EMPLOYMENT, CONFIDENTIALITY, NON-COMPETITION, NON-SOLICITATION AND INVENTIONS AGREEMENT
EMPLOYMENT,
CONFIDENTIALITY, NON-COMPETITION,
This
AGREEMENT (the “Agreement”)
is
made as of October 8, 2008 (the “Effective
Date”),
by
and between Morlex, Inc., an Colorado corporation with its headquarters located
at 000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx Xxxx 00000 (the “Company”)
and
Xxxxxx Xxxxxx (the “Executive”).
In
consideration of the mutual covenants contained in this Agreement, the Employer
and the Executive agree as follows:
1. Employment
Capacity; Term.
(a) The
Company agrees to employ the Executive, and the Executive agrees to serve the
Company, during the Term of Employment (as hereinafter defined), as Chief
Executive Officer of the Company, with such duties consistent with such capacity
as may be assigned to him by the Board of Directors of the Company (the
“Board”).
The
Executive shall perform all services to be rendered hereunder faithfully, devote
his full business time and attention to the duties assigned to him by the Board
and use his best efforts to promote the business interests of the Company.
During the Executive’s employment with the Company, the Executive shall also
serve as a member of the Board and in such additional capacities as may from
time to time be designated by the Board, without additional compensation.
(b) Employment
of the Executive pursuant to the terms of this Agreement shall continue for
two
years from the date hereof, to be renewed annually for successive one-year
terms
thereafter, unless terminated by the Company or the Executive (the “Term
of Employment”),
subject to the terms and conditions hereinafter set forth.
2. Compensation.
The
Company agrees to compensate the Executive for the services rendered by him
during his employment as follows:
(a) The
Company shall (i) pay the Executive an annual salary of Three Hundred Fifty
Thousand Dollars ($350,000) payable in accordance with the standard payroll
practices of the Company (“Base”),
which
may be revised annually by the Board, (ii) pay the Executive an annual bonus
equal to 50% of Base, conditioned upon the achievement of the annual EBITDA
target as set by the Board from time to time (the “Annual
Bonus”),
(iii)
pay the Executive a quarterly bonus of Ten Thousand Dollars ($10,000),
conditioned upon the achievement of each quarterly EBITDA target as set by
the
Board from time to time (the “Quarterly
Bonus”),
(iv)
grant
to
the Executive options to purchase the common stock of the Company equal
to
5% of
the issued and outstanding stock of the Company as of the date hereof at a
price
of $0.75
per
share, vesting as follows: one-third on the one-year anniversary of the date
hereof and the remainder vesting equally quarterly over a two-year period
thereafter (the “Options”),
and
(v) beginning in 2009, every year that this Agreement is in effect grant the
Executive additional incentive options to purchase the common stock of the
Company equal to 1% of the issued and outstanding stock of the Company at such
time at the market price, such grants to be conditioned upon the achievement
of
the respective annual EBITDA targets as determined by the Board, or as otherwise
approved by the Board from time to time (the “Incentive
Options”,
and
collectively with the Base, Annual Bonus, Quarterly Bonus and Options, the
“Compensation”).
The
Executive’s Compensation shall be reviewed annually on the anniversary of this
Agreement. All options will be granted pursuant to the adoption of a Company
Stock Option program, which will be adopted in the 2009 annual proxy statement,
and will include typical vesting acceleration language as approved by the Board.
The vesting of the Options and the Incentive Options will be accelerated upon
a
“change of control” of the Company, to be defined in the Company Stock Option
program, and the option grant agreement of the Executive will provide
accordingly.
(b) The
Executive shall be permitted to participate in all employee medical, retirement
and insurance benefit plans applicable to similarly-situated executives of
the
Company, and such other plans as may from time to time be made available or
applicable to the Executive, consistent with the policies of the
Company.
(c) The
Executive shall be permitted to take four weeks of paid vacation annually.
