EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT 10.2
EXECUTION VERSION
This Executive Employment Agreement (“Agreement”) is made effective as of April 11, 2011
(“Effective Date”), by and between Spark Networks, Inc., a Delaware Corporation (“Company”) and
Xxxxxxx X. Xxxxxxxx (“Executive”) and supersedes and replaces the Executive Employment Agreement
dated August 31, 2005, and as amended, that was previously entered into with Executive.
The parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive hereby accepts
such employment, upon the terms and conditions set forth herein.
2. Duties.
2.1 Position. Effective, as of the date hereof, Executive is employed on a full-time
basis as President & Chief Executive Officer, shall report directly to the Board of Directors of
the Company (the “Board”), and shall have the duties and responsibilities commensurate with such
position as shall be reasonably and in good faith determined from time to time by the Board.
Executive shall also continue to serve on the Board. Executive, however, acknowledges that in the
event that he is not re-elected as a director of the Company by the stockholders from time to time
in accordance with the Company’s certificate of incorporation, bylaws or other applicable
constitutional documents, subject to the Company’s compliance with Section 2.2 the resulting
termination of his position as a director will not affect his position as an employee and President
& Chief Executive Officer of the Company and this Agreement will not be terminated solely as a
result of such termination of his directorship.
2.2 Duties. Except for vacation and illness periods, Executive shall devote
substantially all of his business time, energy, skill and efforts to the performance of his duties
hereunder in a manner that will faithfully and diligently further the business interests of the
Company, provided, that, notwithstanding the foregoing, Executive may (i) make and manage personal
business investments of his choice, (ii) subject to obtaining the prior consent of the Board, which
consent will not be unreasonably withheld, serve as a director or in any other capacity of any
business enterprise, including an enterprise whose activities may involve or relate to the business
of the Company, provided that such service is not to a business enterprise that competes with a
“Company Business,” as defined in Section 9 of this Agreement, and (iii) serve in any capacity with
any civic, educational, religious or charitable organization, or any governmental entity or trade
association. In addition, during Term of Employment, subject to the Company’s certificate of
incorporation, bylaws and the rules and requirements of the charter of the nominating and corporate
governance committee of that Board, the Company shall cause Executive to be nominated as a member
of the Board and the Board shall not take any action to remove Executive from the Board (the
obligation to nominate and for the Board to not remove will continue even if Executive is not
re-elected in any year). Executive agrees to serve as a member of the Board.
3. Term of Employment. The term of Executive’s employment with the Company under this
Agreement shall commence on the Effective Date and shall continue until the third
anniversary of the Effective Date, unless earlier terminated as herein provided (the “Initial
Term”). As used herein, “Term of Employment” shall include the Initial Term and any additional
term that may be agreed to by the Company and Executive (the “Extended Term”), but the Term of
Employment shall end upon any termination of Executive’s employment with the Company as herein
provided.
4. Compensation.
4.1 Base Salary. As compensation for Executive’s performance of Executive’s duties,
the Company shall pay to Executive a base salary of three hundred twenty-five thousand dollars
($325,000) per year (“Base Salary”), payable in accordance with the normal payroll practices of the
Company, less all legally required or authorized payroll deductions and tax withholdings. Base
Salary shall be reviewed annually, and may be increased, at the sole discretion of the Board’s
Compensation Committee, in light of Executive’s performance and the Company’s financial performance
and other economic conditions and relevant factors, but may not be decreased at anytime without
Executive’s written consent.
4.2 Annual Bonus. The Company shall pay an annual bonus to Executive based on a
performance plan established by the Board of Directors for each fiscal year during the Term of
Employment (the “Annual Bonus”). The performance plan shall be based on a 12-month performance
period beginning on January 1 and ending on December 31 of each fiscal year during the Term of
Employment. The performance goals under the performance plan shall be set by the Board, with the
input of Executive and the Board’s Compensation Committee, and shall be based on metrics, which may
include: (i) Company gross revenue, (ii) Company earnings before interest, depreciation and
amortization (“EBITDA”), and (iii) management objectives. The performance plan for each fiscal
year during the Term of Employment shall be incorporated into this Agreement by reference. Except
as otherwise provided by Section 8 of this Agreement, to be eligible for an annual incentive bonus,
Executive must maintain continued employment with the Company throughout the relevant performance
period. The Annual Bonus payable under the performance plan shall be paid to Executive as soon as
reasonably practical upon the release of audited financial statements but in no event later than
two and one-half (2-1/2) months from the last day of each performance period. The target Annual
Bonus payable to Executive under the performance plan shall be two hundred twenty-five thousand
dollars ($225,000) (the “Target Annual Bonus”). The Board or the Compensation Committee may
increase (but not decrease) the amount of the Target Annual Bonus and may also develop separate
bonus plans.
