EXHIBIT 10.1
N2H2, INC.
XXXXXX XXXXXX WELT EMPLOYMENT AGREEMENT
This Agreement is made by and between N2H2, Inc. (the "Company"), and
Xxxxxx Xxxxxx Welt ("Executive") effective as of May 18, 2002.
1. DUTIES AND SCOPE OF EMPLOYMENT.
a. POSITIONS AND DUTIES. Executive will continue to serve as
President and Chief Executive Officer of the Company. Executive
will render such business and professional services in the
performance of his duties, consistent with Executive's position
within the Company, as shall reasonably be assigned to him by the
Company's Board of Directors (the "Board"). Executive will report
to the Board and all other Company employees will report to
Executive.
b. BOARD MEMBERSHIP. Executive will continue to serve as a member of
the Company's Board of Directors (the "Board"), subject to any
required Board and/or stockholder approval.
c. OBLIGATIONS. During the Employment Term, Executive will devote
his full business efforts and time to the Company. For the
duration of the Employment Term, Executive agrees not to actively
engage in any other employment, occupation or consulting activity
for any direct or indirect remuneration without the prior
approval of the Board (which approval will not be unreasonably
withheld); provided, however, that Executive may, without the
approval of the Board, serve in any capacity with any civic,
educational or charitable organization, or as a member of
corporate Boards of Directors (but in all cases subject to
Section 11).
2. TERM.
a. Executive and the Company agree that Executive's employment with
the Company shall be for a period of twelve (12) months
commencing on the Effective Date (defined below). Executive and
the Company acknowledge that this employment relationship may be
terminated at any time, upon sixty (60) days advance written
notice to the other party, with or without good cause or for any
or no cause, at the option either of the Company or Executive.
The period of Executive's employment under this Agreement is
referred to herein as the "Employment Term."
3. EXECUTIVE BENEFITS.
a. During the Employment Term, Executive will be eligible to
participate in accordance with the terms of all Company employee
benefit plans that are applicable to other senior executives of
the Company, as such plans and terms may exist from time to time.
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b. Executive will be eligible to participate in an incentive bonus
plan or program for senior management of the Company, should one
be established during the Employment Term.
c. Company shall, during the Employment Term, pay for Executive's
parking and health club membership.
4. COMPENSATION.
a. BASE SALARY. During the Employment Term, the Company will pay
Executive no salary in compensation for his services. The
Compensation Committee of the Board (the "Committee") will
reevaluate compensation arrangements from time to time and may
adjust the Base Salary in accordance with its normal practices.
b. STOCK OPTIONS. The Company will grant Executive an option to
purchase up to 1,400,000 shares of the Company's common stock
("Shares") at an exercise price equal to the Fair Market Value on
the date of grant. The option will vest monthly in arrears in
equal (116,666) amounts, with such vesting commencing as of the
Effective Date. For purposes of this Section 4(b), "Fair Market
Value" shall mean the average of the high and low sales prices of
the Company's common stock on the Over-the-Counter Bulletin
Board.
5. EXPENSES. The Executive is authorized to incur reasonable expenses on
behalf of the Company in the performance of his duties under this
Agreement on a basis consistent with the Company's policies from time to
time, including expenses for travel, business entertainment and other
business activities. The Executive shall submit all claims for
reimbursement of such expenses directly to the Company and the Company
shall ensure that such expenses are reimbursed to the Executive within a
reasonable time after submission by the Executive of an itemized account
of such expenses, together with such vouchers or receipts for individual
expense items as the Company may reasonably require.
6. SEVERANCE.
a. TERMINATION WITHOUT AGREEMENT OF EXECUTIVE OTHER THAN FOR CAUSE.
If the Company terminates Executive's employment with the Company
without "Cause" (as defined below) , then promptly following such
termination of employment, Executive will be entitled to
immediate 100% vesting of any stock options previously granted to
Executive that would have vested within eighteen - (18) months of
the date Executive is terminated without "Cause" (as defined
below). The term within which Executive must exercise any options
to acquire Company stock received prior to the date hereof shall
be as provided in any applicable stock option agreement and the
Company's stock option plan. If Executive is terminated without
agreement of Executive other than for Cause, Death or Disability,
then the term within which Executive must exercise any vested
options to acquire Company stock received under this Agreement
shall be
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the earlier of three (3) years from the Termination Date and the
expiration of the 10-year term of the Option. If the Executive is
terminated for reason of Death or Disability, then the term
within which Executive must exercise any options to acquire
Company stock shall be as provided in any applicable stock option
agreement and the Company's stock option plan
b. VOLUNTARY TERMINATION FOR GOOD REASON. If Executive voluntarily
terminates his employment with the Company for "Good Reason" (as
defined below) then Executive will be entitled to the same
benefits provided in Section 6(a) above (and subject to the same
terms and conditions provided in Section 6(a)). The term within
which Executive must exercise any options to acquire Company
stock received prior to the date hereof shall be as provided in
any applicable stock option agreement and the Company's stock
option plan. Under this paragraph 6(b), the term within which
Executive must exercise any vested options to acquire Company
stock received under this Agreement shall be the earlier of three
(3) years from the Termination Date and the expiration of the
10-year term of the Option.
