EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of September 24,
1999, between XXXXXXXX.XXX, INC., a Delaware corporation with offices at 000
Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and Xxxx X.
Xxxx, residing at 0000 Xxxxxx Xxxxx Xxxxxxx, Xxx. 0X, Xxxxx Xxx Xxxx 00000
("Employee").
WHEREAS, the Company desires to engage Employee to perform services for
the Company, and any present or future parent, subsidiary, or affiliate of the
Company, and (subject to Section 11) any successor or assign of the Company (the
"Companies"), and Employee desires to perform such services, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. Term
The Company shall employ Employee, and Employee shall perform duties
and provide services, on the terms and conditions of this Agreement, for a
period commencing October 11, 1999 (the "Commencement Date") and ending twelve
months from the Commencement Date (the "Initial Period") or such shorter period
as may be provided for herein. Thereafter, such period shall extend for
consecutive forty-five (45) day periods, unless either party shall provide
notice of non-renewal to the other party not less than thirty (30) days prior to
the expiration of the Initial Period or any such forty-five (45) day period, as
the case may be. The period during which Employee is employed hereunder is
hereinafter referred to as the "Employment Period."
SECTION 2. Duties and Services
During the Employment Period, Employee shall serve as General Counsel
of the Company. Employee shall also be available to serve as the Secretary or an
Assistant Secretary of any of the Companies. In performance of his duties
contemplated in this Agreement, Employee shall be subject to the direction of
the President or the Chief Executive Officer of the Company. Employee agrees to
his employment as described in this Section 2, not to engage in any business
activities other those of the Companies, to devote all of his business time and
efforts to the performance of his duties under this Agreement, to perform in a
diligent, professional and competent manner and to comply with the Company's
policies in effect from time to time. The preceding sentence shall not preclude
Employee from (i) engaging in charitable activities and community affairs, (ii)
managing his personal investments and affairs and (iii) serving on the boards of
a reasonable number of charitable organizations, provided that such activities
set forth in this sentence do not interfere with the proper performance of his
duties and responsibilities under this Section 2. Employee shall be based at the
Company's headquarters, which shall be in New York City or within 25 miles
thereof, and shall be available to travel as the needs of
Company require. Prior to the Commencement Date, Employee shall execute the
Company's proprietary information agreement in substantially the form provided
to Employee.
SECTION 3. Compensation
(a) Base Salary. The Company shall pay Employee, during the Employment
Period, an annual base salary of $116,327 (as it may be increased from time to
time pursuant to this Section 3(a), the "Base Salary"), payable in equal,
bi-monthly installments, or in accordance with the Company's policy for the
payment of salaries to employees. The Base Salary will be reviewed not less
frequently than once per year and may be increased at the sole discretion of the
Board of Directors of the Company; provided, however, that in no event shall the
Base Salary be decreased.
(b) Options. On the Commencement Date, the Company shall award to
Employee, subject to the terms and provisions of either (at the Company's sole
discretion) the Xxxxxxxx.xxx, Inc. 1999 Stock Option Plan or the Xxxxxxxx.xxx,
Inc 1997 Stock Option Plan (the "Option Plan") and one or more option agreements
(the "Option Agreements") pursuant thereto, options (the "Options") to purchase
up to:
(i) 35,000 shares of common stock, $.0001 par value per
share, of the Company ("Common Stock"), for a
purchase price equal to $5.00 per share, vesting on a
monthly basis for a period of 42 months with the
first monthly vesting date beginning on the 3-month
anniversary of the Commencement Date, in 41
installments of 833 shares and a final installment of
847 shares; and
(ii) 15,000 shares of Common Stock on the following terms:
(A) vesting on a monthly basis for a period of
42 months, with the first monthly vesting
date being the earlier of October 31, 2000
and the closing of a Qualified IPO (as such
term is defined in the Certificate of
Designation of the Company's Series A
Convertible Preferred Stock), in 41
installments of 357 shares and a final
installment of 363 shares; and
(B) a purchase price equal to $25.00 per share
if the Qualified IPO does not close prior to
October 31, 2000, or the price per share of
Common Stock sold in the Qualified IPO if
the Qualified IPO closes prior to October
31, 2000.