4.3 Stock Options.
(a) Concurrent with the execution of this Agreement, Executive shall be granted an option
pursuant to the Company’s 2007 Omnibus Incentive Plan (the “Plan”) to purchase three hundred
forty-three thousand (343,000) shares of the Company’s common stock (the “Shares”). Such option
shall be granted with an exercise price equal to the Fair Market Value of the underlying stock on
the Effective Date, such option shall provide for a term of ten (10) years and shall have a one
year exercisability period immediately following Executive’s termination of employment (it being
understood that, in no event shall any option remain exercisable after the expiration of the full
stated term of such option). So long as Executive’s
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employment relationship with the Company continues, the Shares underlying the option shall
vest and become exercisable in accordance with the following schedule: 1/36th of the
aggregate Shares underlying the option (i.e., approximately 9,528) shall vest and become
exercisable on each monthly anniversary of the Effective Date such that all of the Shares will be
fully vested and exercisable on the three year anniversary of the Effective Date. In addition,
such options shall be subject to the terms and conditions of the Plan and a form of option
agreement (the “Option Agreement”) reflecting (and not inconsistent with) the terms set forth in
this Agreement between the Company and Executive, which documents are incorporated herein by
reference.
(b) For purposes of the Agreement, “Fair Market Value” shall mean the closing price of the
Company’s shares on the Effective Date as traded on the NYSE American Stock Exchange, the principal
exchange on which the Company’s shares are traded on the Effective Date. If the Effective Date is
on a Saturday, Sunday or a holiday, Fair Market Value” shall mean the closing price of the
Company’s shares on the Friday immediately before the Effective Date as traded on the NYSE American
Stock Exchange.
(c) The Company represents and warrants to Executive that the terms of the Plan do not
conflict with and will not prevent the option grants and the terms and treatment of the options
contemplated anywhere in this Agreement. To the extent that after the date hereof the Company, the
board or any committee thereof has under the terms of the Plan any discretion with respect to the
interpretation of the Plan or the power to make any decisions under the Plan, such discretion shall
be exercised and decisions made in a manner to give full effect to the intent of this Agreement
with respect to the options.
5. Health and Welfare Benefits. Executive shall be eligible for all health and
welfare benefits generally available to other executives, officers, or full-time employees of the
Company, subject to the terms and conditions of the Company’s policies and benefit plan documents.
However, Company shall pay one hundred percent (100%) of the cost of coverage for all Company
health and welfare benefits.
6. Vacation. Notwithstanding the standard vacation policy provisions on vacation
accrual rates, Executive shall be entitled to earn vacation at the rate of twenty (20) days per
year.
7. Business and Personal Expenses. Executive shall be reimbursed promptly for all
reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on
behalf of the Company. Such business expenses shall include the costs incurred by Executive for
cellular telephone hardware and usage fees, facsimile hardware and usage fees, DSL hardware and
usage fees and reasonable business related education and training costs. In addition, the Company
shall reimburse Executive for any reasonable legal fees incurred in connection with this Agreement,
the negotiation and execution of any new employment agreements of any successor organization in
connection with a Change in Control and any future agreements with the Company entered into upon
Executive’s termination of employment. To obtain reimbursement, expenses must be submitted
promptly with appropriate supporting documentation and must be submitted within the same fiscal
year in which they were incurred or within two and one-half (21/2) months after the
end of such year.
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8. Termination of Employment. Subject to the terms and conditions of this Section 8,
either the Company or Executive may terminate Executive’s employment at any time, with or without
Cause (as defined in Section 8.9), during the Term of Employment. Any termination of Executive’s
employment during the Term of Employment shall be communicated by written notice of termination
from the terminating party to the other party (“Notice of Termination”). The Notice of Termination
shall indicate the specific provision(s) of this Agreement relied upon in effecting the termination
and a written statement of the reason(s) for the termination. In the case of a Notice of
Termination provided by Executive to the Company, such Notice of Termination shall not be effective
for a period of thirty (30) days after receipt of such Notice of Termination by the Company. In
the case of a Notice of Termination provided by the Company to Executive, such Notice of
Termination shall be effective on the date designated by the Company in the Notice of Termination.
In the event Executive’s employment is terminated by either party, for any reason, during the Term
of Employment, the Company shall pay the prorated Base Salary earned as of the date of Executive’s
termination of employment and the accrued but unused vacation as of the date of Executive’s
termination of employment to Executive upon Executive’s termination of employment. Except as
otherwise provided in this Section 8 or in any other agreement between the Company and Executive,
the Company shall have no further obligation to make or provide to Executive, and Executive shall
have no further right to receive or obtain from the Company, any payments or benefits in respect of
the termination of Executive’s employment with the Company during the Term of Employment.