c. OTHER VOLUNTARY TERMINATIONS. If Executive's employment is
terminated for any reason other than for Cause, Death or
Disability (including by Executive, for any reason) within twelve
(12) months after a "Change of Control" (as defined below) then
Executive will be entitled to the same payments and benefits
provided in Section 6(a) above (and subject to the same terms and
conditions provided in Section 6(a)); and will be paid a cash
severance payment of $250,000, in twelve monthly installments
beginning on the first day of the month immediately following
termination. The term within which Executive must exercise any
options to acquire Company stock shall be as provided in any
applicable stock option agreement and the Company's stock option
plan.
d. TERMINATION WITHOUT AGREEMENT OF EXECUTIVE FOR CAUSE. If the
Company Terminates Executive's employment with the Company for
Cause then Executive will not be entitled to any other
compensation or benefits from the Company except to the extent
provided under the applicable stock option agreement(s) or as may
be required by law (for example, under Section 4980B of the
Code), and except that promptly following termination of such
employment, Executive will be entitled to an additional two
months vesting of the stock options granted to Executive
hereunder (not to exceed the total number of stock options
granted to Executive hereunder). The term within which Executive
must exercise any options to acquire Company stock shall be as
provided in any applicable stock option agreement and the
Company's stock option plan.
e. DEFINITIONS. For purposes of this Agreement:
"Cause" means a termination of Executive's employment by the
Company due to (i) Executive's failure or refusal to perform his
duties, responsibilities or obligations hereunder after at least
twenty-one (21) days' prior written notice
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regarding any such failure or refusal; (ii) Executive's breach of
any non-competition or confidentiality agreement with the
Company; (iii) the willful misappropriation of funds or property
of the Company; (iv) use of alcohol or drugs which interferes
with performance of Executive's obligations under this Agreement,
continuing after thirty (30) days' prior written notice; (v)
conviction of a felony or of any crime involving moral turpitude,
fraud or misrepresentation; or (vi) the commission by Executive
of any willful or intentional act in disregard of the interests
of the Company which could be reasonably expected to materially
injure the reputation, business or business relationships of the
Company, provided, however, that a good faith mistake in the
normal course of business shall not be considered "Cause" under
this Section 6(e).
"Disabled" means Executive being unable to perform the principal
functions of his duties due to a physical or mental impairment,
but only if such inability has lasted or is reasonably expected
to last for at least six (6) months. Whether Executive is
Disabled shall be determined by the Committee based on evidence
provided by one or more medical experts selected by the
Committee. Executive agrees to be seen by or consult with medical
experts of the Committee's choosing;
"Good Reason" means (i) a material reduction (without Executive's
consent) in his title, authority, status, or responsibilities, or
(ii) a material breach by the Company of its obligations under
this Agreement;
"Change of Control" means a merger, consolidation or other
reorganization in which the Company is not the surviving
corporation, or in which the Company becomes a subsidiary of
another corporation, or the sale, lease or exchange of all or
substantially all of the Company's assets to any other
corporation or entity (except a subsidiary or parent
corporation).
7. INDEMNIFICATION. The Company shall (and is hereby obligated to)
indemnify (including advance payment of expenses, which such expenses
shall include, without limitation, attorneys' fees) the Executive for
all actions taken by Executive as an officer of Company or the failure
of Executive to take any action in each and every situation where the
Company is obligated to make such indemnification pursuant to applicable
law and the relevant portions of the Company's Articles of Incorporation
and Bylaws. During the Employment Term, the Company, at its sole
expense, shall maintain in effect director and officer liability
insurance containing a liability coverage endorsement covering the
Company's indemnification duty. Upon request, the Company shall furnish
to the Executive a certificate of such insurance that shall bear an
endorsement that the same shall not be canceled, non-renewed or
materially reduced in coverage or limits by the Company, without thirty
(30) days prior written notice to the Executive.
8. ASSIGNMENT. This Agreement will be binding upon and inure to the benefit
of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such
successor of the Company will be deemed substituted for the Company
under the terms of this Agreement for all purposes. For this purpose,
"successor" means any person, firm, corporation or other business entity
which
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at any time, whether by purchase, merger or otherwise, directly or
indirectly acquires all or substantially all of the assets or business
of the Company. None of the rights of Executive to receive any form of
compensation payable pursuant to this Agreement may be assigned or
transferred except by will or the laws of descent and distribution. Any
other attempted assignment, transfer, conveyance or other disposition of
Executive's right to compensation or other benefits will be null and
void.
9. NOTICES. All notices, requests, demands and other communications called
for hereunder shall be in writing and shall be deemed given (i) on the
date of delivery if delivered personally, (ii) one (1) day after being
sent by a well established commercial overnight service, or (iii) four
(4) days after being mailed by registered or certified mail, return
receipt requested, prepaid and addressed to the parties or their
successors at the following addresses, or at such other addresses as the
parties may later designate in writing:
If to the Company:
N2H2, Inc
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
ATTN: Xxxxx Xxxxxxxxx, Chairman of the Board
If to Executive:
at the last residential address known by the Company.