The Option Agreements shall each provide that the vesting of the Options shall
accelerate upon the earlier of (x) a Change in Control (as defined in Section 11
below) to the 6-month anniversary date of the consummation of a Change in
Control or (y) termination of the Employee's employment by the Company following
a Change in Control other than for Cause (as defined in Section 10(a) below) or
by the Employee for Good Reason (as defined in Section 10(c) below) to the
effective date of such termination. The Option Agreements shall also provide
that, in the event the Company terminates the Employee's employment during the
Employment
2
Period other than for Cause or the Employee terminates his employment for Good
Reason, the vesting of those Options that would have vested through the
expiration of the Employment Period had such termination not occurred will
accelerate to the effective date of such termination; provided, that, this
sentence shall only apply to the Options set forth in Section 3(b)(ii) above if
a Change in Control or Qualified IPO shall have occurred prior to such effective
date.
(c) Signing Bonus. The Company shall pay Employee a signing bonus of
$25,000 payable within thirty (30) days following the Commencement Date. If at
any time during the Initial Period, the Employee shall terminate his employment
other than for Good Reason or the Company shall terminate Employee's employment
for Cause, Employee shall disgorge to the Company a pro rata amount of such
bonus based on a 12-month period.
(d) IPO/Change in Control Bonus.
The Company shall pay Employee a $50,000 cash bonus within fifteen (15)
days of the earlier of (x) the date of the closing of a Qualified IPO and (y)
the date of consummation of a Change in Control. The Company shall pay the
Employee a $25,000 cash bonus on the earlier of (x) the one-year anniversary
date of the closing of the Qualified IPO or (y) the 6-month anniversary date of
the consummation of the Change in Control. The $50,000 cash bonus and the
$25,000 cash bonus are hereinafter referred to as the "IPO/COC Bonuses." If a
Qualified IPO or execution of a definitive agreement which contemplates a Change
in Control shall occur during the Employee's employment with the Company, and
the Employee (i) is terminated by the Company for a reason other than for Cause,
(ii) terminates for Good Reason, or (iii) the Company determines not to extend
the Employment Period as provided in Section 1, then the Company shall pay the
IPO/COC Bonuses at the following times: in the case of a Qualified IPO, on the
effective date of the termination or non-renewal, and in the case of the
execution of a definitive agreement which contemplates a Change in Control, on
the date of the consummation of such Change in Control.
(e) Employee Benefits. Employee shall be entitled to participate in all
benefits for which Employee qualifies that the Company may make available to
executive or administrative employees, on like terms, including all medical,
disability, hospital, health and life insurance plans and arrangements. For the
3-month period during which Employee is not eligible to participate in the
Company's current medical insurance program, the Company shall pay to Employee
an amount equal to the amount of the Company's share of the insurance premium
that the Company would have paid during such period.
(f) Termination Payment upon Termination by the Company other than for
Cause or by Employee with Good Reason. If the Company gives notice of
termination of Employee's employment for a reason other than those described in
Section 10(a) below or if Employee terminates the Employment Period for Good
Reason, then the Company shall pay Employee the Base Salary earned up to the
effective date of such termination (the "Termination Date"), plus an amount (a
"Termination Payment") equal to the Base Salary that would have been earned
pursuant to Section 3 during the period from the Termination Date to the then
scheduled expiration of the Employment Period.
3
The Company may elect to make the Termination Payment (but not the IPO/COC
Bonuses) in regular and equal installments, or in a single payment equal to the
present value thereof determined using an interest rate equal to 110% of the
Short-Term Applicable Federal Rate for the month such termination is effective.
Employee shall not be required to mitigate damages resulting from his
termination of employment and the amounts payable to Employee pursuant to this
Section 3(f) shall not be offset or reduced by any other compensation earned by
Employee. Unless otherwise stated in the Option Plan, all options to purchase
Common Stock, including the Options, vested at the time of termination shall
remain outstanding unless Employee is terminated for Cause.
(g) Vacation. Employee shall be entitled to vacation and sick days in
accordance with the Company's policies for senior executive staff from time to
time.
SECTION 4. Expenses
The Company shall reimburse Employee for all reasonable travel and
other out-of-pocket expenses necessarily incurred in carrying out his duties
hereunder, upon submission and approval of written statements and bills in
accordance with the then regular procedures of the Company.
SECTION 5. Representations and Warranties
(a) Representations and Warranties of Employee. Employee represents and
warrants to the Company that (a) Employee is not under any contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder and (b) Employee has no knowledge of any physical or mental
disability that would hinder his performance of duties under this Agreement.