8.1 Severance upon Involuntary Termination without Cause and Termination by Executive with
Good Reason. In the event that the Company causes to occur an involuntary termination without
Cause (as defined in Section 8.9) or in the event that Executive resigns from employment with the
Company for Good Reason (as defined in Section 8.9) during the Term of Employment, Executive shall
be entitled to a “Severance Package” that consists of the following: (a) a single cash lump-sum
“Severance Payment” equal to the Target Annual Bonus, pro-rated for the completed portion of the
fiscal year, plus one hundred percent (100%) of the annual Base Salary in effect immediately prior
to Executive’s termination of employment, payment to be made on the thirtieth (30th )
day following termination, (b) reimbursement of any COBRA payments paid by Executive in the twelve
(12) month period following Executive’s termination of employment; provided, however, that if any
plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the
period of continuation coverage to be, exempt from the application of Section 409A under Treasury
Regulation Section 1.409A-1(a)(5) or the Company is otherwise unable to continue to cover Executive
under its group health plans without substantial adverse tax consequences, then an amount equal to
each remaining premium payment shall thereafter be paid to Executive as currently taxable
compensation in substantially equal monthly installments over the continuation coverage period (or
the remaining portion thereof), (c) immediate accelerated vesting of the lesser of (w) eighty-nine
thousand two hundred fifty (89,250) stock-option Shares of the unvested stock option shares that
are held by and granted to Executive prior to the option grant in Section 4.3 (“Prior Options”), or
(x) the remaining unvested stock-option shares from the Prior Options, and (d) immediate vesting of
the lesser of (y) eighty-five thousand seven hundred fifty (85,750) stock-option Shares of the
unvested stock option Shares held by Executive pursuant to the option grant in Section 4.3 (“New
Options”), or (z) the remaining unvested stock-option Shares from the New Options, and Executive
shall also have one year to exercise any and all vested stock-options held by Executive immediately
following Executive’s termination of employment (it being understood that, in no event shall any
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option remain exercisable after the expiration of the full stated term of the option);
provided , however, that Executive executes, within the thirty (30)-day period following
termination, a Separation Agreement that includes a general mutual release by the Company and
Executive in favor of the other and their successors, affiliates and estates to the fullest extent
permitted by law, drafted by and in a form reasonably satisfactory to the Company and Executive,
and Executive does not revoke the mutual general release within any legally required revocation
period, if applicable. All legally required and authorized deductions and tax withholdings shall be
made from the Severance Payment, including for wage garnishments, if applicable, to the extent
required or permitted by law. Effective immediately upon termination of employment, Executive shall
no longer be eligible to contribute to or to receive additional Company contributions as an active
participant in any retirement or benefit plan covering employees of the Company, but shall continue
to have all rights under each such plan that are afforded to terminated employees and inactive
participants.
8.2 Change in Control; Severance upon Termination Following a Change in Control. In
the event of a Change in Control (as defined in Section 8.9), Executive shall be entitled to
immediate vesting of any and all unvested stock options (including any unvested equity awards) held
by Executive immediately prior to the Change in Control. However, in the event a successor company
desires to retain Executive’s services for the one-year period following a Change in Control, such
acceleration of unvested options and the payment of any proceeds from such option acceleration
shall occur in accordance with the terms and conditions set forth under Section 8.3 below. In
addition, in the event that within twelve (12) months following a Change in Control, the Company or
its successors causes to occur an involuntary termination without Cause (as defined in Section 8.9)
or in the event that Executive resigns from employment with the Company for Good Reason (as defined
in Section 8.9), Executive shall be entitled to the Severance Package provided under Section 8.1,
payment to commence on the thirtieth (30th ) day following termination, except that
vesting of all of Executive’s unvested stock options (including any unvested equity awards) shall
have accelerated immediately prior to the Change in Control; provided, however, that Executive
must, within the thirty (30)-day period following termination, execute a Separation Agreement that
includes a general mutual release by the Company and Executive in favor of the other and their
successors, affiliates and estates to the fullest extent permitted by law, drafted by and in a form
reasonably satisfactory to the Company and Executive, and Executive does not revoke the mutual
general release within any legally required revocation period, if applicable. All legally required
and authorized deductions and tax withholdings shall be made from the Severance Payment, including
for wage garnishments, if applicable, to the extent required or permitted by law. Effective
immediately upon termination of employment, Executive shall no longer be eligible to contribute to
or to receive additional Company contributions as an active participant in any retirement or
benefit plan covering employees of the Company, but shall continue to have all rights under each
such plan that are afforded to terminated employees and inactive participants.
8.3 Continuation of Employment after Change in Control. In the event a successor
company desires to retain Executive’s services for the one-year period following a Change in
Control on all of the terms and conditions set forth in this Agreement, this Agreement shall
continue to remain in force and effect and any cash or other proceeds received by Executive with
respect to fifty percent (50%) of Executive’s options the vesting of which was accelerated under
Section 8.2 by reason of the Change in Control (the “Accelerated Proceeds”) shall be
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deposited in an escrow (the “Escrow”) with an independent escrow holder to be held for
Executive’s benefit pursuant to an escrow agreement which shall provide that (i) if Executive’s
employment with the successor company is terminated during the one-year period following the Change
in Control by the successor company for Cause or by Executive without Good Reason, Executive shall
forfeit the Accelerated Proceeds (and any earnings thereon) and they shall be paid to the
predecessor company immediately and (ii) the Accelerated Proceeds (and any earnings thereon) shall
be paid to Executive immediately upon the earlier of (x) the first anniversary of the Change in
Control if Executive maintains continuous employment with the successor company throughout the
one-year period following such Change in Control date, (y) the date of Executive’s termination of
employment with the successor company if Executive’s employment is terminated for any reason other
than by the successor company for Cause or by Executive without Good Reason, or (z) the effective
date of a Change in Control of the successor company. Any taxes due on the Accelerated Proceeds
shall be withheld and paid from the Escrow at the appropriate time.
