EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated August 1, 1999, by and between Enterprise Solutions
Inc., a Florida corporation ("Company"), and Xxxxx Xxxxxx ("Employee").
WHEREAS, Company desires to establish a new division, subsidiary or
affiliate to enter into the business of developing and operating internet and
computer security solutions, government and corporate systems integration and
contract selling and development work; and
WHEREAS, Employee has unique skills and experience in internet and
computer security solutions.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
---------------------
1.01 New Division or Subsidiary. Company will form a division, subsidiary or
affiliate with its principal place of business in Northern, California to
produce and sell Commercial and Mass Market security products
1.02. Place of Employment. Company will employ Employee in Northern California.
1.03 Position, Duties. Company hereby employs Employee as the Executive Vice
President and Sr. Engineer Executive for new and existing security products
development of the Company. The duties of Employee are as part of the new
division, subsidiary or affiliate and include being the senior engineering
executive who is the line manager responsible for hiring the key people needed,
establishing personnel policies for the staff, and choosing the physical
facilities and the equipment and services to support the development team. From
time to time the Board of Directors ("Board") of Company may change employee's
position and duties in a manner consistent with Employee's abilities and the
needs of the business. Employee hereby accepts this employment upon the terms
and conditions herein contained and agrees to devote his time, attention and
efforts to promote and further the business and services of Company. Employee
shall faithfully adhere to, execute and fulfill all policies established by
Company. Any Prior Agreements are hereby superseded, terminated and shall have
no further force or effect nor shall they be legally binding upon either
Employee or Company.
1.04 Full Time Employment. Employee shall perform such duties, assume such
responsibilities and devote such time, attention and energy to the business of
Company as the Board shall from time to time require and shall not, during the
term of his employment hereunder, be engaged in any other business activity
1
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder. However, the
foregoing limitations shall not be construed as prohibiting Employee from making
personal investments in such form or manner as will neither require his services
in the operation or affairs of the companies or enterprises in winch such
investments are made nor violate the terms of Paragraphs 3 or 4 hereof ..
1.05 Funds Held in Trust. All funds received by Employee on behalf of Company,
if any, shall be held in trust for Company and shall be delivered to Company as
soon as practicable.
ARTICLE 11
Compensation
------------
2.01 Salary and Draw. From and after the effective date of this Agreement,
Employee shall receive a salary ("Salary") from Company in an amount equal to
ONE HUNDRED AND FIFTY THOUSAND ($150,000.00) per year. However, employee shall
defer 50% of salary for the initial five months of this agreement, or until
completion of Company's public offering, whichever is the first to complete, at
which time payment will be made in full.
Employee's Salary shall be payable pursuant to a monthly schedule
consisting of seventy-two (72) semi-monthly payments ("Draw"), each such payment
being in an amount equal to 1/72 of FOUR HUNDRED AND FIFTY THOUSAND DOLLARS
($450,000.00) or SIX THOUSAND, TWO HUNDRED AND FIFTY DOLLARS ($6,250.00)
2.02. Expense Reimbursement. Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of Company. Employee shall provide a written accounting an
explanation of all expenses for which reimbursement is sought on a monthly basis
and Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. Employee shall be entitled to receive such bonuses as the Board
shall determine from time to time in accordance with Company policy and at the
sole discretion of the Board.
2.04 Plan Participation. Employee shall be entitled to participate in any and
all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by Company.
2.05 Other. Employee shall be entitled to such fringe benefits as Company shall
establish for its employees generally which shall include with respect to
Employee at least two weeks paid vacation annually, eight paid holidays as
designated by Company, provisions for an industry competitive health, dental and
vision insurance plan coverage for Employee and his dependents. from the
starting date of this agreement, $500,000 of term life insurance, and $500,000
of term life insurance with the Company as beneficiary, disability pay and such
other benefits as Company shall adopt, subject to the discretion of Company to
add or delete such standard benefits as the Board deems appropriate, from time
to time. In addition, on the earlier of five months from the
2
date of this Agreement or Company's initial public offering, Company shall
approve and reimburse Employee's relocation expenses of up to $ 10,000.