(b) Representations and Warranties of the Company. The Company has full
power and legal right to execute and deliver this Agreement and to perform its
obligations hereunder. The Company has taken all action necessary for the
authorization, execution, delivery, and performance of this Agreement and its
obligations hereunder, and, upon execution and delivery by Employee, this
Agreement shall constitute the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The Company has
authorized the issuance and delivery of the Options in accordance with this
Agreement. The Company is not under any contractual or other restriction or
obligation which is inconsistent with the execution of this Agreement, the
performance of its obligations hereunder, or the other rights of Employee
hereunder or pursuant to which the Company is required to give any notice or
obtain any consent, approval or action prior to the execution of this Agreement
or the performance of its obligations hereunder.
SECTION 6. Non-Solicitation
In view of the unique and valuable services it is expected Employee
will render to the Companies, Employee's knowledge of the customers, trade
secrets, and other proprietary
4
information relating to the business of the Company and its customers and
suppliers and similar knowledge regarding the Companies it is expected Employee
will obtain, and in consideration of the compensation to be received hereunder,
Employee agrees:
(i) that he will not during the Employment Period directly or
indirectly reveal the name of, solicit or interfere with, or
endeavor to entice away from any of the Companies any of its
suppliers, customers, contractors, consultants, or employees;
and
(ii) for a period of twelve months after he ceases to be employed
by any of the Companies under this Agreement or otherwise that
neither he nor any of his affiliates will:
(A) intentionally solicit, or induce any employee,
contractor, consultant of any of the Companies to
terminate his or his employment therewith or
hire/contract any person who within twelve (12)
months preceding such hiring had been employed
thereby; provided, however, that this subsection (A)
shall not prohibit such action with respect to any
person whose employment is terminated or suspended by
any of the Companies; and
(B) in any manner, other than fair competition,
intentionally (1) cause or attempt to cause any
customer, supplier or other independent contractor of
any of the Companies to reduce the level of business
theretofore conducted by such customer, supplier or
other independent contractor, or to cease doing
business, with any of the Companies, or (2)
discourage or attempt to discourage any prospective
customer, supplier or other independent contractor
from doing business with any of the Companies.
5
SECTION 7. Patents, Etc.
Any interest in patents, patent applications, inventions, technological
innovations, copyrights, copyrightable works, developments, discoveries,
designs, and processes ("Such Inventions") which Employee now or hereafter
during the Employment Period and for six (6) months thereafter may own, conceive
of, or develop and either relating to the fields in which any of the Companies
may then be engaged or contemplates being engaged or conceived of or developed
utilizing the time, material, facilities, or information of any of the
Companies, shall belong to the Company; as soon as Employee owns, conceives of,
or develops any Such Invention, he shall immediately communicate such fact in
writing to the Company, and without further compensation, but at the Company's
expense (except as noted in clause (a) of this Section 7 below), forthwith upon
request of the Company, Employee shall execute all such assignments and other
documents (including applications for patents, copyrights, trademarks, and
assignments thereof) and take all such other action as the Company may
reasonably request in order (a) to vest in the Company all Employee's right,
title, and interest in and to Such Inventions, free and clear of liens,
mortgages, security interests, pledges, charges, and encumbrances ("Liens")
(Employee to take such action, at his expense, as is necessary to remove all
such Liens) and (b), if patentable or copyrightable, to obtain patents or
copyrights (including extensions and renewals) therefor in any and all countries
in such name as the Company shall determine.
SECTION 8. Confidential Information
All confidential information (including, without limitation, trade
secrets, know how, proprietary information, price lists, marketing plans and
customer lists), which Employee may now possess, may obtain during the
Employment Period, or may create prior to the end of the Employment Period
relating to the business of the Companies or of any customer or supplier of the
Companies shall not be published, disclosed, or made accessible by Employee to
any other person, firm, or corporation either during or after the termination of
this Agreement or used by it except during the Employment Period in the business
and for the benefit of the Companies in each case without prior written
permission of the Company. Employee shall return all tangible evidence of such
confidential information to the Company prior to or at the termination of the
Employment Period.
SECTION 9. Life Insurance
If requested by the Company, Employee shall submit to such physical
examinations and otherwise take such actions and execute and deliver such
documents as may be reasonably necessary to enable the Company, at its expense
and for its own benefit, to obtain life insurance on the life of Employee.
Employee has no reason to believe that his life is not insurable with a
reputable insurance company at rates now prevailing for healthy men of his age.
