Exhibit 10.6.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1998 by and among Mr. Xxx
Xxxxxx (the "Stockholder"), Xxxxxx Digital Corporation, a Connecticut
corporation ("Xxxxxx Digital"), xxxxxxxxx.xxx LLC, a Delaware limited liability
company ("PriceLine" and, together with Xxxxxx Digital, the "Companies"), and
Mr. Xxxxx Xxxx, a resident of the State of Connecticut (the "Employee").
WHEREAS, the Stockholder (or trusts established for the benefit of
members of the Stockholder's family) currently owns substantially all of the
issued and outstanding common stock, without par value, of Xxxxxx Digital
("Xxxxxx Digital Stock");
WHEREAS, the Stockholder (or trusts established for the benefit of
members of the Stockholder's family) and Xxxxxx Digital currently own
substantially all of the common equity units of PriceLine ("PriceLine Units");
and
WHEREAS, the Stockholder and the Companies desire that the Employee
continue to serve as the Chief Operating Officer of PriceLine and the Employee
desires to continue to so serve under the terms and conditions of this
Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties
agree as follows:
1. EMPLOYMENT.
(a) The Companies agree to continue to employee the Employee, and the
Employee hereby agrees to continue to serve the Companies, upon the terms and
subject to the conditions set forth herein. The Companies hereby agree to
continue to engage the Employee, and the Employee hereby agrees to continue to
serve, as a the Chief Operating Officer of each of the Companies upon the terms
and subject to the conditions set forth herein.
(b) During the Term (as defined herein), the Employee shall serve as
the Chief Operating Officer of each of the Companies and shall have such
responsibilities, duties and authority consistent with the position of Chief
Operating Officer as may from time to time be determined by the respective board
of directors of each of the Companies.
(c) During the Term, the Employee shall diligently and faithfully
serve the Companies and devote substantially all of his working time and efforts
to the business and affairs of the Companies.
(d) Upon the mutual agreement of the Employee and the Stockholder,
the Employee may be employed pursuant to this Agreement by an entity (the "New
Employer") other than the Companies that is controlled by the Stockholder, in
which event (i) the Employee shall be deemed to be employed by the New Employer
pursuant to the terms of this Agreement and the Term shall continue as if the
Employee continued to be employed by the Companies, (ii) the Employee shall be
entitled to the Options vested at the time of such transfer of employment and
(iii) (A) the Employee shall have the right to receive options to purchase
equity interests in the New Employer in lieu of the Options that are not vested
at the time of such transfer of employment and (B) the Employee and the
Stockholder shall negotiate in good faith to ensure that such options have an
equivalent profit opportunity over the term of this Agreement as the unvested
Options at the time of such transfer. For example, if the reasonably anticipate
value of the unvested Options at the time of the Employee's transfer of
employment equals $2 million, then the Employee would receive options to
purchase equity interests in the New Employer valued at $2 million that would be
subject to the same terms and conditions as the unvested Option.
2. TERM. Subject to Section 5 hereof, the term of the employment by
the Companies of the Employee pursuant to this Agreement (the "Term") is for an
initial period commencing on January 1, 1998 and terminating on January 1, 2001.
3. COMPENSATION.
(a) BASE SALARY. In partial consideration of the Employee's services
to be rendered pursuant hereto and the Employee's agreement to the covenants and
restrictions set forth in Section 8 hereof, the Companies shall pay to the
Employee, effective as of January 1, 1998, an annual base salary of $225,000,
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subject to annual adjustment (the "Base Salary"), such salary to be payable to
the employee in semi-monthly installments in accordance with the Companies'
customary payroll practices. PriceLine and Xxxxxx Digital will allocate such
payments between them in their discretion.
(b) CASH BONUS. The Employee shall be eligible to participate in
any cash bonus program introduced by PriceLine at a level commensurate with the
Employee's position and responsibility.
(c) ISSUANCE OF PRICELINE UNITS. In partial consideration for the
services previously rendered by the Employee, the services to be rendered
pursuant hereto and the Employee's agreement to the covenants and restrictions
set forth in Section 8 hereof, PriceLine shall issue and deliver to the Employee
on the date of this Agreement a certificate or certificates representing
2,700,000 PriceLine Units (representing approximately 36% of the founders'
equity of PriceLine and approximately 3.9% of PriceLine's estimated
capitalization), free and clear of any lien, encumbrance, security interest,
mortgage, pledge, charge, claim, option, right of first refusal or call, or
restriction of any kind, other than the restrictions provided for herein. Upon
such delivery of PriceLine Units, the Employee shall agree in writing to be
bound by the terms and conditions of the Limited Liability Company Agreement
dated as of July 18, 1997 by and among PriceLine and its members (as the same
may be amended through the time of exercise or any successor agreement, the
"PriceLine LLC Agreement") and any other agreement pertaining to the rights of
equity holders of PriceLine, and will, if requested by PriceLine or the
Stockholder, execute a separate statement to such effect.
(d) PRICELINE OPTION.