10. SEVERABILITY AND MODIFICATION OF ANY UNENFORCEABLE COVENANT. It is the
parties' intent that each of the covenants be read and interpreted with
every reasonable inference given to its enforceability. However, it is
also the parties' intent that if any term, provision or condition of the
covenants is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the provisions thereof shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated. Finally, it is also the parties' intent that if
a court should determine any of the covenants are unenforceable because
of over breadth, then the court shall modify said covenant so as to make
it reasonable and enforceable under the prevailing circumstances.
11. NON-COMPETITION AND NON-SOLICITATION. For a period beginning on the
Effective Date (defined below) and ending twelve (12) months from the
date when Executive ceases to be employed by the Company for any reason
whatsoever, Executive, directly or indirectly, whether as employee,
owner, sole proprietor, partner, director, member, consultant, agent,
founder, co-venturer or otherwise, will:
a. Not engage, participate or invest in any business activity
anywhere in the world which develops, manufactures or markets
products or performs services which are competitive with the
products or services of the Company at the time of Executive's
termination, or products or services which the Company has under
development or which are the subject of active planning at the
time of Executive's
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termination; PROVIDED, HOWEVER, that Executive, may own as a
passive investor, securities of any corporation which competes
with the business of the Company so long as such securities do
not, in the aggregate, constitute more than 2% of any class of
outstanding securities of such corporations;
b. Not attempt to employ, recruit or otherwise solicit, induce or
influence any person to leave employment with the Company or its
resellers or distributors; and
c. Not directly or indirectly solicit business from any of the
Company's customers and users on behalf of any business that
competes with the Company.
Notwithstanding the foregoing, this Section 11 shall not apply if this Agreement
is breached by the Company.
12. NON-DISPARAGEMENT. Executive and the Company mutually covenant and agree
that, during the Employment Term and for a period of twelve (12) months
after the date of termination of Executive's employment with the
Company, neither shall, directly or indirectly, disparage the other.
13. ENTIRE AGREEMENT. This Agreement represents the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, and supersedes and replaces
any and all prior agreements and understandings concerning Executive's
employment relationship with the Company.
14. ARBITRATION. In the event of any dispute arising out of or relating to
this Agreement, the parties undertake to make every effort to reach an
amicable settlement of their differences (including mediation if
requested by a party). Failing such settlement, the dispute shall be
referred to final and binding arbitration. It is understood and agreed
between the parties hereto that any claim of any nature whatsoever
arising out of or connected with Executive's employment with the
Company, including but not limited to wrongful termination, breach of
contract, defamation, and claims of discrimination (including age,
disability, sex, religion, race, national origin, color, etc.) or
harassment, whether under federal, state or local laws, common law or in
equity, shall be decided by submission to final and binding arbitration.
The arbitrator shall be a retired or former superior court or appellate
court judge. This arbitration provision shall be governed by the Federal
Arbitration Act. Any arbitration hereunder shall be conducted in
Seattle, Washington in accordance with the Employment Arbitration Rules
of the American Arbitration Association. Judgment shall be final upon
the award rendered by the arbitrator and may be entered in any court
having jurisdiction thereof. It is further understood and agreed between
the parties hereto that actions seeking temporary injunctions are hereby
excluded from arbitration and, therefore, may be sought in a court of
appropriate jurisdiction without resort to arbitration, even though
resolution of the underlying claim must be submitted to arbitration.
Provided: This Section shall not govern any matter arising out of
Executive's violation of the covenants contained in Section 11 of this
Agreement, in which event the Company shall be entitled to seek
injunctive or other equitable relief in any state or federal court
located in King County, Washington, and the parties agree to submit to
the jurisdiction of such court.
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15. ATTORNEYS FEES. In the event of any dispute arising out of or involving
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees, experts' fees, and costs, including those
for pretrial, trial, on appeal, in arbitration and in bankruptcy and all
other costs and expenses associated with any such action in addition to
any other relief to which such party may be entitled.
16. NO ORAL MODIFICATION, CANCELLATION OR DISCHARGE. This Agreement may be
changed or terminated only in writing (signed by Executive and the
Company).
17. WITHHOLDING. The Company is authorized to withhold, or cause to be
withheld, from any payment or benefit under this Agreement the full
amount of any applicable withholding taxes.
18. GOVERNING LAW. This Agreement will be governed by the laws of the State
of Washington (with the exception of its conflict of laws provisions).
19. EFFECTIVE DATE. This Agreement is effective as of May 18, 2002.
20. ACKNOWLEDGMENT. Executive acknowledges that he has had the opportunity
to discuss this matter with and obtain advice from his private attorney,
has had sufficient time to, and has carefully read and fully understands
all the provisions of this Agreement, and is knowingly and voluntarily
entering into this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below:
EXECUTIVE
/s/ Xxxxxx X. Xxxx DATE: 8/13/02
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Xxxxxx Xxxxxx Xxxx
X0X0, INC.
BY: /s/ J. Xxxx Xxxxx DATE: 8/13/02
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Name: J. Xxxx Xxxxx
Title: Chief Financial Officer
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