Exhibit 10.25
XXXXXX COMMUNICATIONS, INC.
XXXX XXXXXXX EMPLOYMENT AGREEMENT
This Agreement is made by and between Xxxxxx Communications, Inc. (the
"Company"), and Xxxx Xxxxxxx ("Executive") as of September 17, 2001.
1) Duties and Scope of Employment.
------------------------------
a) Positions; Employment Commencement Date; Duties. Executive's
-----------------------------------------------
employment with the Company pursuant to this Agreement shall
commence immediately (the "Employment Commencement Date"). As
of the Employment Commencement Date, the Company shall employ
the Executive as the President and Chief Executive Officer of
the Company reporting to the Board of Directors of the Company
(the "Board"). The period of Executive's employment hereunder
is referred to herein as the "Employment Term." During the
Employment Term, Executive shall 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 Board.
b) Board Position and Duties. Upon the Employment Commencement
-------------------------
Date, Executive shall be appointed to the Board.
c) Obligations. During the Employment Term, Executive shall
-----------
devote his full business efforts and time to the Company.
Executive agrees, during the Employment Term, 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; provided, however, that Executive
may serve in any capacity with any civic, educational or
charitable organization, or as a member of corporate Boards of
Directors or committees thereof upon which Executive currently
serves (a list of which is attached hereto as Appendix A) or
which are approved by the Board in the future.
2) Employee Benefits. During the Employment Term, Executive shall be
-----------------
eligible to participate in the employee and fringe benefit plans
maintained by the Company that are applicable to other senior
management to the full extent provided for under those plans.
3) Relocation Expense Reimbursements. In connection with Executive's
---------------------------------
relocation, the Company will reimburse Executive for the following
reasonable costs:
a) Transaction costs associated with buying Executive's new
residence (closing costs, inspections, title insurance,
brokerage commissions and related fees, etc.).
b) Transaction costs associated with selling Executive's old
residence (closing costs, inspections, title insurance,
brokerage commissions and related fees, etc.).
c) Costs associated with moving household furnishings and
personal effects (including
packing and unpacking of household goods).
d) Costs associated with three house-hunting trips to the Santa
Barbara, California area, including airfare, hotel
accommodation and related costs for the family.
e) Temporary living expenses and an automobile lease for up to
nine months after the Employment Commencement Date.
f) Other miscellaneous costs associated with Executive's move to
the Santa Barbara, California area, in an aggregate amount not
exceeding $25,000.
Executive will be fully grossed-up by the Company for any
imputed income required to be recognized with respect to these
reimbursements so that the economic effect to Executive, after
taking into account any tax deductions available to Executive,
is the same as if these reimbursements were provided to
Executive on a non-taxable basis.
4) At-Will Employment. Executive and the Company understand and
------------------
acknowledge that Executive's employment with the Company constitutes
"at-will" employment. Subject to the Company's obligation to provide
severance benefits as specified herein, Executive and the Company
acknowledge that this employment relationship may be terminated at any
time, upon 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.
5) Compensation.
------------
a) Base Salary. While employed by the Company, the Company shall
-----------
pay the Executive as compensation for his services a base
salary at the annualized rate of four hundred and seventy-five
thousand dollars ($475,000) (the "Base Salary"). Such Base
Salary shall be paid periodically in accordance with normal
Company payroll practices and subject to the usual, required
withholding. Executive's Base Salary shall be reviewed
annually, beginning at the end of 2002, by the Compensation
Committee of the Board for possible adjustment in light of
Executive's performance and competitive data.
b) Bonuses. Executive shall be eligible to earn the following
-------
bonus:
i) 2001 Bonus. Executive shall be eligible to receive a
----------
bonus for 2001 equal to four hundred thousand dollars
($400,000) multiplied by the pro-rata percentage of
calendar year 2001 that Executive's employment with
the Company represents (the "2001 Bonus"). The
Executive shall be guaranteed the payment of the 2001
Bonus.