(i) In partial consideration for the services previously
rendered by the Employee, the services to be rendered pursuant hereto and the
Employee's agreement to the covenants and restrictions set forth in Section 8
hereof, PriceLine hereby grants to the Employee, effective as of the date
hereof, an option (the "PriceLine Option") to purchase, on the terms set forth
in this Section 3(d), up to 2,200,000 PriceLine Units, which represent
approximately 3.2% of PriceLine's estimated capitalization.
(ii) The PriceLine Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
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(iii) The PriceLine Option is exercisable at an aggregate
exercise price of $2,200,000, or a per security exercise price of $1.00 per
PriceLine Unit.
(iv) Subject to Section 5 hereof, the PriceLine Option shall
become exercisable as to (A) 1,200,000 of the PriceLine Units underlying the
PriceLine Option on the earlier of (x) the day on which the 5,000th airline
ticket is sold through PriceLine's xxxxxxxxx.xxx website and (y) December 31,
1998 (the "Launch Vesting Date"); (B) 500,000 of the PriceLine Units underlying
the PriceLine Option on the first anniversary of the Launch Vesting Date; and
(C) 500,000 of the PriceLine Units underlying the PriceLine Option on the second
anniversary of the Launch Vesting Date.
(v) Except as otherwise specifically provided for in this
Agreement, the PriceLine Option shall be governed by the terms of the Omnibus
PriceLine Option Plan and related Option Agreement.
(e) WD/CASH OPTION.
(i) In partial consideration for the services previously
rendered by the Employee, the services to be rendered pursuant hereto and the
Employee's agreement to the covenants and restrictions set forth in Section 8
hereof, Xxxxxx Digital hereby grants to the Employee, effective as of the date
hereof and upon the terms set forth in this Section 3(e), an option (the
"WD/Cash Option," and together with the PriceLine Option, the "Options" ) to (A)
purchase up to 500 shares of Xxxxxx Digital Stock, which represent approximately
.5% of Xxxxxx Digital's estimated capitalization or (B) elect to receive a cash
payment (the "Cash Payment") from the Stockholder in an amount equal of the
product of (1) the difference between (x) the per share fair market value (as
determined pursuant to Section 3(e)(vi) hereof) of the common stock of NewSub
Services, Inc., a Connecticut corporation ("NewSub"), on the date of exercise of
the WS/Cash Option minus (y) $30,709.74 (the per share fair market value of the
common stock of NewSub on the date hereof) multiplied by (2) 32.563 (the
"Reference Factor").
(ii) The WD/Cash Option is not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
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(iii) The WD/Cash Option is exercisable in the aggregate for
(A) 500 shares of Xxxxxx Digital Stock at an aggregate exercise price of
$1,000,000, or a per security exercise price of $2,000 per share of Xxxxxx
Digital Stock (the "WD/Cash Exercise Price") or (B) the Cash Payment.
(iv) The per security exercise price for Xxxxxx Digital Stock
was determined on the basis of a $200 million valuation of Xxxxxx Digital, after
giving effect to presently anticipated equity transactions. The Reference Factor
of 32.563 was determined on the basis of a $270 million valuation of NewSub and
8,792 issued and outstanding shares of common stock of NewSub as of March 9,
1998.
(v) The WD/Cash Option shall become exercisable upon the
issuance of the WD/Cash Option. The WD/Cash Option may be exercised for Xxxxxx
Digital Stock or the Cash Payment by written notice delivered in person or by
mail to Xxxxxx Digital and the Stockholder specifying either the number of
shares of Xxxxxx Digital Stock that the WD/Cash Option is being exercised for or
that the WD/Cash Option is being exercised for the Cash Payment. If the WD/Cash
Option is exercised for Xxxxxx Digital Stock, the WD/Cash Exercise Price shall
be paid in full and in cash at the time of exercise to Xxxxxx Digital. Unless
sooner exercised or terminated pursuant to the terms of this Agreement, the
WD/Cash Option shall be cancelled and be of no further force and effect after
January 1, 2001 (the "Expiration Date").
(vi) The per share fair market value of the common stock of
NewSub on the date of exercise of the WD/Cash Option shall be determined in good
faith by the Stockholder, PROVIDED, HOWEVER, if the Employee challenges such
valuation within thirty (30) days of being notified of such valuation, then the
valuation shall be determined in the following manner:
(A) First, the Stockholder and the Employee shall each
select a financial advisor who shall work together to determine the per share
fair market value of the common stock of NewSub on the date of exercise of the
WD/Cash Option; and
(B) Second, if the financial advisors of the Stockholder
and the Employee are not able to mutually agree on the per share fair market
value of the common stock of NewSub on the date of exercise of the
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WD/Cash Option, then the financial advisors shall jointly select a third
financial advisor to determine such value.
(vii) In determining the per share fair market value of the
common stock of NewSub on the date of exercise of the WD/Cash Option pursuant to
Section 3(e)(vi) , the Stockholder and the Employee shall each be responsible
for the fees, costs and expenses of their own financial advisor and shall
equally divide the fees, costs and expenses of the third financial advisor.
