential
information or trade secrets of the Company;
(ii) Any breach of this Agreement, the Proprietary
Information and Inventions Agreement between the Employee and the Company,
or any other agreement between the Employee and the Company;
(iii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony under the laws of the United States or any state thereof;
(iv) Threats or acts of violence directed at any present,
former or prospective employee, independent contractor, vendor, customer or
business partner of the Company;
(v) The sale, possession or use of illegal drugs on the
premises of the Company or a client of the Company;
(vi) Misappropriation of the assets of the Company or other
acts of dishonesty;
(vii) Illegal or unethical business practices;
(viii) Misconduct or gross negligence in the performance of
duties assigned to the Employee under this Agreement;
(ix) Failure to perform reasonable duties assigned to the
Employee under this Agreement; or
(x) Failure to comply with the Company's policies or rules,
as they may be in effect from time to time during the term of the
Employee's Employment.
The foregoing shall not be deemed an exclusive list of all acts or omissions
that the Company may consider as grounds for the termination of the Employee's
Employment.
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8. Non-Solicitation and Non-Disclosure.
(a) Non-Solicitation. During the period commencing on the date of
this Agreement and continuing until the second anniversary of the date when the
Employee's Employment terminated for any reason, the Employee shall not directly
or indirectly, personally or through others, solicit or attempt to solicit (on
the Employee's own behalf or on behalf of any other person or entity) the
employment of any employee of the Company or any of the Company's affiliates.
(b) Non-Disclosure. The Employee has entered into a Proprietary
Information and Inventions Agreement with the Company, which is incorporated
herein by reference.
9. Successors.
(a) Company's Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
10. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid. In the case of the Employee, mailed notices shall
be addressed to him at the home address which he most recently communicated to
the Company in writing. In the case of the Company, mailed notices shall be
addressed to its corporate headquarters, and all notices shall be directed to
the attention of its Secretary.
(b) Modifications and Waivers. No provision of this Agreement shall
be modified, waived or discharged unless the modification, waiver or discharge
is agreed to in writing and signed by the Employee and by an authorized officer
of the Company (other than the Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
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(c) Whole Agreement. No other agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof.
(d) Withholding Taxes. All payments made under this Agreement shall
be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (except their provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) Arbitration. Any controversy or claim arising out of or relating
to this Agreement or the breach thereof, or the Employee's Employment or the
termination thereof, shall be settled in Oakland, California, by arbitration in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association. The decision of the arbitrator shall be
final and binding on the parties, and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The parties
hereby agree that the arbitrator shall be empowered to enter an equitable decree
mandating specific enforcement of the terms of this Agreement. The Company and
the Employee shall share equally all fees and expenses of the arbitrator;
provided, however, that the Company or the Employee, as the case may be, shall
bear all fees and expenses of the arbitrator and all of the legal fees and out-
of-pocket expenses of the other party if the arbitrator determines that the
claim or position of the Company or the Employee, as the case may be, was
without reasonable foundation. The Employee hereby consents to personal
jurisdiction of the state and federal courts located in the State of California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.
(h) No Assignment. This Agreement and all rights and obligations of
the Employee hereunder are personal to the Employee and may not be transferred
or assigned by the Employee at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company's obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
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(i) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
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Xxxxxxx X. Xxxxxxx
PLANETRX, INC.
By
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Title:
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