ii) 2002 Bonus. Executive shall be eligible to earn a
----------
bonus for 2002, paid annually based on the following
amounts, if applicable:
(1) in the event that the Company's fiscal year
2002 revenue, earnings per share and balance
sheet metric reach 90% of the annual plan
target levels, as developed by the
Board working with the Executive, then
Executive shall be eligible to earn a bonus
of not less than two hundred thousand
dollars ($200,000);
(2) in the event that the Company's fiscal year
2002 revenue, earnings per share and balance
sheet metric reach 110% of the annual plan
target levels, as developed by the Board
working with the Executive, then Executive
shall be eligible to earn a bonus of not
less than an additional three hundred
thousand dollars ($300,000); and
(3) in the event that the Company's fiscal year
2002 revenue, earnings per share and balance
sheet metric reach 125% of the annual plan
target levels, as developed by the Board
working with the Executive, then Executive
shall be eligible to earn a bonus of not
less than an additional four hundred
thousand dollars ($400,000).
Notwithstanding the foregoing, the Company's
obligation to make any bonus payment,
whether during the first or any subsequent
annual period, shall be dependent upon
Executive's employment with the Company
through the end of such year. Executive will
be eligible to receive annual bonuses based
upon a similar structure in future years
under arrangements to be approved by the
Compensation Committee of the Board.
c) Loan. The Company shall grant to Executive an interest-free
----
loan for a reasonable amount of money, with such amount to be
established upon mutual determination between Executive and
the Board at a time after the Employment Commencement Date,
for Executive's purchase of a primary residence in the Santa
Barbara, California area. The loan shall be fully-recourse and
additionally secured by the primary residence. The loan will
be forgiven over a period of eight (8) years, and shall be
governed by a Promissory Note given at a later date by
Executive to the Company.
d) Equity Compensation.
-------------------
i) Initial Stock Option. As of the Employment
--------------------
Commencement Date, Executive shall be granted a stock
option (the "Stock Option") to purchase a total of
one million nine hundred twenty-three thousand
(1,923,000) shares of Company common stock with a per
share exercise price equal to the fair market value
of the Company's common stock on the date of grant.
The Stock Option shall be for a term of ten (10)
years (or shorter upon termination of employment
relationship with the Company) and, subject to
accelerated vesting as set forth elsewhere herein,
shall vest as follows: twenty-five percent (25%) of
the shares subject to the Stock Option shall vest
twelve (12) months after the Employment Commencement
Date and one forty-eighth (1/48th) of the shares
subject to the Option shall vest each month
thereafter at the end of the month, so as to be one
hundred percent (100%) vested on the four (4) year
anniversary of the Employment Commencement Date,
conditioned upon Executive's continued employment
with the Company as of each vesting date. Except as
specified otherwise herein, the Stock Option is in
all respects subject to the terms, definitions and
provisions of the Company's standard form of stock
option agreement (the "Option Agreement"), which
document is incorporated herein by reference and
attached as
Exhibit A. Executive's equity compensation level
shall be reviewed annually, beginning at the end of
2002, by the Compensation Committee of the Board for
possible adjustment in light of Executive's
performance and competitive data.
ii) Performance Based Stock Option. As of the Employment
------------------------------
Commencement Date, Executive shall be granted an
additional stock option (the "Performance-Based Stock
Option") to purchase a total of eight hundred
twenty-four thousand (824,000) shares of Company
common stock with a per share exercise price equal to
the fair market value of the Company's common stock
on the date of grant. The Performance-Based Stock
Option shall be for a term of six (6) years (or
shorter upon termination of employment relationship
with the Company) and, subject to accelerated vesting
provisions based on strategic, business and financial
objectives as set forth in the Option Agreement
governing the Performance-Based Stock Option, shall
vest 100% on the date that is seven (7) days
immediately prior to the six (6) year anniversary of
the Employment Commencement Date, conditioned upon
Executive's continued employment with the Company as
of each vesting date. Except as specified otherwise
herein, the Performance-Based Stock Option is in all
respects subject to the terms, definitions and
provisions of the Company's Option Agreement, which
document is incorporated herein by reference and
attached as Exhibit B.
e) Severance.
---------
(i) Involuntary Termination Other Than for Cause;
---------------------------------------------
Constructive Termination Prior to Change of Control.