2.06 Stock Compensation. Employee shall be entitled to purchase from the Company
150,000 shares of the Company's Common Stock in blocks of 50,000 shares each on
or after August 15, 2000, August 15, 2001 and August 15, 2002, paying the
aggregate price of FIFTY DOLLARS ($50.00) for each block of shares, provided
that this Agreement is not sooner terminated for death under Section 5.02A,
disability under Sections 5.02B or 503A or Cause under sections 5.02C below. On
the execution of this Agreement, Company shall place all of said shares in
escrow, and hold them for the benefit of Employee. In the event that Company
breaches this Agreement with a purported termination or Employee terminates it
for Good Reason, Employee shall be entitled to purchase from Company within 30
days of termination the remainder of the 150,000 shares of Common Stock not
previously purchased hereunder.
2.07 Cash Bonus Compensation. Employee shall be paid a signing bonus of TWENTY
SEVEN THOUSAND DOLLARS $27,000 for joining Company. The bonus shall be paid on
the earlier of the following: five months after the date of this Agreement, or
upon Company raising $1,500,000 for the Division in which Employee shall be
employed.
2.08 Financial Disclosures. Company agrees to share with Employee all financial
information relevant to the raising of capital and the making of a public
offering, as set forth in Section 2.01.
ARTICLE III
Non-Competition Agreement
------------------------
3.01 No Competition During Employment Term. Employee will not, during his
employment by or with Company, engage in Competition with Company.
3.02 No Competition After Employment Term. In the event that the Company
exercises its Option to repurchase all of the Company's Common Stock paid to
Employee hereunder within 30 days of termination, Employee will not for a period
of one (1) year immediately following the termination of his employment for any
reason whatsoever directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature engage in Competition with Company. Pursuant to
California Business and Professions Code ss.16600 et seq., Employee will be
free to engage in Competition after the termination of his employment unless
Company exercises its Option as set forth in ss. 5.06 below.
3.03 Competition Defined. For purposes of this Agreement, Employee engages in.
"Competition" when he directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, (i) calls upon any customer of Company (including,
but not limited to, any customer obtained for Company by Employee) for the
purpose of soliciting or selling any Commercial and Mass Market security
products; and (ii) establishes, enters it, is employed by or, advises, consults
3
with or becomes a part of any company, partnership, corporation or other
business entity or venture, or in any way engage in business for himself or for
others, in producing or selling Commercial and Mass Market security products
within thirty (30) miles of the home office of Company and/or any affiliated
company location, such location having a permanent and known facility wherein
Employee has served in any capacity and wherever Employee has performed duties
or had management responsibility on behalf of Company or its affiliates.
3.04 Injunctive Relief. Because of the difficulty of measuring economic losses
to Company and its affiliates as a result of his breach of the foregoing
covenant and because of the immediate and irreparable damage that would be
caused to Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by Company
and its affiliates in the event of breach by him by injunctions and restraining
orders.
3.05 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Paragraph 3 are necessary to protect the goodwill and business
interests of Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of Company and its affiliates
on the date of the execution of this Agreement and the future plans of Company;
but it is also the intent of Company and Employee that such covenants be
construed and enforced in accordance with the activities and business of Company
and its affiliates on the date of the termination of the employment of Employee.
3.06 Severable Covenants. The covenants in this Paragraph 3 are severable and
separate and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restriction set
forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and the Agreement shall thereby be reformed.
3.07 Independent Covenants. All of the covenants in this Paragraph 3 shall be
construed as an agreement independent of any other provision in this Agreement
and the existence of any claim or cause of action of Employee against Company or
its affiliates, whether predicated in this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of such covenants.