Accrued vacation not taken in any calendar year may not be carried forward
or be
usable in any subsequent calendar year. Paid holidays may be taken in accordance
with the holiday policy and schedule of the Company as from time to time in
effect.
(d) The
Company shall reimburse the Executive, consistent with the Company’s expense
reimbursement policies and procedures as in effect from time to time and subject
to receipt of appropriate documentation, for all reasonable and necessary
out-of-pocket travel, business entertainment and other business expenses
incurred or expended by him incident to the performance of his duties hereunder;
provided,
however,
that, in
order to qualify for reimbursement for any expense that exceeds
$10,000 in
the
aggregate, Executive shall obtain the Company’s approval prior to the incurrence
of such expense.
3. Termination.
(a) For
Cause.
The
Company may terminate the Executive’s employment at any time for Cause (as
defined below). For the purposes of this Agreement, “Cause”
shall
mean the occurrence of one or more of the following: (i) habitual
drunkenness or any substance abuse which adversely affects the Executive’s
performance of his or her job responsibilities, (ii) commission of a
felony, (iii) dishonesty relating to the Executive’s employment, (iv)
personal misconduct by the Executive which could cause the Company to violate
any state or federal law relating to sexual harassment, sex or other prohibited
discrimination, or any intentional violation of any written policy of the
Company or any successor entity adopted in respect to any such law,
(v) conduct in the performance of the Executive’s employment which the
Executive knows or should reasonably be expected to know (either as a result
of
a prior warning by the Company, custom within the industry or the flagrant
nature of the conduct) violates applicable law or causes the Company to violate
applicable law in any material respect, (vi) failure to follow the lawful
instructions of the Company’s Board, provided compliance with such instructions
was within the scope of the Executive’s duties, if such failure continues
uncured for a period of fifteen (15) days after receipt by the Executive of
written notice from the Company stating that continuation of such failure would
constitute grounds for termination for Cause, (vii) gross
incompetence, or (viii)
violation of any confidentiality or non-competition provision at any time
applicable to the Executive, or any other material provision of this Agreement.
(b) Upon
Death or Disability.
This
Agreement shall automatically terminate upon the death of the Executive and
may
be terminated by the Company upon the Disability of the Executive. For purposes
of this Section 3, the Executive shall be deemed disabled (and termination
of
his employment shall be deemed to be due to such “Disability”)
if an
independent medical doctor (selected by the Company’s applicable health or
disability insurer) certifies that the Executive has, for a cumulative period
of
more than one hundred twenty (120) days during any 365-day period, been disabled
in a manner which seriously interferes with his or her ability to perform the
essential functions of his or her job even with a reasonable accommodation
to
the extent required by law. Any refusal by the Executive to submit to a medical
examination for the purpose of certifying Disability shall be deemed
conclusively to constitute evidence of the Executive’s Disability.
(c) For
Convenience of the Company.
Notwithstanding any other provisions of this Agreement, the Company shall have
the right to terminate the Executive’s employment at the “Company’s
Convenience”
(i.e.,
for any reason other than Cause, death or Disability) upon ninety (90) days’
notice.
(d) Resignation;
Good Reason.
Notwithstanding any other provisions of this Agreement, the Executive shall
have
the right to resign at any time upon ninety (90) days’ written notice to the
Company (whether or not for Good Reason). For purposes hereof, resignation
by
the Executive based on either of the following shall constitute resignation
for
“Good
Reason”:
(i) a
transfer of the Company’s offices, or a transfer of the Executive (other than on
a temporary basis), to a location which would increase the Executive’s commute
(by the most direct route) from his permanent residence by more than fifty
(50)
miles in each direction, in either case without Executive’s consent, provided
such resignation occurs within thirty (30) days following the date of transfer,
or (ii) a material breach by the Company of this Agreement, which breach
continues uncured for a period of forty-five (45) days after receipt by the
Company of written notice thereof from the Executive specifying the breach,
provided such resignation occurs within ten days following the expiration of
the
45-day cure period.