8.4 Section 409A Compliance. The parties intend for this Agreement either to satisfy
the requirements of Section 409A or to be exempt from the application of Section 409A, and this
Agreement shall be construed and interpreted accordingly. If this Agreement either fails to
satisfy the requirements of Section 409A or is not exempt from the application of Section 409A,
then the parties hereby agree to amend or to clarify this Agreement in a timely manner so that this
Agreement either satisfies the requirements of Section 409A or is exempt from the application of
Section 409A.
(a) Notwithstanding any provision in this Agreement to the contrary, in the event that
Executive is a “specified employee” (as defined in Section 409A), any Severance Payment, severance
benefits or other amounts payable under this Agreement that would be subject to the special rule
regarding payments to “specified employees” under Section 409A(a)(2)(B) of the Code (together,
“Specified Employee Payments”) shall not be paid before the expiration of a period of six months
following the date of Executive’s termination of employment (or before the date of Executive’s
death, if earlier). The Specified Employee Payments to which Executive would otherwise have been
entitled during the six-month period following the date of Executive’s termination of employment
shall be accumulated and paid as soon as administratively practicable following the first date of
the seventh month following the date of Executive’s termination of employment, with interest on
each of the Specified Employee Payments for the period of deferral, at the prime rate, as published
in the Wall Street Journal (which shall be adjusted on the effective date of each change in such
rate) plus 300 basis points.
(b) To the extent necessary to ensure satisfaction of the requirements of Section 409A(b)(3)
of the Code, assets shall not be set aside, reserved in a trust or other arrangement, or otherwise
restricted for purposes of the payment of amounts payable under this Agreement.
(c) The Company hereby informs Executive that the federal, state, local, and/or foreign tax
consequences (including without limitation those tax consequences implicated by Section 409A) of
this Agreement are complex and subject to change. Executive acknowledges and understands that
Executive should consult with his or her own personal tax or financial advisor in connection with
this Agreement and its tax consequences. Executive
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understands and agrees that the Company has no obligation and no responsibility to provide
Executive with any tax or other legal advice in connection with this Agreement and its tax
consequences. Executive agrees that Executive shall bear sole and exclusive responsibility for any
and all adverse federal, state, local, and/or foreign tax consequences (including without
limitation any and all tax liability under Section 409A) of this Agreement to which he may be
subject under applicable law. The Company shall bear sole and exclusive responsibility for any and
all adverse federal, state, local, and/or foreign tax consequences (including without limitation
any and all tax liability under Section 409A) of this Agreement to which it may be subject under
applicable law.
(d) To the extent that any payments or reimbursements provided to Executive under this
Agreement, are deemed to constitute taxable compensation to which Treasury Regulation Section
1.409A-3(i)(1)(iv) would apply, such amounts shall be paid in accordance with the terms of the
provisions under which such rights arise, but in no event later than December 31 of the year
following the year in which the expense is incurred (which payment shall be contingent upon
Executive’s timely submission of proper substantiation). The amount of any such payments eligible
for reimbursement in one year shall not affect the payments or expenses that are eligible for
payment or reimbursement in any other taxable year, and Executive’s right to such payments or
reimbursement shall not be subject to liquidation or exchange for any other benefit.
(e) Notwithstanding anything to the contrary herein, a termination of employment shall not be
deemed to have occurred for purposes of any provision of this Agreement providing for the payment
of amounts or benefits upon or following a termination of employment unless such termination is
also a “Separation from Service” within the meaning of Section 409A and, for purposes of any such
provision of this Agreement, references to a “resignation,” “termination,” “termination of
employment” or like terms shall mean Separation from Service. Further, for purposes of Section 409A
of the Code, each payment made under this Agreement shall be designated as a “separate payment”
within the meaning of the Section 409A.
8.5 Effect of Death or Disability. In the event that Executive dies or terminates
employment by reason of a Disability (as defined in Section 8.9) during the Term of Employment,
Executive shall be entitled to (i) payment of the unpaid prorated Base Salary earned as of the date
of Executive’s death or Disability (the “Measurement Date”), and (ii) reimbursement of any COBRA
payments paid by Executive or his estate or beneficiaries in the twelve (12) month period following
the Measurement Date; provided, however, that if any plan pursuant to which such benefits are
provided is not, or ceases prior to the expiration of the period of continuation coverage to be,
exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5) or the
Company is otherwise unable to continue to cover Executive under its group health plans without
substantial adverse tax consequences, then an amount equal to each remaining premium payment shall
thereafter be paid to Executive or his estate or beneficiaries as currently taxable compensation in
substantially equal monthly installments over the continuation coverage period (or the remaining
portion thereof). All legally required and authorized deductions and tax withholdings shall be
made from the payments described in the previous sentence, including for wage garnishments, if
applicable, to the extent required or permitted by law. Payment under this Section 8.5 shall be
made not more than once, if at all.
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8.6 Statement Regarding Termination of Employment. In the event Executive’s
employment is terminated without Cause, or Executive resigns for Good Reason, Executive and the
Company will negotiate in good faith to reach an agreement on a statement reflecting a benign
reason for termination or resignation.
8.7 Ineligibility for Severance. Executive shall not be entitled to any Severance
Package under this Agreement, if at any time during the Term of Employment, either (a) Executive
voluntarily resigns or otherwise terminates employment with the Company other than for Good Reason,
or (b) the Company properly terminates Executive’s employment with Cause. Effective immediately
upon termination of employment, Executive shall no longer be eligible to contribute to or to be an
active participant in any retirement or benefit plan covering employees of the Company.