3.08 Calculation of Time It is specifically agreed that the period of one (1)
year stated at the beginning of this Section 3.02, during which the agreements
and covenants of Employee made in this Paragraph 3 shall be effective, shall run
from the Company's exercise of its option under ss. 5.06 and exclude from such
computation any time during which Employee is in violation of any provision of
this Paragraph 3 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any final judgment)
brought by any person, whether or not a party to this Agreement, in which action
Company or its affiliates seeks to enforce the agreements and covenants of
Employee or in which any person contests the validity of such agreements and
4
covenants or their unenforceability or seeks to avoid their performance or
enforcement
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
-----------------------------------------------------
4.01 Proprietary Information. Employee recognizes and acknowledges that the
information, techniques, processes, formulas, developments, experimental work,
work in progress, business, list of Company's customers, contractual
arrangements, contract negotiations and any other trade secret or other secret
or confidential information relating to Company's business as they may exist
from time to time are valuable, special and unique assets of Company's business.
In addition, Employee recognizes that Company is continually engaged in research
and development of new inventions and improvements to the information,
techniques, processes, formulas, developments, trade secrets, and other secrets
and confidential matters relating to Company's business. Therefore, Employee
agrees as follows:
A. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express authorization of the Board of Directors
of Company, any information, manufacturing technique, process, business
customer lists, contractual arrangements, contract negotiations, trade
secrets or any other secrets or confidential matter relating to any aspect
of Company's business as designated from time to time by the Board of
Directors of Company, except as such disclosure or use may be required in
connection with Employee's work for Company.
B. Employee will not disclose Company's customers or any other trade
secrets of Company whether in existence or proposed, to any person, firm
partnership, corporation or business for any reason or purpose whatsoever.
C. That upon request or at the time of leaving the employ of Company,
Employee will deliver to Company, and not keep or deliver to anyone else,
any and all notes, memoranda, documents and, in general, any and all
material relating to Company's business.
4.02 Assignment of Inventions Conceived During Employment. Employee shall
(without any additional compensation) promptly disclose in writing to the Board
of Directors of Company all ideas, formulas, programs, systems, devices,
processes, business concepts, discoveries and inventions (hereinafter referred
to collectively as "discoveries"), whether or not patentable, which Employee,
while employed by Company, conceives, makes develops, acquires or reduces to
practice, whether alone or with others and whether during or after usual working
hours, and which are related to Compan3es business or interest, or are used or
usable by Company, or arise out of or in connection with the duties performed by
Employee hereunder, and Employee hereby transfers and assigns to Company, all
rights, title and interests in and to said discoveries, including any and all
domestic and foreign contractual agreements entered into by Employee during the
term of this Agreement and any renewals thereof. On request of Company, Employee
5
shall from time to time during or after the expiration or termination of their
employment, execute such further instruments (including, without limitation,
royalties, licenses and/or interest whatsoever and assignments thereof) and do
all such other acts and things as may be deemed necessary or desirable by
Company to protect and/or enforce its rights in respect of said discoveries.
Company agrees to pay all expenses of filing and/or prosecuting any interest in
such discovery shall be borne by Company, as well as reasonable consulting fees
to Employee in the amount of S200/hour. Employee shall cooperate in filing
and/or prosecuting any such interest or violation in rights thereto.
4.03. Non-Solicitation. During the term of this Agreement and for one year
thereafter, Employee will not call upon or cause to be called upon any employee
of Company or any of its affiliates for the purpose or with the intent of
enticing them away from or out of the employ of Company or any reason whatever.
4.04 Injunctive Relief. In the event of a breach or threatened breach by
Employee of the provisions of this Paragraph 4, Company shall be entitled to an
injunction:
A. Restraining Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to be
disclosed; and/or
B. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as described
above upon Employees leave of the employ of Company. Nothing herein shall
be construed as prohibiting Company from pursuing other remedies available
to Company for such breach or threatened breach, including the recovery of
damages from the Employer.
ARTICLE V
Term: Terminations
------------------
5.01 Term. The term of this agreement shall begin on August 15, 1999 and
continue until August 14, 2002, unless further extended or sooner terminated as
herein provided. On August 14, 2002, and on the 13th day of June of each year
thereafter, the term of Employees employment shall be automatically extended one
(1) additional year unless, on or before sixty (60) days in advance of such last
day of December, Company shall have delivered to Employee or Employee shall have
delivered to Company written notice that the term of Employee's employment
hereunder will not be extended.