(e) Effect
of Termination on Compensation.
i) Termination
for Cause; Resignation.
In the
event Executive’s employment with the Company is terminated by the Company for
Cause or the Executive resigns (for reasons other than for Good Reason), the
Company shall have no further liability to Executive hereunder, whether for
Compensation, benefits, incentive compensation or otherwise, other than for
Base, benefits and any unused vacation accrued through the date of termination,
as well as reimbursement of expenses properly incurred through the date of
termination. In such events, the Executive may elect to continue, at his own
expense, medical insurance coverage to the extent mandated under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).
ii) Death
or Disability.
In the
event the Executive’s employment with the Company terminates as a result of the
death of the Executive or is terminated by the Company as a result of the
Disability of the Executive, the Executive shall be entitled to receive his
Base
and benefits described in Sections 2(a) and 2(c) accrued and expenses properly
incurred through the date of termination and any accrued incentive compensation
which has been earned but remains unpaid from the year prior to the year of
termination, as well as applicable health, disability or death benefits, if
any,
offered by the Company at the time consistent with the policies of the Company,
provided that Executive meets the eligibility requirements of such
benefits.
iii) Company’s
Convenience; Resignation for Good Reason.
In the
event the Executive’s employment with the Company is terminated by the Company
at the Company’s Convenience, or by the Executive for Good Reason, the Executive
shall be entitled to continue to receive the Base described in Section 2(a)
payable monthly in arrears, and, to the extent permitted by the terms of the
applicable group insurance policies, the benefits described in Section 2(b)
all
at the times and in the manner provided in such sections (and at the levels
in
effect at the date of termination), or compensation and benefits that, in the
aggregate, are comparable to those described in Sections 2(a) and 2(b), for
the
Severance Period (as defined below). To the extent the Executive is not eligible
for continued participation in the Company’s group medical insurance program,
the Company shall reimburse the Executive, on an after-tax basis, for a portion
of his COBRA premiums during the Severance Period equal to the excess of what
he
would have paid as an employee and the amount payable under COBRA. As used
herein, the term “Severance
Period”
shall
mean the period beginning on the date of termination of Executive’s employment
with the Company and expiring (A) six (6) months following the date of
termination so long as the Executive has been employed with the Company for
more
than six (6) months but less than eighteen (18) months prior to his termination;
(B) twelve (12) months following the date of termination so long as the
Executive has been employed with the company for more than eighteen (18) months
but less than thirty (30) months prior to his termination; or (C) eighteen
(18)
months following the date of termination so long as the Executive has been
employed with the company for at least thirty (30) months prior to his
termination. The Executive shall not receive any severance benefits unless
he
has been employed with the Company for at least six (6) months. In no event
shall Executive receive severance benefits for a period longer than the
Severance Period set forth in Section 3(e)(iii)(C) herein.
As
a
condition to receiving the severance benefits described in this Section
3(e)(iii), the Executive shall be required to execute and deliver to the Company
the written confirmation described in Section 4(b)(ii) and a general release
of
all claims (including without limitation all claims for breach of contract,
for
employment discrimination under Title VII of the Civil Rights Act of 1964,
as
amended, and claims under the Americans with Disabilities Act of 1990, the
Equal
Pay Act of 1963, the Age Discrimination in Employment Act of 1967, the Older
Workers Benefit Protection Act of 1990, the Civil Rights Act of 1866, the Family
and Medical Leave Act of 1993, the Civil Rights Act of 1991, the Employee
Retirement Income Security Act of 1974 and any equivalent state, local and
municipal laws, rules and regulations) he may have against the Company, its
Affiliates (as defined below), and the officers, directors, shareholders (and
related entities) and agents of the Company and its Affiliates, in each case
in
such form as may be reasonably requested by the Company. Upon the occurrence
of
any material breach of this Agreement (it being understood that, without
limitation, any breach of Sections 4, 5 or 6 shall be deemed material), the
Company shall have no further liability to pay severance benefits hereunder
and
may, in addition to exercising any other remedies it may have hereunder or
under
law, immediately discontinue payment of remaining unpaid severance benefits.