(f) ISSUANCE OF XXXXXX DIGITAL STOCK. The Employee will be issued
10% of the Xxxxxx Digital Stock as founder's equity effectively granted "as of"
June 30, 1996. This investment was diluted by capital contributions in the
amount of $5,977,843 that were made by the Stockholder from June 30, 1996
through December 31, 1997 based on a $20 million pre-investment valuation,
thereby diluting the Employee's equity stake to 7.7% by virtue of the
Stockholder's investment during such period. Such issuance will be in the form
of a profits interest and will be made as soon as practicable following the
recapitalization of Xxxxxx Digital to an limited liability company. The
tag-along and conversion provisions set forth in Section 3(g) hereof shall also
apply to the units received in such grant. The Employee will have the right to
maintain his base 10% stake in Xxxxxx Digital by giving the Stockholder a
personal recourse note accumulating interest at the rate of 12% compounded
annually in a principal amount equal to 10% of the Stockholder's investment
during this period (i.e., $597,784). The Stockholder's investment in Xxxxxx
Digital beginning January 1, 1998 will be based on a $100 million valuation,
subject to adjustment up or down based on changes in fair market value and
subject to fiduciary obligations to other shareholders. The Employee will have
the right to preserve his ownership percentage in Xxxxxx Digital by investing
cash in Xxxxxx Digital at the same valuation as any new investments. The
Employee will be diluted ratably with the Stockholder for the $5 million of
Xxxxxx Investment Unit subscriptions based on a $200 million valuation of Xxxxxx
Digital, thereby reducing Employee's investment ownership to 7.7%. The Employee
will have the right to co-invest with the Stockholder on a pari passu basis in
any venture that licenses or otherwise receives Xxxxxx Digital intellectual
property. In addition, it is currently anticipated that the Employee will
receive 30% of a management participation pool of 20% (i.e., 6% of the total) of
the 1996 Xxxxxx Digital patents and 20% of a management participation pool of
20% (i.e., 4% of the total) of the 1997 Xxxxxx Digital patents. Xxxxxx Digital
will hold approximately 7.3% of the fully diluted equity of PriceLine. In the
event that Xxxxxx Digital does not create any such management participation
pools or effect
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the aforementioned recapitalization, the Employee and the Stockholder will
negotiate in good faith for a comparable management participation arrangement or
comparable founders' stock arrangement, as the case may be..
(g) ADJUSTMENT.
(i) In the event that, following March 9, 1998, Xxxxxx Digital
or PriceLine effects an extraordinary dividend or other extraordinary
distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spin-off, combination, repurchase or
share exchange, or other similar corporate transaction or event that affects the
Xxxxxx Digital Stock, PriceLine Units, as the case may be, such that an
adjustment is appropriate to prevent dilution or enlargement of the rights of
the Employee with respect to the Options, then Xxxxxx Digital or PriceLine, as
the case may be, shall make such equitable changes or adjustments as Xxxxxx
Digital, with respect to the Xxxxxx Digital Stock, and PriceLine with respect to
the PriceLine Units, deems necessary or appropriate to any or all of (A) the
number and kind of equity securities for which the Options are exercisable and
(B) exercise price of the Options.
(ii) In the event that, following March 9, 1998, NewSub effects
an extraordinary dividend or other extraordinary distribution, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
spin-off, combination, repurchase or share exchange, or other similar corporate
transaction or event that affects the common stock of NewSub, such that an
adjustment is appropriate to prevent dilution or enlargement of the rights of
the Employee with respect to the WD/Cash Option, then the Stockholder shall make
such equitable changes or adjustments to the WD/Cash Option as the Stockholder
deems necessary or appropriate to the maximum Reference Factor and Section
3(e)(3). For example, in the event that NewSub declares a two-for-one stock
split the maximum Reference Factor would be increased to 65.126 and Section
3(e)(3) would be adjusted accordingly.
(iii) The parties hereto acknowledge and understand that
ordinary dividends and/or additional issuances of equity securities by Xxxxxx
Digital, PriceLine or NewSub for cash or property shall not result in an
adjustment under this Section 3(g), unless such issuances are to the Stockholder
or any member of the Stockholder's immediate family or any entity controlled by
the Stockholder or pursuant to a transaction that is not an "arm's length"
purchase of
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such securities, in either case, at a valuation less than the valuations set
forth in Sections 3(d) and 3(e) hereof.
(h) BENEFITS. During the Term, Xxxxxx Digital or PriceLine shall
provide the Employee with health, welfare and insurance benefits to the extent
and on the same terms as it provides such benefits to its executive officers.
The Employee also shall be entitled to participate in and receive any fringe
benefits or perquisites which may become available to the Companies' executive
officers.
(i) TAG-ALONG RIGHTS; CONVERSION.