----------------------------------------------------
If, prior to a Change of Control, Executive's
employment with the Company is Constructively
Terminated or involuntarily terminated by the Company
other than for (x) Cause, (y) Executive's death, or
(z) Executive's Disability, then, subject to
Executive executing and not revoking a standard form
of mutual release of claims with the Company, (A)
Executive's Stock Option (and any other stock option,
not to include the Performance-Based Stock Option,
granted to Executive following the Employment
Commencement Date) shall have its vesting accelerated
to receive an additional twelve (12) months of
vesting, provided, that, if such employment
termination takes place within twelve (12) months
from the Employment Commencement Date, then
Executive's Stock Option shall have its vesting
accelerated such that 50% of the shares underlying
such Stock Option shall vest; (B) Executive shall
receive continued payments of one year's Base Salary
plus the pro rata portion of the bonus earned by
Executive in the time employed during such year, less
applicable withholding, in accordance with the
Company's standard payroll practices; (C) the Company
shall pay the group health, dental and vision plan
continuation coverage premiums for Executive and his
covered dependents under Title X of the Consolidated
Budget Reconciliation Act of 1985, as amended
("COBRA"), through the lesser of (x) twelve (12)
months from the date of Executive's termination of
employment, or (y) the date upon which Executive and
his covered dependents are covered by similar plans
of Executive's new employer; and (D) the Company
shall provide Executive with all other Company
welfare plan and fringe benefits in which Executive
participated prior to his termination through the
lesser of (x) twelve (12) months from the date of
Executive's termination of employment, or (y) the
date upon which Executive and his covered
dependents are covered by similar plans of
Executive's new employer, and if Executive is
ineligible to participate in one or more of such
benefit plans or programs of the Company, the Company
shall provide Executive with such benefits on an
equivalent basis, including a Tax Gross-Up to the
extent such benefits constitute taxable income to the
Executive but were provided to Executive on a
non-taxable basis while Executive was employed by the
Company.
(ii) Involuntary Termination Other Than for Cause;
---------------------------------------------
Constructive Termination On or Following Change of
--------------------------------------------------
Control. If, on or within the twelve (12) month
--------
period immediately following a Change of Control,
Executive's employment with the Company is
Constructively Terminated or involuntarily terminated
by the Company other than for (x) Cause, (y)
Executive's death, or (z) Executive's Disability,
then, subject to Executive executing and not revoking
a standard form of mutual release of claims with the
Company, (A) Executive's Stock Option shall have its
vesting accelerated such that 100% of the shares
underlying such Stock Option shall vest; (B)
Executive shall receive continued payments of one
year's Base Salary plus the pro rata portion of the
bonus earned by Executive in the time employed during
such year, less applicable withholding, in accordance
with the Company's standard payroll practices; (C)
the Company shall pay the group health, dental and
vision plan continuation coverage premiums for
Executive and his covered dependents under COBRA
through the lesser of (x) twelve (12) months from the
date of Executive's termination of employment, or (y)
the date upon which Executive and his covered
dependents are covered by similar plans of
Executive's new employer; and (D) the Company shall
provide Executive with all other Company welfare plan
and fringe benefits in which Executive participated
prior to his termination through the lesser of (x)
twelve (12) months from the date of Executive's
termination of employment, or (y) the date upon which
Executive and his covered dependents are covered by
similar plans of Executive's new employer, and if
Executive is ineligible to participate in one or more
of such benefit plans or programs of the Company, the
Company shall provide Executive with such benefits on
an equivalent basis, including a Tax Gross-Up to the
extent such benefits constitute taxable income to the
Executive but were provided to Executive on a
non-taxable basis while Executive was employed by the
Company.
For the purposes of this Agreement, "Cause" means (1)
material act of dishonesty made by Executive in
connection with Executive's responsibilities as an
employee, (2) Executive's conviction of, or plea of
nolo contendere to, a felony, (3) Executive's gross
misconduct in connection with the performance of his
duties hereunder, or (4) Executive's material breach
of his obligations under this Agreement; provided,
however, that with respect to clauses (3) and (4),
such actions shall not constitute Cause if they are
cured by Executive within thirty (30) days following
delivery to Executive of a written explanation
specifying the basis for the Board's beliefs with
respect to such clauses.