As
used in this Agreement, an “Affiliate”
of
the
Company shall mean any corporation, partnership, limited liability company
or
other entity which, directly or indirectly, controls, is under common control
with or is controlled by the Company at any time. For the purposes of this
definition, “control,” as used with respect to any entity, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
the ownership of voting securities or voting interests, by contract or
otherwise.
4. Confidentiality.
(f) The
Executive recognizes and acknowledges that certain information possessed by
the
Company and its Affiliates constitutes valuable, special, and unique proprietary
information and trade secrets. Accordingly, the Executive agrees that he or
she
shall not, during the term of his or her employment with the Company or at
any
time thereafter, divulge, use, furnish, disclose or make available to any
person, whether or not a competitor of the Company, any confidential or
proprietary information concerning the assets, business, or affairs of the
Company, of any of its Affiliates, or of its suppliers, customers, licensees
or
licensors including, without limitation, financial information concerning the
Company or its Affiliates, information regarding trade secrets and information
(whether or not constituting trade secrets) concerning sources of supply, costs,
pricing practices, telemarketing sales techniques, sales training techniques,
formulas, business plans, marketing plans, strategies, forecasts, unpublished
financial data, budgets, projections, customer and supplier identifiers,
peculiar likes and fancies, customer characteristics (product preferences,
contact person, pricing, when to make sales call, purchase patterns, etc.),
agreements, inventions, improvements, research or development, test results,
product specifications, know-how, manufacturing and technical processes, product
designs, source codes and production applications, or any other confidential
information which gives the Company or its Affiliates an opportunity to claim
a
competitive advantage or has economic value (collectively, “Confidential
Information”).
The
foregoing shall not be applicable to any information which is required to be
disclosed by law, provided that the Executive provides prompt notice to the
Company of such disclosure request and assists the Company in preventing such
disclosure.
(g) Upon
the
resignation or termination of the Executive's employment, for any reason,
whether voluntary or involuntary and whether by the Company or the Executive,
or
at any time the Company may request, the Executive shall (i) surrender to
the Company all documents and data of any kind (including data in
machine-readable form) or any reproductions (in whole or in part) of any items
relating to the Confidential Information and shall not make or retain any copy
or extract of any of the foregoing, and (ii) will confirm in writing that to
his
or her knowledge, after inquiry, no Confidential Information exists on any
computers, computer storage devices or other electronic media that were at
any
time within the Executive’s control (other than those which remain at, or have
been returned to, the Company).
5. Non-Competition,
Non-Solicitation and Non-Association.
(h) In
consideration of this Agreement and all the recitals and provisions contained
herein, and in view of the Executive’s participation in and access to the unique
and valuable information of the current and proposed business activities of
the
Company and its Affiliates in all aspects, the Executive covenants and agrees
that, during the Term of Employment and thereafter during the Restrictive Period
(as defined below), the Executive shall not, directly or indirectly:
i) except
in
the ordinary course performance of his duties as an employee of the Company,
induce or attempt to induce or encourage others to induce or attempt to induce,
any person who is an employee of, consultant to or agent of the Company or
any
Affiliate of the Company as of the date of termination of Executive’s
employment, to (x) terminate such person’s employment with such employer (in the
case of an employee) or cease providing its services to the Company or its
Affiliates (in the case of a consultant or sales or other commercial
representative), provided
that
nothing herein shall prevent general solicitations through advertising or
similar means which are not specifically directed at employees of, consultants
to or agents of the Company or its Affiliates; or (y) engage in any of the
activities hereby prohibited with respect to the Executive under subparagraphs
(ii) and (iii) below;
ii) in
any
Competitive Area (as defined below), directly or indirectly engage in, or make
any financial investment in any Person (other than the Company) which engages
in, the design, development, production, marketing or sales of products and
services related to the internet-focused data and direct marketing business
(including, without limitation, internet sales and advertising, lead generation,
and publication of online financial newsletters); provided
that
this
Section 5(a)(ii) shall not prohibit Executive from acquiring, solely as an
investment, marketable securities of a publicly traded entity constituting
less
than two percent (2%) of the capital stock of such entity. For purposes of
this
Section 5(a)(ii), “Competitive
Area”
shall
mean the States and Territories of the United States and Canada.
iii) divert,
solicit or attempt to divert, or assist or encourage any person in diverting,
soliciting or attempting to divert, to or for any competitor of the Company
or
any of its Affiliates, any customer, vendor or supplier of the Company or any
Affiliate of the Company.
(i) As
used
in this Section 5, “Restrictive
Period”
shall
mean six (6) months from the date of the termination of Executive’s employment
with the Company for any reason.
6. Rights
in Company Property; Inventions.
(j) The
Executive hereby recognizes the Company’s proprietary rights in the tangible and
intangible property of the Company and its Affiliates and acknowledges that
notwithstanding the relationship of employment, the Executive has not obtained
or acquired and will not hereafter obtain or acquire through such employment
any
personal property rights in any of the property of the Company and its
Affiliates, including but not limited to, any writing, communications, manuals,
documents, instruments, contracts, agreements, files, literature, data,
technical information, know-how, secrets, formulas, products, methods,
procedures, processes, devices, apparatuses, trademarks, trade names, trade
styles, service marks, logos, copyrights, works of authorship, patents, or
other
matters which are the property of the Company and its Affiliates.
(k) The
Executive agrees that any and all discoveries, inventions, works of authorship
improvements and innovations (including all data and records pertaining
thereto), whether or not patentable, or copyrightable, or reduced to writing
(collectively, “Inventions”),
which
during his or her employment by the Company, the Executive conceived or made,
or
conceives or makes, either alone or in conjunction with others, which are
related to the business of the Company and its Affiliates, are and shall be
the
sole and exclusive property of the Company and its Affiliates, except for those
inventions and discoveries conceived by the Executive prior to commencement
of
his or her employment with the Company or its predecessor which are disclosed
on
Schedule
A
of this
Agreement. The Executive shall promptly disclose all Inventions to the Company
conceived during the period of his or her employment. At the request of the
Company and at anytime during or after the Executive’s employment with the
Company, the Executive shall execute any assignments or other documents the
Company and its Affiliates may deem necessary to protect or perfect its rights
in the Inventions, and shall assist the Company, at the Company’s expense, in
obtaining, defending and enforcing the Company’s and its Affiliates’ rights
therein. The Executive hereby appoints the Company as his or her
attorney-in-fact to execute on his or her behalf any assignments or other
documents deemed necessary by the Company to protect or perfect its rights
to
any Inventions.
7. Enforcement;
Modification.
(l) The
Executive further acknowledges and agrees that any breach or threatened breach
by the Executive of any provision of Section 4, 5 or 6 due to his unique
services provided to the Company as further detailed above will result in
irreparable injury to the Company (or its Affiliates), that monetary damages
will be an inadequate remedy for such breach and that, accordingly, in addition
to any other remedy that the Company may have, the Company shall be entitled
to
injunctive relief in the event of any breach hereof without posting bond or
other security. In the event the Company brings an action to obtain such relief,
the prevailing party in such action shall be entitled to recover its attorney’s
fees and other expenses incurred in said action, and the court in which said
action is brought shall award such expenses to the prevailing party as part
of
the costs of such action.
(m) It
is
expressly agreed that if any restrictions set forth in Section 4, 5 or 6 are
found by any Court having jurisdiction to be unreasonable because they are
too
broad in any respect, then and in each such case, the remaining restrictions
herein contained shall nevertheless remain effective, and this Agreement, or
any
portion thereof, shall be considered to be amended so as to be considered
reasonable and enforceable by such Court, and the Court shall specifically
have
the right to restrict the business, geographical or temporal scope of such
restrictions to any portion of the business or geographic areas or time period
described above to the extent the Court deems such restriction to be necessary
to cause the covenants to be enforceable, and in such event, the covenants
shall
be enforced to the extent so permitted.
8. General.
(n) Notices.
All
notices and other communications hereunder shall be in writing or by written
telecommunication, and shall be deemed to have been duly given if delivered
personally or if mailed by certified or registered mail, or if sent by confirmed
written telecommunication, to the relevant address set forth below, or to such
other address as the recipient of such notice or communication shall have
specified to the other party hereto in accordance with this Section
8(a):
If
to the
Company, to:
Morlex,
Inc.
000
Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxxx, Chairman
Facsimile:
(000) 000-0000
with
a
copy to:
Butzel
Long
000
Xxxxxxx Xxxxxx - 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxx Xxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
If
to the
Executive:
At
the
address shown below his signature below.
(o) Successors
and Assigns.
This
Agreement shall be binding upon the Executive and inure to the benefit of the
Company and its successors and assigns, including without limitation any
corporation to which substantially all of the assets or the business of the
Company are sold or transferred.
(p) Severability.
If any
provision of this Agreement is or becomes invalid, illegal or unenforceable
in
any respect under any law, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be affected or
impaired.
(q) Waivers.
No
delay or omission by either party hereto in exercising any right, power or
privilege hereunder shall impair such right, power or privilege, nor shall
any
single or partial exercise of any such right, power or privilege preclude any
further exercise thereof or the exercise of any other right, power or
privilege.
(r) Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same
instrument. A facsimile or telecopied signature shall be deemed an original
for
all purposes.
(s) Governing
Law.
This
Agreement and the performance hereof shall be construed and governed in
accordance with the laws of the State of California.
(t) Waiver
of Jury Trial.
THE
PARTIES TO THIS AGREEMENT FURTHER AGREE THAT TO THE FULLEST EXTENT ALLOWED
BY
LAW, EACH PARTY EXPRESSLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY A
JURY IN CONNECTION WITH ANY CONTROVERSY, CLAIM OR DISPUTE (A “CONTROVERSY”)
BETWEEN THE PARTIES ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY ACTUAL
OR
ALLEGED BREACH THEREOF. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS
VOLUNTARILY MADE BY IT AND THAT IT IS INFORMED AS TO AND UNDERSTANDS THE
CONSEQUENCES THEREOF AND THAT EACH PARTY EXPECTS, IN THE EVENT OF SUCH
CONTROVERSY, THAT THE OTHER PARTY WILL SEEK TO ENFORCE THIS WAIVER.
(u) Consent
to Jurisdiction.
Each of
the Company and the Executive agrees to submit to the non-exclusive jurisdiction
of the courts in and of the State of New York, and consents that service of
process with respect to any action or proceeding relating to this Agreement
may
be made by registered mail to it at its address set forth herein.
(v) Entire
Agreement.
This
Agreement contains the entire agreement between the parties concerning the
subject matter hereof and supercedes any prior employment, severance,
confidentiality or invention assignment agreement between the parties hereto,
provided
however,
that
the Company reserves and shall retain all rights and remedies it may have
against the Executive with respect to any breach of any prior confidentiality
and invention assignment agreements.
IN
WITNESS WHEREOF, the parties have duly executed this Agreement to be effective
as of the date first above written.
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MORLEX,
INC.
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Name:
Xxxxxxx X. Xxxxxx
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Title:
Chairman and Chief
Executive Officer
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/s/
Xxxxxx Xxxxxx
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Xxxxxx
Xxxxxx
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| Address: | |||
Schedule
A
Inventions
Conceived By Executive
Prior
to Employment with the Company
The
following inventions are excluded from the provisions of Section 6 of the
Agreement:
[●].