8.8 Taxes and Withholdings. The Company may withhold from any amounts payable under
this Agreement, including any benefits or Severance Payment, such federal, state or local taxes as
may be required to be withheld pursuant to applicable law or regulations, which amounts shall be
deemed to have been paid to Executive.
8.9 Definitions.
(a) “Cause” shall mean the occurrence during the Term of Employment of any of the following:
(i) formal admission to (including a plea of guilty or nolo contendere to), or conviction of a
felony, or any criminal offence involving Executive’s moral turpitude under any applicable law,
(ii) gross negligence or willful misconduct by Executive in the performance of Executive’s material
duties required by this Agreement; or (iii) material breach of this Agreement by Executive which
breach has been communicated to Executive in the form of a written notice from the Board, and that
Executive has not substantially cured within thirty (30) days following receipt by Executive of
such written notice.
(b) “Change in Control” shall mean (i) any “person” (as such term is used in Sections 13(d)
and 14(d) of the 1934 Securities Exchange Act) or group becomes the “beneficial owner” (as defined
in Rule 13d-3 of the 1934 Securities Exchange Act) or has the right to acquire beneficial
ownership, 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;
(ii) the consummation of the sale, lease or other disposition by the Company of all or
substantially all of the Company’s assets (including any equity interests in subsidiaries); (iii)
the consummation of a liquidation or dissolution of the Company; (iv) the consummation of a merger,
consolidation, business combination, scheme of arrangement, share exchange or similar transaction
involving the Company and any other corporation (“Business Combination”), other than a Business
Combination 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 or its parent) at least fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such surviving entity or its
parent outstanding immediately after such Business Combination or (v) any combination of the
foregoing. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely
as a result of (x) a repurchase or redemption of securities (which is open to all stockholders) by
the Company done in the ordinary course of
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business and the purpose of which is not to effect a Change of Control or (y) a rights issue,
recapitalization, capitalization, sub-division or consolidation or a share capital reduction and
any other variation of the capital of the Company and/or rights in respect thereof, or capital
distribution (being any distribution, whether in cash or in other specie, out of capital profits or
capital reserves (including share premium account and any capital redemption reserve fund)) so long
as in each instance it is done either as part of a reincorporation merger or in the ordinary course
of business and in any event is not done to effect a Change of Control.
(c) “Disability” shall mean, to the extent consistent with applicable federal and state law
(including, without limitation Section 409A), Executive’s inability by reason of physical or mental
illness to fulfill his obligations hereunder for ninety (90) consecutive days or for a total of one
hundred and eighty (180) days in any twelve (12) month period which, in the reasonable opinion of
an independent physician selected by the Company or its insurers and reasonably acceptable to
Executive or Executive’s legal representative, renders Executive unable to perform the essential
functions of his job, even after reasonable accommodations are made by the Company. The Company is
not, however, required to make unreasonable accommodations for Executive or accommodations that
would create an undue hardship on the Company.
(d) “Good Reason” shall mean the occurrence during the Term of Employment of any of the
following: (i) a material breach of this Agreement by the Company which is not cured by the
Company within thirty (30) days following the Company’s receipt of written notice by Executive to
the Company describing such alleged breach; (ii) Executive’s Base Salary, Annual Bonus target or
other bonus opportunity is reduced by the Company or the terms and conditions for stock option
agreements are not fully complied with by the Company; (iii) a reduction in Executive’s title
(other than in connection with a continuation of employment after Change in Control pursuant to
Section 8.3), or a material reduction in Executive’s duties, authorities, and/or responsibilities;
or (iv) a requirement by the Company, without Executive’s consent, that Executive relocate to a
location greater than thirty-five (35) miles from Executive’s place of residence; (v) the Company
provides Executive with notice of non-renewal of this Agreement or does not agree to renew or
extend the Term of Employment in writing by at least another annual term; or (vi) the circumstances
described in the last sentence of Section 12.7.3. Notwithstanding the above, the occurrence of any
of the events described in the foregoing sentence shall not constitute Good Reason unless Executive
gives the Company written notice, within thirty (30) calendar days after Executive has knowledge of
the occurrence of any of the events described in the foregoing sentence, that such circumstances
constitute Good Reason and the Company thereafter fails to cure such circumstances within thirty
(30) days after receipt of such notice.
(e) “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended,
(“Code”) and all applicable guidance promulgated thereunder.
8.10 Nonduplication of Benefits. Notwithstanding any provision in this Agreement or
in any other Company benefit plan or compensatory arrangement to the contrary, but at all times
subject to Section 8.4, (a) any payments due under either Section 8.1 or Section 8.2 shall be made
not more than once, if at all, (b) payments may be due under either Section 8.1 or Section 8.2, but
under no circumstances shall payments be made under both
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Section 8.1 and Section 8.2, and (c) Executive shall not be entitled to severance benefits from the Company
other than as contemplated under this Agreement, unless such other severance benefits provide for
larger benefits than under this Agreement.
8.11 Section 280G Best After-Tax. If any payment or benefit that Executive would
receive under this Agreement or otherwise, when combined with any other payment or benefit
Executive receives that is contingent upon a Change in Control (“Payment”) would (i) constitute a
“parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence,
be subject to the excise tax imposed by Section 4999 of the Code (“Excise Tax”), then at the sole
discretion of the Executive, such Payment shall be either (x) the full amount of such Payment or
(y) such lesser amount as would result in no portion of the Payment being subject to the Excise Tax
(the “Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable
federal, state and local employment taxes, income taxes and the Excise Tax, that the Executive
chooses which may result in Executive’s receipt, on an after-tax basis, of the greater economic
benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.
If a reduction in payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in a manner necessary to provide Executive
with the greatest economic benefit. If more than one manner of reduction of payments or benefits
necessary to arrive at the Reduced Amount yields the greatest economic benefit, the payments and
benefits shall be reduced pro rata.
9. No Competition and No Conflict of Interest. Except as otherwise provided in
Section 2.2 of this Agreement, during the Term of Employment, Executive must not engage in any
work, paid or unpaid, that creates an actual conflict of interest with the Company Business where
such conflict would materially and substantially disrupt operations. Such work shall include
directly or indirectly competing with the Company Business, or acting as an officer, director,
employee, consultant, stockholder, volunteer, lender, or agent of any business enterprise which is
in direct competition with the Company Business (in each case where it would materially and
substantially disrupt operations). Notwithstanding the foregoing, Executive’s investment in, or
ownership of, less than five percent (5%) of the capital stock of any business entity that competes
with the Company Business and whose securities are traded on any national securities exchange or
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, shall not be treated
as a breach of this Section 8. For purposes of this Agreement, the term “Company Business” shall
mean an online personals service or internet dating.
10. Confidentiality. During the Term of Employment, Executive has been and will
continue to be given access to a wide variety of information about the Company, its affiliates and
other related businesses that the Company considers “Confidential Company Information.” As a
condition of continued employment, Executive agrees to abide by the Company’s reasonable and
written business policies and directives on confidentiality and nondisclosure of “Confidential
Company Information.” “Confidential Company Information” shall mean all information applicable to
the business of the Company which confers a competitive advantage upon the Company over one who
does not possess the information; and has commercial value in the business of the Company or any
other business in which the Company engages or is preparing to engage during Executive’s employment
with the Company. “Confidential Company Information” includes, but is not limited to, information
regarding the Company’s business plans
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and strategies; contracts and proposals; and other business partners and the Company’s
business arrangements and strategies with respect to them; current and future marketing or
advertising campaigns; software programs; codes, formulae or techniques; financial information;
personnel information; and all ideas, plans, processes or information related to the current,
future and proposed projects or other business of the Company that has not been disclosed to the
public by an authorized representative of the Company, acting within the scope of his or her
authority, whether or not such information would be enforceable as a trade secret of the Company or
enjoined or restrained by a court or arbitrator as constituting unfair competition. “Confidential
Company information” also includes confidential information of any third party who may disclose
such information to the Company or Executive in the course of the Company’s business.
10.1 Continuing Obligation. Executive agrees that the agreement not to disclose
Confidential Company Information will be effective during Executive’s employment and continue even
after Executive is no longer employed by the Company. Any obligation not to disclose any portion
of any Confidential Company Information will continue for two (2) years after the date Executive’s
employment is terminated unless such information (a) has become public knowledge through no fault
of Executive; or (b) has been developed independently without any reference to any information
obtained during Executive’s employment with the Company; (c) must be disclosed in response to a
valid order by a court or government agency or is otherwise required by law; or (d) was known by
Executive prior to the date hereof or later becomes known to Executive outside the scope of his
employment. Nothing in this Section 10 shall be interpreted to prohibit or restrict Executive from
taking any actions not prohibited by Section 11, it being understood that Executive’s use in
subsequent employment or in any other role of his experience, general knowledge or other skills
gained during employment with the Company shall not violate this Section 10.
10.2 Return of Company Property. On termination of employment with the Company for
whatever reason, or at the request of the Company before termination, Executive agrees to promptly
deliver to the Company all records, files, computer disks, memoranda, documents, lists and other
information regarding or containing any Confidential Company Information, including all copies and
reproductions thereof, then in Executive’s possession or control, whether prepared by Executive or
others. Executive also agrees to promptly return, on termination or the Company’s request, any and
all Company property issued to Executive, including but not limited to computers, cellular phones,
keys and credits cards. Executive further agrees that should Executive discover any Company
property or Confidential Company Information in Executive’s possession after the return of such
property has been requested, Executive agrees to return it promptly to the Company without
retaining copies of any kind.
10.3 No Violation of Rights of Third Parties. Executive warrants that the performance
of all the terms of this Agreement does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by Executive prior to Executive’s employment
with the Company. Executive agrees not to disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any previous employers or
others. Executive warrants that Executive is not a party to any other agreement that will
interfere with Executive’s full compliance with this Agreement. Executive further agrees not to
enter into any agreement, whether written or oral, in conflict with the provisions of this
Agreement while such provisions remain effective.
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11. Interference with Business Relations.
11.1 Interference with Customers, Suppliers and Other Business Partners. Executive
acknowledges that the Company’s tenant and customer base and its other business arrangements have
been developed through substantial effort and expense, and its nonpublic business information is
confidential. In addition, because of Executive’s position, Executive understands that the Company
will be vulnerable to significant harm from Executive’s use of such information for purposes other
than to further the Company’s business interests. Accordingly, Executive agrees that during
Executive’s employment with the Company, and for a period of twelve (12) months thereafter,
Executive will not knowingly, separately or in association with others, materially and
substantially interfere with, impair, disrupt or damage the Company’s relationship with any of the
customers of the Company with whom Executive has had contact by contacting them for the purpose of
inducing or encouraging any of them to divert or take away business from the Company and to an
enterprise that is in direct competition with the Company Business; provided, however, that none of
the foregoing restrictions shall preclude Executive from (i) being employed by a consulting,
financial or advisory firm that provides any advice or services to a person, enterprise or business
that is in competition with the Company Business so long as Executive does not personally provide
such advice or services to the competing person, enterprise or business, (ii) becoming or acting as
an employee, consultant, partner, principal, agent, representative or equity holder in any
subsidiary, division or separate business unit of a person, enterprise or business that is in
competition with the Company Business if that subsidiary, division or separate business unit does
not itself directly engage in internet dating and online personals or (iii) becoming or acting as
an employee, consultant, partner, principal, agent, representative or equity holder or engaging in
any other manner in any business that does not derive more than twenty percent (20%) of its revenue
from internet dating and online personals (such exclusion does not apply to Xxxxx.xxx, eHarmony,
Zoosk, OKCupid or People Media).
11.2 Interference with the Company’s Employees. Executive acknowledges that the
services provided by the Company’s officers and key employees are unique and special, and that the
Company’s officers and key employees possess trade secrets and Confidential Company Information
that is protected against misappropriation and unauthorized use. As such, Executive agrees that
during, and for a period of twelve (12) months after, Executive’s employment with the Company,
Executive will not, knowingly, separately or in association with others, materially and
substantially, interfere with, impair, disrupt or damage the Company’s business by directly
contacting any Company officers or key employees for the purpose of inducing or encouraging them to
discontinue their employment with the Company; provided, however, that the foregoing provisions
shall not (i) restrict Executive from directly or indirectly making any general solicitation for
employees, making a public advertising or participating in any job fairs or recruiting workshops or
(ii) preclude Executive from soliciting and/or hiring any officer, key employee or other person at
any time (A) in the case of voluntary terminations, later than six (6) months after such person’s
termination of employment from the Company and (B) in the case of all other terminations, after
such person’s termination of employment from the Company.
11.3 Injunctive Relief. Executive acknowledges that Executive’s breach of the
covenants contained in Sections 9 through 11 of this Agreement inclusive (collectively
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“Covenants”) would cause irreparable injury and continuing harm to the Company for which there
will be no adequate remedy at law, and agrees that in the event of any such breach, the Company
seek temporary, preliminary and permanent injunctive relief to the fullest extent allowed by
applicable law, without the necessity of proving actual damages or posting any bond or other
security.
12. General Provisions.
12.1 Successors and Assigns. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the
Company. The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) or assignee to all or substantially all of the business and/or assets
of the Company to assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such succession or
assignment had taken place (provided that the Company shall also remain liable under this
Agreement). Executive shall not be entitled to assign any of Executive’s rights or obligations
under this Agreement without the Company’s written consent, provided that upon Executive’s death,
Executive’s named beneficiaries, estate or heirs, as the case may be, shall succeed to all of
Executive’s rights under this Agreement.
12.2 Indemnification; Directors’ and Officers’ Liability Insurance.
(a) During the Term of Employment and thereafter, the Company shall indemnify Executive to the
fullest extent permitted under Delaware law from and against any expenses (including but not
limited to attorneys’ fees, expenses of investigation and preparation and fees and disbursements of
Executive’s accountants or other experts), judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by Executive in connection with any proceeding in which
Executive was or is made party or was or is involved (for example, as a witness) by reason of the
fact Executive was or is employed by or serving as an officer or director of the Company or any of
its affiliates. Such indemnification shall continue as to Executive during the Term of Employment
and for so long thereafter as Executive may have exposure with respect to acts or omissions which
occurred prior to his cessation of employment with the Company and shall inure to the benefit of
Executive’s heirs, executors and administrators. The Company shall advance to Executive all costs
and expenses incurred by him in connection with any proceeding covered by this provision within 20
calendar days after receipt by the Company of a written request for such advance. Such request
shall include an undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such costs and expenses.
(b) The Company agrees to use its best efforts to purchase and maintain adequate Directors’
and Officers’ liability insurance from a reputable, nationally recognized and financially sound
insurer with terms no less favorable to Executive than those in effect as of the date of this
Agreement, with coverage limits of not less than thirty-five million dollars ($35,000,000) and with
provisions that will provide coverage for Executive as a director, officer and employees as well as
coverage as a former director, officer and employee following any termination of this Agreement or
Executive’s employment and service on the Board. Such insurance shall inure to the benefit of
Executive’s heirs, executors and administrators.