(i) Except as set forth below, if the Stockholder proposes to
transfer, sell or otherwise dispose of PriceLine Units or shares of Xxxxxx
Digital Stock (other than to an affiliate, as defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended, of the Stockholder), the
Stockholder shall provide the Employee with not less than ten business days'
prior written notice of such proposed sale, which notice shall include all of
the terms and conditions of such proposed sale and identify the proposed
purchaser(s) ("Tag-Along Purchaser(s)") of such securities (the "Sale Notice").
The Employee shall have the option, exercisable by written notice given to the
Stockholder within ten business days after receipt of the Sale Notice, to
require the Stockholder to arrange for such Tag-Along Purchaser(s) to purchase
from the Employee, together with the Stockholder's securities, that number of
PriceLine Units or shares of Xxxxxx Digital Stock, as the case may be ("Employee
Put Shares"), equal to the product, rounded down to the nearest whole number, of
(a) a fraction, the numerator of which is the number of PriceLine Units or
shares of Xxxxxx Digital Stock, as the case may be, proposed to be sold by the
Stockholder and the denominator of which is the number of PriceLine Units or
shares of Xxxxxx Digital Stock, as the case may be, then owned by the
Stockholder, multiplied by (b) the number of PriceLine Units or shares of Xxxxxx
Digital Stock, as the case may be, then owned by the Employee, or any lesser
number of shares of such securities as the Employee shall desire. If the
Employee shall so elect, the Stockholder shall either (y) arrange for such
Tag-Along Purchaser(s) to purchase the Employee Put Shares at the same time as
and upon the same terms (including price per PriceLine Unit or share of Xxxxxx
Digital Stock) and conditions (including all direct or indirect consideration or
compensation) at which the Stockholder sells his PriceLine Units or shares of
Xxxxxx Digital Stock, as the case may be (it being understood that in the event
the Employee Put Shares require exercise, con-
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version or exchange to effect such sale, such exercise, conversion or exchange
may be made simultaneously with the closing of such sale), and provided that if
such Tag-Along Purchaser(s) elect to purchase only such aggregate number of
securities as originally agreed with the Stockholder, then the number of
securities to be sold by the Stockholder and the Employee shall be reduced pro
rata to such aggregate number or (z) not effect the proposed sale to such Tag
Along Purchaser(s).
(ii) Upon the conversion of PriceLine from a limited
liability company to a "C" corporation under the Code, the issued and
outstanding PriceLine Units owned by the Employee shall be converted into the
number of shares of stock of the successor corporation that is necessary for the
Employee to own the same percentage of the issued and outstanding stock of such
corporation immediately after such conversion as the Employee owned of the
issued and outstanding PriceLine Units immediately prior to such conversion.
(iii) In the event that PriceLine sells all or a
substantial portion of its assets outside of the ordinary course of business,
then the Employee shall be paid, as additional compensation, an amount equal to
the excess, if any, of (A) an amount equal to what would have been his "pro
rata" share of the net proceeds available for distribution to all holders of
PriceLine Units (calculated as if all holders of PriceLine Units were to receive
distributions strictly in accordance with the number of PriceLine Units
outstanding and owned by each member of PriceLine) over (B) the amount available
for distribution to him under the terms of the PriceLine LLC Agreement.
4. BUSINESS EXPENSES. The Employee shall be reimbursed for all
direct, out-of-pocket business expenses incurred by him in connection with his
employment (including, without limitation, expenses for travel and entertainment
incurred in conducting or promoting business for the Companies) upon timely
submission by the Employee of receipts and other documentation as required by
the Code and in accordance with the normal expense reimbursement policies of the
Companies.
5. TERMINATION.
(a) DEATH. The employment by the Companies of the Employee pursuant
to this Agreement shall be terminated upon the death of the
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Employee. In the event that this Agreement is terminated pursuant to this
Section 5(a), (i) the Employee's spouse or heirs shall be entitled to (A) the
Base Salary and benefits to be paid or provided to the Employee under this
Agreement through the Date of Termination (as defined herein) and (B) the Base
Salary and benefits to be paid or provided to the Employee under this Agreement
for the period commencing on the day after the Date of Termination and ending on
the later of (x) the six (6) month anniversary of the Date of Termination or
(y) January 1, 1999 and (ii) the Employee's executor, administrator or other
person entitled by law to his rights under the Options shall be entitled to
exercise the Options in accordance with the terms set forth in Section 3 as
though the Employee had not been terminated and vested Options shall be
exercisable at any time prior to the later of (A) one year after the Date of
Termination and (B) ninety days after the third anniversary of the date of this
Agreement. To the extent not exercisable pursuant to Section 3 hereof or this
Section 5(a), the Options shall immediately terminate on the Date of
Termination.
(b) DISABILITY. The employment by the Companies of the Employee
pursuant to this Agreement may be terminated by written notice to the Employee
at the option of either of the Companies, in the event that the Employee becomes
unable to perform his duties and responsibilities by reason of physical or
mental illness or accident for any six (6) consecutive month period. In the
event that this Agreement is terminated by the Companies pursuant to this
Section 5(b), the Employee shall be entitled to (i) the Base Salary and benefits
to be paid or provided to the Employee under this Agreement through the Date of
Termination; (ii) the Base Salary and benefits to be paid or provided to the
Employee under this Agreement for the period commencing on the day after the
Date of Termination and ending on the later of (A) the six (6) month anniversary
of the Date of Termination or (B) January 1, 1999; and (iii) exercise the
Options in accordance with the terms set forth in Section 3 as though the
Employee had not been terminated and vested Options shall be exercisable at any
time prior to the later of (A) one year after the Date of Termination and (B)
ninety days after the third anniversary of the date of this Agreement. To the
extent not exercisable pursuant to Section 3 hereof or this Section 5(b), the
Options shall immediately terminate on the Date of Termination.
(c) BY THE COMPANIES FOR CAUSE. This Agreement may be terminated by
either of the Companies by written notice to the Employee ("Notice of
Termination") upon the occurrence of any of the following events (each of which
shall constitute "Cause" for termination): (i) the commission by the
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Employee of any act of gross negligence, fraud or dishonesty causing harm to
either of the Companies; (ii) the conviction of the Employee of a felony; (iii)
intentional obtainment by the Employee of personal gain, profit or enrichment at
the expense of either of the Companies or from any transaction in which the
Employee has an interest which is adverse to the interest of either of the
Companies, unless the Employee shall have obtained the prior written consent of
the board of directors of the Company as to which his interest is adverse; (iv)
acts by the Employee in a manner which is materially detrimental or damaging to
either of the Companies' reputation, business operations or relations with its
employees, suppliers or customers; or (v) any material breach by the Employee of
this Agreement, including, without limitation, a breach of Section 1 or 8 hereof
or the Confidentiality Agreements (as defined herein), which breach, if able to
be corrected, remains uncorrected for a period of thirty (30) days after receipt
by the Employee of written notice from the Companies setting forth the breach.
In the event the employment by the Companies of the Employee is terminated
pursuant to this Section 5(c), the Employee shall be entitled to the Base Salary
and benefits to be paid or provided to the Employee under this Agreement through
the Date of Termination and the Options, whether or not then exercisable, may
not be exercised at any time on or after the Date of Termination.
(d) BY THE COMPANIES WITHOUT CAUSE. The employment by the Companies
of the Employee pursuant to this Agreement may be terminated by either of the
Companies at any time without Cause by delivery of a Notice of Termination to
the Employee. In the event that the employment by the Companies of the Employee
pursuant to this Agreement is terminated by the Companies pursuant to this
Section 5(d), the Employee shall be entitled to (i) the Base Salary and benefits
to be paid or provided to the Employee under this Agreement through the Date of
Termination; (ii) the Base Salary and benefits to be paid or provided to the
Employee under this Agreement for the period commencing on the day after the
Date of Termination and ending on the later of (A) the six (6) month anniversary
of the Date of Termination or (B) January 1, 1999; and (iii) exercise the
Options in accordance with the terms set forth in Section 3 as though the
Employee had not been terminated and vested Options shall be exercisable at any
time prior to ninety days after the third anniversary of the date of this
Agreement. To the extent not exercisable pursuant to Section 3 hereof or this
Section 5(d), the Options shall immediately terminate on the Date of
Termination.
(e) BY THE EMPLOYEE. The employment of the Employee by the Companies
pursuant to this Agreement may be terminated by the Employee at any
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time by delivery of a written notice of resignation to the Companies and the
Stockholder ("Notice of Resignation"). In the event the employment by the
Companies of the Employee pursuant to this Agreement is terminated by the
Employee pursuant to this Section 5(e), the Employee shall be entitled to (i)
the Base Salary and benefits to be paid or provided to the Employee under this
Agreement through the Date of Termination, (ii) exercise the PriceLine Option in
accordance with the terms set forth in Section 3(d) hereof, as to the number and
type of securities for which the PriceLine Option would be exercisable on the
next vesting date following the Date of Termination, at any time prior to 90
days after the Date of Termination and (iii) exercise the WD/Cash Option in
accordance with the terms set forth in Section 3(e) hereof, at any time prior to
90 days after the Date of Termination. To the extent not exercisable pursuant
to Section 3 hereof or this Section 5(e), the Options shall immediately
terminate on the Date of Termination.
(f) DATE OF TERMINATION. The Employee's Date of Termination shall be
(i) if the Employee's employment by the Companies is terminated pursuant to
Section 5(a) hereof, the date of his death, (ii) if the Employee's employment by
the Companies is terminated pursuant to Section 5(b) hereof, the last day the
Employee worked, (iii) if the Employee's employment by the Companies is
terminated pursuant to Section 5(c) or 5(d) hereof, the date on which a Notice
of Termination is given and (iv) if the Employee's employment by the Companies
is terminated pursuant to Section 5(e) hereof, the date on which a Notice of
Resignation is given.
6. REPRESENTATIONS.
(a) Xxxxxx Digital represents and warrants that (i) this Agreement
has been authorized by all necessary corporate action of Xxxxxx Digital and is a
valid and binding agreement of Xxxxxx Digital enforceable against it in
accordance with its terms and (ii) all shares of Xxxxxx Digital Stock which may
be issued upon exercise of the WD/Cash Option shall be, when issued in
accordance with the terms of this Agreement, duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive rights in respect
thereto.
(b) PriceLine represents and warrants that (i) this Agreement has
been authorized by all necessary corporate action of PriceLine and is a valid
and binding agreement of PriceLine enforceable against it in accordance with its
terms and (ii) all PriceLine Units which may be issued pursuant to this
Agreement shall
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be, when issued in accordance with the terms of this Agreement, duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive rights
in respect thereto.
(c) The Stockholder represents and warrants that he is not a party to
any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement and that this Agreement is
a valid and binding agreement of the Stockholder enforceable against him in
accordance with its terms.
(d) The Employee represents and warrants that he is not a party to
any agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement and that this Agreement is
a valid and binding agreement of the Employee enforceable against him in
accordance with its terms.
7. LIMITATION ON TRANSFER OF SECURITIES.
(a) The Employee shall not, directly or indirectly, offer, transfer,
sell, assign, pledge, encumber, hypothecate or otherwise dispose of all or part
of the securities issued pursuant to this Agreement or solicit any offers to
purchase or otherwise acquire or take a pledge of all or part of such securities
without the prior written consent of the issuer of such securities, PROVIDED,
HOWEVER, the foregoing restrictions shall not apply to the securities of an
issuer that has issued common equity securities in a public offering pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "Act"), other than a registration statement filed on Form S-8, or any
successor form thereto, or any other applicable form with respect to the
issuance of common equity securities to be issued or granted to employees,
officers or directors of the issuer, in an amount not to exceed 15% of the
common equity securities of the issuer then outstanding on a fully-diluted
basis.
(b) In the event of any purported or attempted transfer by the
Employee of all or part of the securities issued pursuant to this Agreement that
does not comply with this Agreement, the purported transferee or successor shall
not be deemed to be a security holder of the issuer of such securities for any
purpose and shall not be entitled to any of the rights of a security holder,
including, without limitation, the right to vote or to receive any dividends or
other distributions on or with respect to such securities.
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(c) Notwithstanding the foregoing, no provision hereof is intended to
prohibit the transfer of the securities issued pursuant to this Agreement (i)
upon the death of the Employee, by operation of laws of inheritance and descent
to the Employee's personal representatives, executors, administrators,
testamentary trustees, legatees or beneficiaries or (ii) by gift to a spouse,
child, other descendant or any other United States citizen, PROVIDED such person
is reasonably satisfactory to the Stockholder, or to a trust established for the
benefit of such person (each transferee referred to in clause (i) or (ii) being
a "Permitted Transferee"); PROVIDED, HOWEVER, that (i) any and all such
Permitted Transferees shall agree in writing to be bound by the terms of this
Agreement, a copy of which writing shall be filed with the issuer of such
securities and (ii) any such securities so transferred shall continue to be
subject to this Agreement.
(d) The Employee acknowledges that he is aware that there are
substantial restrictions on the transferability of the securities issued
pursuant to this Agreement. In addition to the restrictions set forth above,
since the securities issued pursuant to this Agreement will not be, and the
Employee has no right to require that such securities be, registered under the
Act, such securities may not be sold unless such sale is exempt from such
registration under the Act. The undersigned further acknowledges that the
Employee shall be responsible for compliance with all conditions on transfer
imposed by any state "blue sky" or securities law administrator.
(e) Each certificate representing the securities (other than the
PriceLine Option and the WD/Cash Option) issued to the Employee pursuant to this
Agreement shall bear substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF THE EMPLOYMENT AGREEMENT DATED AS OF JANUARY 1, 1997.
IN ADDITION TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE
14
MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
IN EFFECT THEREUNDER (THE "ACT"), AND ALL APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS OR (B) IF SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
ENCUMBRANCE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF THE ACT AND, IF REQUIRED BY THE COMPANY, THE COMPANY HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND
COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THAT EFFECT.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT.
8. CONFIDENTIALITY; NON-COMPETITION. As a condition to the
Companies' and the Stockholder's willingness to enter into this Agreement and in
partial consideration of the grant of the Options, the Employee agrees to the
covenants and restrictions set forth in this Section 8.
(a) The Employee agrees that, during the Term and for a period of two
(2) years thereafter, he shall not, directly or indirectly, induce or solicit
(or authorize or assist in the taking of any such actions by any third party)
any employee or consultant of the Companies to leave his or her business
association with the Companies.
(b) The Employee acknowledges and agrees that, during the course of
the provision of the Employee's services to the Companies, the Employee may be
exposed to confidential, proprietary or sensitive data and information
concerning the business and affairs of the Companies, and that all such data and
information constitutes a protectable business interest of the Companies. In
furtherance of such business interest, the Employee is contemporaneously
herewith executing and delivering to Xxxxxx Digital and PriceLine the standard
consultant confidentiality agreement of each of them (the "Confidentiality
Agreements").
(c) The Employee agrees that he will not at any time during the Term
and, (i) for a period of one (1) year following the Date of Termination, di-
15
rectly or indirectly, own any interest in, operate, join, control or participate
as a director, stockholder, owner, partner, principal, officer or agent of,
enter into the employment of, act as a consultant to, or perform any services
for, any entity that is engaged anywhere in the United States of America in any
business in which either of the Companies is presently engaged. Notwithstanding
anything herein to the contrary, this Section 8 shall not prevent the Employee
from acquiring securities representing not more than one percent (1%) of the
outstanding voting securities of any publicly held corporation. It is the
desire and intent of the parties that the provisions of this Section 8(c) shall
be enforced to the fullest extent permitted under applicable law. If all or
part of this Section 8(c) is held invalid, illegal or incapable of being
enforced by any law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect. If any part of
this Section 8(c) is ultimately determined to be excessively broad as to
duration, scope, activity or subject, such part will be construed by limiting
and reducing it so as to be enforceable to the maximum extent compatible with
applicable law.
(d) The Employee acknowledges and agrees that each of the covenants
set forth in this Section 8 and in the Confidentiality Agreements are reasonable
and necessary for the protection of the Companies' business interests, that
irreparable injury will result to the Companies if the Employee breaches any of
the terms of said covenants, and that in the event of the Employee's actual or
threatened breach of any such covenants, the Companies will have no adequate
remedy at law. The Employee accordingly agrees that in the event of any actual
or threatened breach by the Employee of any of said covenants, the Companies
shall be entitled to immediate injunctive and other equitable relief without
bond and without the necessity of showing actual monetary damages. Nothing
contained herein shall be construed as prohibiting the Companies from pursuing
any other remedies available to it for such breach or threatened breach,
including the recovery of any damages which it is able to prove.
(e) The provisions of this Section 8 shall survive the expiration or
termination of this Agreement, and any of the arrangements contained herein, and
shall be binding upon the Employee's corporate or personal successors and
assigns.
9. INDEMNIFICATION. In the event the Employee was, is or becomes a
party to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, any threatened, pending or completed
16
action, suit or proceeding, or any inquiry or investigation (whether instituted
by the Companies or any other party) that the Employee in good faith believes
might lead to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or otherwise (a "Claim"), by
reason of (or arising in part out of) any event or occurrence related to the
fact that the Employee is or was a director, officer, employee, agent,
independent contractor, consultant or fiduciary of either of the Companies, or
is or was serving at the request of either of the Companies as a director,
officer, employee, trustee, agent, independent contractor, consultant or
fiduciary of another corporation, partnership, limited liability company, joint
venture, employee benefit plan, trust or other enterprise, or by reason of
anything done or not done by the Employee in any such capacity (an
"Indemnifiable Event"), then the Companies, jointly and severally, shall
indemnify and hold harmless the Employee to the fullest extent permitted by law
as soon as practicable but in any event no later than thirty (30) days after
written demand is presented to the Companies, against any and all expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such expenses, judgments, fines,
penalties or amounts paid in settlement of such Claim. If so requested by the
Employee, the Companies shall advance (within two (2) business days of such
request) to the Employee any and all expenses (including attorneys' fees)
incurred by the Employee in connection with any Claim relating to an
Indemnifiable Event, upon the receipt of an undertaking by or on behalf of the
Employee to repay such amounts if it shall ultimately be determined that he is
not entitled to be indemnified by the Companies as authorized in this Section 9.
Notwithstanding anything contained herein to the contrary, the indemnification
obligations of the Companies set forth in this Section 9 shall survive the
termination or expiration of this Agreement.
10. SUCCESSORS; BINDING AGREEMENT. This Agreement is a personal
contract and the rights and interests of the Employee hereunder may not be sold,
transferred, assigned, pledged, encumbered or hypothecated by him, except as
otherwise expressly permitted by the provisions of this Agreement. This
Agreement shall inure to the benefit of the parties hereto and their respective
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
11. ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreements contain all of the understandings between the parties hereto
pertaining to the matters referred to herein, and supersedes any other
undertakings and agree-
17
ments, whether oral or in writing, previously entered into by them with respect
thereto. The Employee represents that, in executing this Agreement, he does not
rely and has not relied upon any representation or statement not set forth
herein made by the Stockholder or the Companies with regard to the subject
matter or effect of this Agreement or otherwise.
12. AMENDMENT, MODIFICATION AND WAIVER. No provision of this
Agreement may be amended, modified or waived unless such amendment, modification
or waiver is agreed to in writing, signed by the Employee, the Stockholder and a
duly authorized officer of each of the Companies. No waiver by any party hereto
of any breach by another party hereto of any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, any prior time or
any subsequent time.