6
SECTION 10. Termination
(a) Notwithstanding anything herein contained, if on or after the date
hereof and prior to the end of the Employment Period,
(1) either (i) Employee shall be physically or mentally
incapacitated or disabled or otherwise unable fully to discharge his duties
hereunder for a period of three consecutive months, (ii) Employee shall be
convicted of a crime, (iii) Employee breaches a fiduciary duty, (iv) Employee
breaches a material term of this Agreement or a material policy of the Company
(v) Employee shall continually fail or refuse to perform any duties reasonably
required in the course of his employment, (vi) Employee shall refuse to take or
fail to satisfactorily to complete any screening test for illegal drugs and
controlled substances that may be administered, (vii) Employee commits a
dishonest act or common law fraud against the Company or any customer thereof,
or (viii) Employee engages in misconduct in bad faith which is materially
injurious to the Company (the events specified in clauses (ii) through (viii),
"Cause") then, and in each such case, the Company shall have the right to give
notice of termination of Employee's employment as of a date (not earlier than
ten (10) days from such notice) to be specified in such notice, and Employee's
employment hereunder shall terminate on the date so specified; provided,
however, that, in the case of an event specified in clause (iv), or (v), the
Company shall provide Employee with notice of such breach and a reasonable
opportunity to cure such breach under the circumstances (but not more than
thirty (30) days), and Employee's employment hereunder shall terminate on the
date so specified if Employee has not cured such breach to the reasonable
satisfaction of the Company within the period specified.
(2) Employee shall die, then Employee's employment hereunder
shall terminate on the date of Employee's death. Unless otherwise stated in the
Option Plan, all Options vested at the time of termination due to Employee's
death shall remain outstanding.
Upon termination of Employee's employment under this Section 10(a), Employee
shall be entitled to receive the Base Salary to the date on which termination
shall take effect. If the Company shall terminate the Employee for Cause, any
vested but unexercised Options granted under the Option Plan shall be cancelled
and of no force and effect. Notwithstanding any other provision of this
Agreement, upon a termination under Section 10(a)(1)(i), unless otherwise stated
in the Option Plan, all Options (and, if applicable other options to purchase
Common Stock granted to Employee) vested at the time of such termination shall
remain outstanding and exercisable.
(b) Nothing contained in this Section 10 shall be deemed to limit any
other right the Company may have to terminate Employee's employment hereunder
upon any ground permitted by law, by giving forty-five (45) days notice of
termination. Upon termination of Employee's employment under this Section 10(b),
Employee shall be entitled to receive all benefits and payments as specifically
provided for pursuant to Section 3 of this Agreement.
(c) Notwithstanding anything herein, Employee shall have the right to
terminate his employment for Good Reason (as defined below) on giving ten (10)
days notice to the
7
Company. Upon termination of Employee's employment under this Section 10(c),
Employee shall be entitled to receive all benefits and payments as specifically
provided for pursuant to Section 3 of this Agreement. For purposes of this
Agreement, "Good Reason" shall mean:
(1) any action by the Company which results in a material and
continuing diminution in the position, authority, duties or responsibilities, or
the assignment to Employee of duties on a regular or continuing basis which are
materially inconsistent with his duties described in Section 2,excluding for
this purpose one or several isolated and insubstantial actions not taken in bad
faith and which are remedied by the Company promptly after receipt of notice
thereof given by the Employee or which are consistent with duties or
responsibilities of senior executives of the Company;
(2) any material failure by the Company to comply with any of
the provisions of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company after receipt of notice thereof given by the Employee; or
(3) the Company's requiring Employee to be based at any office
or location other than as provided in Section 2 hereof.
(d) Notwithstanding anything herein, Employee shall have the right to
terminate his employment without Good Reason on giving forty-five (45) days
notice to the Company. Upon such notice, Employee shall be entitled to receive
the Base Salary to the date on which such termination shall take effect provided
that he shall continue to perform his duties hereunder to such date. Following
receipt of such notice, the Company may terminate the Employee's employment
effective immediately in which case the Employee shall be entitled to receive
the Base Salary to the date on which such termination shall take effect, shall
not be entitled to any further bonus payments and shall not vest in any Options
after such date.
(e) Upon termination of employment for any reason, Employee shall be
entitled to continued coverage under the Company's health, disability and
medical benefits for the period provided under applicable law (but only to the
extent Employee takes whatever actions are required of him under applicable law
to secure such continued coverage).