For the purposes of this Agreement, "Change of
Control" is defined as:
(1) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) becomes
the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or
indirectly, of securities of the Company
representing fifty percent (50%) or more of
the total voting power represented by the
Company's then outstanding voting
securities; or
(2) The consummation of a merger or
consolidation of the Company with any other
corporation, other than a merger or
consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding
or by being converted into voting securities
of the surviving entity) at least fifty
percent (50%) of the total voting power
represented by the voting securities of the
Company or such surviving entity outstanding
immediately after such merger or
consolidation; or
(3) The consummation of the sale by the Company
of all or substantially all of the Company's
assets.
For the purposes of this Agreement,
"Constructive Termination" means (1) a
material reduction in Executive's Base
Salary or bonus level, (2) a reduction in
Executive's title or a material reduction in
Executive's authority or duties, or (3) the
requirement that Executive relocate more
than fifty (50) miles from the current
Company headquarters.
For the purposes of this Agreement,
"Disability" shall mean Executive's mental
or physical impairment which has or is
likely to prevent Executive from performing
the responsibilities and duties of his
position for three (3) months or more in the
aggregate during any six (6) month period.
Any question as to the existence or extent
of Executive's disability upon which the
Executive and the Company cannot agree shall
be resolved by a qualified independent
physician who is an acknowledged expert in
the area of the mental or physical
impairment, selected in good faith by the
Board and approved by the Executive, which
approval shall not unreasonably be withheld.
The Executive shall not be required to
mitigate the value of any severance benefits
contemplated by this Agreement, nor shall
any such benefits be reduced by any earnings
or benefits that the Executive may receive
from any other source.
iii) Voluntary Termination; Involuntary Termination for
--------------------------------------------------
Cause. Except as otherwise specified herein, in the
-----
event Executive terminates his employment voluntarily
or is involuntarily terminated by the Company for
Cause, then all further vesting of the Stock Option,
Performance-Based Stock Option and any other equity
compensation shall terminate immediately and all
payments of compensation by the Company to Executive
hereunder shall immediately terminate (except as to
amounts already earned).
iv) Termination Due to Death or Disability. Except as
--------------------------------------
otherwise specified herein, in the event Executive's
employment is terminated due to Executive's death or
Disability,
then all further vesting of the Stock Option,
Performance-Based Stock Option and any other equity
compensation shall terminate immediately and all
payments of compensation by the Company to Executive
hereunder shall immediately terminate (except as to
amounts already earned and all death benefits and/or
disability benefits payable under plans of the
Company).
6) Assignment. This Agreement shall be binding upon and
----------
inure to the benefit of (a) the heirs, beneficiaries,
executors and legal representatives of Executive upon
Executive's death and (b) any successor of the
Company. Any such successor of the Company shall be
deemed substituted for the Company under the terms of
this Agreement for all purposes. As used herein,
"successor" shall include any person, firm,
corporation or other business entity which 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 shall
be assignable or transferable except through a
testamentary disposition or by the laws of descent
and distribution upon the death of Executive. Any
attempted assignment, transfer, conveyance or other
disposition (other than as aforesaid) of any interest
in the rights of Executive to receive any form of
compensation hereunder shall be null and void.
7) Notices. All notices, requests, demands and other
-------
communications called for hereunder shall be in
writing and shall be deemed given if (i) delivered
personally or by facsimile, (ii) one (1) day after
being sent by Federal Express or a similar commercial
overnight service, or (iii) three (3) days after
being mailed by registered or certified mail, return
receipt requested, prepaid and addressed to the
parties or their successors in interest at the
following addresses, or at such other addresses as
the parties may designate by written notice in the
manner aforesaid:
If to the Company: Xxxxxx Communications, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Attn: Chief Financial Officer
----
If to Executive: Xxxx Xxxxxxx
at the last residential address
known by the Company.
8) Severability. In the event that any provision hereof
------------
becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void,
this Agreement shall continue in full force and
effect without said provision.
9) Proprietary Information Agreement. Executive agrees
---------------------------------
to enter into the Company's standard Employment,
Confidential Information and Invention Assignment
Agreement (the "Proprietary Information Agreement")
upon commencing employment hereunder, as modified so
as not to conflict with the provisions of this
Agreement and attached as Exhibit C.