13. NOTICES. Any notices, requests, demands, waivers or other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed given when delivered personally, sent by courier or
facsimile or registered or certified mail, postage prepaid, return receipt
requested, by reputable overnight courier (receipt of which is confirmed)
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently give notice hereunder in writing:
To the Employee at:
Mr. Xxxxx Xxxx
Xxxx Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
To Xxxxxx Digital at:
Xxxxxx Digital Corporation
Five Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Mr. Xxx Xxxxxx
To PriceLine at:
18
xxxxxxxxx.xxx LLC
Five Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
Attention: Mr. Xxx Xxxxxx
To the Stockholder at:
Mr. Xxx Xxxxxx
Four Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Telecopier: (000) 000-0000
All such notices, requests, demands, waivers and communications shall be deemed
to have been given on the date on which so hand-delivered, on the third business
day following the date on which so mailed, on the next business day following
the date on which delivered to such overnight courier and on the date of such
facsimile transmission and confirmation, except for a notice of change of person
or address, which shall be effective only upon receipt thereof.
14. SEVERABILITY. If for any reason any provision of this Agreement
shall be held invalid, such invalidity shall not affect any other provision of
this Agreement not so held invalid, and all other such provisions shall to the
full extent consistent with law continue in full force and effect. If any such
provision shall be held invalid in part, such invalidity shall in no way affect
the rest of such provision which, together with all other provisions of this
Agreement, shall likewise to the full extent consistent with law continue in
full force and effect.
15. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
16. GOVERNING LAW; JURISDICTION; ARBITRATION.
(a) This Agreement will be governed by and construed in accordance
with the laws of the State of Connecticut, without regard to its conflicts of
laws principles.
19
(b) The parties hereto hereby irrevocably:
(i) agree that any suit, action or other legal proceeding
arising out of this Agreement, or any of the transactions contemplated hereby,
may be brought in the courts of record of the State of Connecticut or the courts
of the United States located in the State of Connecticut;
(ii) consent to the jurisdiction of each such court in any
such suit, action or proceeding;
(iii) waive any objection to the laying of venue of any such
suit, action or proceeding in any of such courts; and
(iv) agree that Connecticut is the most convenient forum for
litigation of any such suit, action or proceeding.
(c) If any dispute arising under this Agreement is not settled
promptly in the ordinary course of business, the parties shall seek to resolve
any such dispute between them, first, by negotiating promptly with each other in
good faith. If the parties are unable to resolve the dispute between them
within twenty (20) business days (or such period as the parties shall otherwise
agree) through these negotiations, then any such disputes shall be settled by
binding arbitration in accordance with this Agreement and the following
procedures:
(i) Any arbitration shall be conducted in accordance with the
Commercial Rules of the American Arbitration Association (the "AAA") then in
effect.
(ii) Either party shall serve upon the other parties a written
demand that the dispute be arbitrated, specifying in reasonable detail the
nature of the dispute to be submitted to arbitration.
(iii) Within thirty (30) days after service of a demand for
arbitration, the parties shall attempt to agree upon a single arbitrator.
(iv) In the event the parties cannot agree upon a single
arbitrator, any party may request the AAA to appoint an arbitrator in accordance
with its rules; except that if the parties fail to agree upon an arbitrator from
the persons named by the AAA or if for any reason the appointment cannot be made
20
from the lists submitted by the AAA, then the Employee, on the one hand, and the
Companies and the Stockholder, on the other hand, shall appoint an arbitrator
within seven (7) days thereafter and the third arbitrator shall be appointed by
the AAA.
(v) The arbitration proceeding shall be held in Stamford,
Connecticut.
(vi) The arbitrators shall have no power or authority to add
to or detract from the agreements of the parties. The arbitrators shall have no
authority to award punitive, exemplary, consequential, special, indirect or
incidental damages.
(vii) The expenses of arbitration shall be borne equally by the
Employee, on the one hand, and the Companies and the Stockholder, on the other
hand, unless the arbitrators determine that one of the parties has not proceeded
in good faith with respect to the matters submitted for arbitration, in which
case, such party shall bear fully the expenses of arbitration.
(viii) Judgment may be entered on any arbitration award in any
court of competent jurisdiction.
17. HEADINGS. All descriptive headings of sections and paragraphs in
this Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
18. SPECIFIC PERFORMANCE. Each party hereto acknowledges that money
damages would be both incalculable and an insufficient remedy for any breach of
this Agreement by such party and that any such breach would cause the other
parties irreparable harm. Accordingly, each party hereto also agrees that, in
the event of any breach or threatened breach of the provisions of this Agreement
by such party, the other parties shall be entitled to equitable relief without
the requirement of posting a bond or other security, including in the form of
injunctions and orders for specific performance, in addition to all other
remedies available to such other parties at law or in equity.
21
19. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYEE
/s/ Xxxxx Xxxx
----------------------------------
Xxxxx Xxxx
XXXXXX DIGITAL CORPORATION
By: /s/ Xxx X. Xxxxxx
-------------------------------
Name:
-----------------------------
Title:
----------------------------
xxxxxxxxx.xxx LLC
By: /s/ Xxx X. Xxxxxx
-------------------------------
Name:
-----------------------------
Title:
----------------------------
STOCKHOLDER
/s/ Xxx X. Xxxxxx
----------------------------------
Xxx Xxxxxx
23