SECTION 11. Change in Control
In the event of a Change of Control as defined below, then the Company
may elect:
(1) to assign this Agreement and all of its rights and
obligations hereunder to the acquiring or surviving corporation; provided that
such corporation shall assume in writing all of the obligations of the Company
hereunder; and provided further that the Company (in the event and so long as it
remains in business as an independent going enterprise) shall remain liable for
the performance of its obligations hereunder in the event of a failure of the
acquiring or surviving corporation to perform its obligations under this
Agreement; or
8
(2) in addition to its other rights of termination, to
terminate this Agreement upon at least ten (10) days' notice following the
consummation of such Change in Control, whereupon Employee shall be entitled to
receive all benefits and payments as specifically provided for pursuant to
Section 3 of this Agreement.
For purposes of this Agreement, "Change in Control" shall mean (i) the sale of
all or substantially all of the assets of the Corporation or the merger or
consolidation of the Corporation with or into any other corporation or entity in
which the holders of the Corporation's outstanding Common Stock immediately
prior to the merger or consolidation do not retain a majority of the voting
power of the corporation or entity surviving the merger of consolidation or (ii)
the acquisition by any person of shares of Common Stock representing a majority
of the issued and outstanding shares of Common Stock then outstanding.
SECTION 12. Survival
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall survive the Employment Period,
irrespective of any investigation made by or on behalf of any party.
SECTION 13. Modification
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof, supersedes all existing agreements between
them concerning such subject matter, and may be modified only by a written
instrument duly executed by each party.
SECTION 14. Notices
Any notices or other communication required or permitted by this
Agreement shall be in writing and shall be sufficiently given if delivered in
person, by air courier or by facsimile transmission, at the address set forth in
the preamble to this Agreement (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 14). Any
such notice or communication shall be deemed given (a) if by air courier, when
recorded on the records of the air courier as received by the receiving party;
(b) if sent by facsimile transmission, upon transmission, if on a business day
and during business hours in the country of receipt; otherwise, notice shall be
deemed given at 9:00 A.M. on the next business day in the country of receipt and
(c) if delivered in person, on the date of delivery.
SECTION 15. Waiver
Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
9
SECTION 16. Binding Effect
Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Employee and his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees, and shall be binding upon and inure to the benefit of the Company and
its successors and those who are its assigns under Section 11. If Employee
should die while any amount would still be payable to Employee hereunder if he
had continued to live, all such amounts shall be paid in accordance with the
terms of this Agreement to Employee's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Employee's estate.
SECTION 17. No Third Party Beneficiaries
Except as provided in Section 16, this Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement.
SECTION 18. Headings
The headings in this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
SECTION 19. Counterparts; Governing Law
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
any conflict of laws rule which would have the substantive law of any other
jurisdiction apply to the subject matter hereof.
SECTION 20. Specific Performance
Since a breach of the provisions of Sections 6, 7 and 8 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and remedy available to it, to an injunction
restraining such breach or a threatened breach, and in either case no bond or
other security shall be required in connection therewith, and Employee hereby
consents to the issuance of such injunction. Employee agrees that the provisions
of Sections 6, 7 and 8 are necessary and reasonable to protect the Company in
the conduct of its business. If any restriction contained in Sections 6, 7 and 8
shall be deemed to be invalid, illegal, or unenforceable by reason of the
extent, duration, or geographical scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced form such
restriction shall then be enforceable in the manner contemplated hereby.
SECTION 21. Severability
If any provision of this Agreement (including any provision relating to
the scope or term of or geographic areas covered by Sections 6, 7 or 8) or the
application thereof to any
10
person or circumstance is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby;
provided that, if any provision hereof or the application thereof shall be so
held to be invalid, void or unenforceable by a final judgment of a court of
competent jurisdiction, then such court may substitute therefor a suitable and
equitable provision in order to carry out, so far as may be valid and
enforceable, the intent and purpose of the invalid, void or unenforceable
provision and if such court shall fail or decline to do so, the parties shall
negotiate in good faith a suitable and equitable substitute provision. To the
extent that any provision shall be judicially unenforceable in any one or more
jurisdictions, such provision shall not be affected with respect to any other
jurisdiction, each provision with respect to each state being construed as
several and independent.
SECTION 22. Waiver of Jury Trial
Each of the Company and Employee hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or any
other basis document or the transactions contemplated hereby or thereby.
11
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name:
Title:
/s/ Xxxx X. Xxxx
-------------------------------
Xxxx X. Xxxx
12