10) Entire Agreement. This Agreement, the Option
----------------
Agreements, the employee benefit plans referred to in
Section 2 and the Proprietary Information Agreement
represent the entire agreement and understanding
between the Company and Executive concerning
Executive's
employment relationship with the Company, and
supersede and replace any and all prior agreements
and understandings concerning Executive's employment
relationship with the Company.
11) Non-Binding Mediation, Arbitration and Equitable
------------------------------------------------
Relief.
------
a) The parties agree to make a good faith
attempt to resolve any dispute or claim
arising out of or related to this Agreement
through negotiation. In the event that any
dispute or claim arising out of or related
to this Agreement is not settled by the
parties hereto, the parties will attempt in
good faith to resolve such dispute or claim
by non-binding mediation in Santa Xxxxxxx
County, California to be conducted by one
mediator belonging to the American
Arbitration Association. The mediation shall
be held within thirty (30) days of the
request therefor. The costs of the mediation
shall be borne equally by the parties to the
mediation.
b) Executive and the Company agree that, to the
extent permitted by law, any dispute or
controversy arising out of, relating to, or
in connection with this Agreement, or the
interpretation, validity, construction,
performance, breach, or termination thereof
which has not been resolved by negotiation
or mediation as set forth in Section 11(a)
shall be finally settled by binding
arbitration to be conducted by one
arbitrator in Santa Barbara, California in
accordance with the National Rules for the
Resolution of Employment Disputes then in
effect of the American Arbitration
Association (the "Rules"). The arbitrator
may grant injunctions or other relief in
such dispute or controversy. The decision of
the arbitrator shall be confidential, final,
conclusive and binding on the parties to the
arbitration. Judgment may be entered under a
protective order on the arbitrator's
decision in any court having jurisdiction.
c) The arbitrator shall apply California law to
the merits of any dispute or claim, without
reference to rules of conflict of law. The
arbitration proceedings shall be governed by
federal arbitration law and by the Rules,
without reference to state arbitration law.
Executive hereby expressly consents to the
personal jurisdiction of the state and
federal courts located in California for any
action or proceeding arising from or
relating to this Agreement and/or relating
to any arbitration in which the parties are
participants.
d) Executive understands that nothing in
Section 11 modifies Executive's at-will
status. Either the Company or Executive can
terminate the employment relationship at any
time, with or without cause.
e) EXECUTIVE HAS READ AND UNDERSTANDS SECTION
11, WHICH DISCUSSES ARBITRATION. EXECUTIVE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES, TO THE EXTENT PERMITTED BY
LAW, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT
OF, RELATING TO, OR IN CONNECTION WITH THIS
AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH, OR
TERMINATION THEREOF TO BINDING ARBITRATION,
AND THAT THIS ARBITRATION CLAUSE CONSTITUTES
A WAIVER OF EXECUTIVE'S RIGHT TO A JURY
TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS
OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED
TO, THE FOLLOWING CLAIMS:
i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF
THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS
AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF
EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE
WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND
DEFAMATION.
ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE
VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT
OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967,
THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND
HOUSING ACT, AND LABOR CODE SECTION 201, et seq;
iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT
DISCRIMINATION.
12) Indemnification Agreement. Effective upon the Employment Commencement
-------------------------
Date, Executive and the Company shall enter into the standard form of
indemnification agreement previously approved by the Board customarily
entered into between the Company and its executive officers and
directors and attached as Exhibit D.
13) Advisor & Legal Fee Reimbursement. The Company agrees to directly pay
---------------------------------
Executive's reasonable advisor and legal fees associated with entering
into this Agreement up to $10,000 upon receiving invoices for such
services.
14) No Oral Modification, Cancellation or Discharge. This Agreement may
-----------------------------------------------
only be amended, canceled or discharged in writing signed by Executive
and the Chairman of the Board.
15) Withholding. The Company shall be entitled to withhold, or cause to
-----------
be withheld, from payment any amount of withholding taxes required by
law with respect to payments made to Executive in connection with his
employment hereunder.
16) Governing Law. This Agreement shall be governed by the laws of the
-------------
State of California without reference to rules relating to conflict of
law.
17) 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:
XXXXXX COMMUNICATIONS, INC.
/s/ Xxx Xxxxxxxxx
-------------------------------
Xxx Xxxxxxxxx
Chairman of the Board
EXECUTIVE
/s/ Xxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx