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12.3 Nonexclusivity Rights. Executive is not prevented from continuing or future
participation in any Company benefit, bonus, incentive or other plans, programs, policies or
practices provided by the Company subject to the terms and conditions of such plans, programs, or
practices.
12.4 Waiver. Either party’s failure to enforce any provision of this Agreement shall
not in any way be construed as a waiver of any such provision, or prevent that party thereafter
from enforcing each and every other provision of this Agreement.
12.5 Attorneys’ Fees. In any action to enforce the terms of this Agreement, the
prevailing party shall be reimbursed by the non-prevailing party for such prevailing party’s
reasonable attorneys’ fees and costs, including the costs of enforcing a judgment.
12.6 Severability. Subject to Section 12.7, in the event any provision of this
Agreement is found to be unenforceable by a court of competent jurisdiction, such provision shall
be deemed modified to the extent necessary to allow enforceability of the provision as so limited,
it being intended that the parties shall receive the benefit contemplated herein to the fullest
extent permitted by law. If a deemed modification is not satisfactory in the judgment of such
arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and
enforceability of the remaining provisions shall not be affected thereby.
12.7 Overriding Provision — Compliance with Applicable Law.
12.7.1 The Company represents and warrants to Executive that (i) this Agreement and the Option
Agreement have been duly authorized, executed and delivered by the Company, (ii) as of the date of
this Agreement, no shareholder approval, Board approval or any other action on the part of the
Company or any other person or entity is necessary to authorize the execution and delivery of this
Agreement and the Option Agreement or the performance by the Company of its obligations hereunder
or thereunder and (iii) as of the date of this Agreement, the execution, delivery and performance
of this Agreement and the Option Agreement does not result in any breach of or result in a
violation of any law, regulation, ordinance or order or the terms of the Plan, any material
contract, any certificate of incorporation or any other organizational document of the Company.
12.7.2 To the extent that any law or regulation becomes effective and enforceable after the
date of this Agreement that requires shareholder approval in order for the Company to comply with
one or more provisions of this Agreement (“Shareholder Approval”), the Company undertakes to use
all reasonable efforts to seek such Shareholder Approval, and Executive acknowledges that in the
event that Shareholder Approval is sought but is not obtained, subject to the Company’s compliance
with Section 12.7.3, the Company will not be regarded as in breach of the relevant unapproved
provision(s) of this Agreement if the Company is unable to comply with such unapproved provision(s)
as a result of such failure to obtain Shareholder Approval.
12.7.3 In the event that:
(a) Shareholder Approval is required for any provision of this Agreement and Shareholder
Approval is sought but is not obtained; and
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(b) any provision of this Agreement, or any part of a provision of this Agreement, is found to
be illegal, invalid or unenforceable due to the absence of such Shareholder Approval; the remaining
provisions, or the remainder of the provision concerned, shall continue in effect. In relation to
any illegal, invalid or unenforceable part of this Agreement, the Company agrees to amend such part
in such manner as may be reasonably requested by the Executive provided that such proposed
amendment is legal and enforceable and to the maximum extent possible carries out the original
intent of the parties in relation to that part. If this Agreement cannot or is not amended in a
manner that preserves the economic value (over the Initial Term) of this Agreement to Executive,
then Executive will be entitled to resign from employment with the Company for “Good Reason.”
12.8 Interpretation; Construction. The headings set forth in this Agreement are for
convenience only and shall not be used in interpreting this Agreement. This Agreement has been
drafted by legal counsel representing the Company, but Executive has participated in the
negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an
opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired,
and, therefore, the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of this Agreement.
12.9 Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the State of California. Each party consents to the jurisdiction and venue of the
state or federal courts in Los Angeles County, California in any action, suit or proceeding arising
out of or relating to this Agreement.
12.10 Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery
when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by
telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or
(d) by certified or registered mail, return receipt requested, upon verification of receipt.
Notice shall be sent to the addresses set forth below, or such other address as either party may
specify in writing.
12.11 Survival. The following provisions shall survive Executive’s employment with
the Company to the extent reasonably necessary to fulfill the parties’ expectations in entering
this Agreement: Sections 7, (“Business and Personal Expenses”), 8 (“Termination of Employment”),
10 (“Confidentiality”), 11 (“Interference with Business Relations”), 12 (“General Provisions”) and
13 (“Entire Agreement”).
13. Entire Agreement. This Agreement, together with the other agreements and
documents governing the benefits described in this Agreement constitute the entire agreement
between the parties relating to this subject matter hereof and supersedes all prior or simultaneous
representations, discussions, negotiations, and agreements, whether written or oral. This
Agreement may be amended or modified only with the written consent of Executive and the Board of
Directors of the Company. No oral waiver, amendment or modification will be effective under any
circumstances whatsoever.
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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND
EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES
SHOWN BELOW.
| XXXXXXX X. XXXXXXXX |
||||
| /s/ Xxxxxxx X. Xxxxxxxx | ||||
| Dated: April 11, 2011 | ||||
| SPARK NETWORKS, INC |
||||
| /s/ Xxxx X. Xxxxxx | ||||
| Xxxx X. Xxxxxx | ||||
| Chairman of the Board of Directors | ||||
Dated: April 11, 2011 |
||||
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