5.02 Termination by Company. Company may terminate this Agreement and Employee's
employment only in one of the following ways:
6
A. Termination for Death. Company may terminate this Agreement in the event
of the death of Employee.
B. Termination for Disability. Company may terminate the Agreement after
thirty (30) days written notice ("Notice of Termination") to Employee if,
because of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months, Employee is
unable to perform his duties under this Agreement. Until such Notice of
Termination becomes effective, Employee shall continue to receive his
compensation and benefits hereunder.
C. Termination for Cause. Company may terminate this Contract for Cause.
For purposes of this Agreement "Cause" exists if Employee commits any of
the following: material act of dishonesty or gross misconduct,
unjustifiable neglect of his employment duties, conviction of a felony, or
such acts of dishonesty, theft, fraud, misrepresentation, or other acts of
moral turpitude as would have a direct, substantial and adverse effect on
Employer's business.
5.03 Termination by Employee. Employee may terminate this Agreement and
Employee's employment only in one of the following ways:
A. Termination for Disability. Employee may terminate his employment if his
health should become impaired to an extent that makes his continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished Company
with a written statement from a qualified doctor to such effect and
provided, further, that, at Company's request, Employee shall submit to an
examination by a doctor selected by Company and such doctor shall have
concurred in the conclusion of Employee's doctor.
B. Termination for Good Reason. Employee may terminate his employment
hereunder by resigning for Good Reason,
C. Definitions. For purposes of this Agreement, the capitalized terms shall
have the meaning set forth below:
"Good Reason" shall mean (i) a Change in Control of Company (as described
below), (ii) a failure by Company to comply with any material provision of this
Agreement which has not been cured within thirty (30) days after written notice
of such noncompliance has been given by Employee to Company, or (iii) any
purported termination of Employee's employment by Company which is not effected
pursuant to the provisions hereof (and for purposes of this Agreement no such
purported termination shall be effective).
"Change in Control of Company" shall mean a change in control that would
be required to be reported in response to Item I(a) of Form 8-K under the
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"); provided that, without
limitation, such a
7
change in control shall be deemed to have occurred if (i) any "person" (as that
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
Company, as constituted, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Company representing 25% or more of the combined voting power of Company's then
outstanding securities, (h) during any period of three consecutive years during
the term of this Agreement, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof unless the election of each director who was not a director at the
beginning of such period has been approved in advance by directors representing
at least two-thirds of the directors then in office who were directors at the
beginning of the period.
5.04 Compensation Upon Termination for Death or Disability. If Employee's
employment is terminated on death pursuant to 5.02A or disability pursuant to
Section 5.02B or 5.03A, Company shall pay Employee's estate his full salary and
benefits through the date of termination plus all outstanding expenses payable
pursuant to section 2.02 and Company shall have no futher obligations to
Employee under this Agreement
5.05 Compensation Upon Termination for Cause. If Company terminates Employee's
employment for Cause pursuant to Section 5.02C, Company shall pay Employee his
full salary through the date of termination, at the rate in effect at the time
Notice of Termination is given, and Company shall have no further obligations to
Employee under this Agreement.
5.06 Compensation on Resignation for Good Reason or Company Termination in
Breach of Agreement.
If Employee shall terminate his employment for Good Reason or if Company
shall commit a material breach hereof including without limitation the wrongful
termination of this Agreement, then Employee shall have the following remedies
in addition to those otherwise provided by law;
A. Within 30 days after such resignation or termination, Employee shall
receive from Company his full salary for the remaining term of this
Agreement, and any deferred salary, bonus not previously released to
Employee. Employee shall have the right to purchase Common Stock as set
forth in Section 2.06 without regard to the completion of employment with
the Company.
B. Employee shall receive for three (3) months from the date of
termination, all employee benefit plans and programs in which Employee
participated immediately prior to the date of termination provided that
Employee's continued participation is possible under the general terms and
provisions of such plans and programs. All such benefit plans and program
shall be maintained at the level and value provided immediately prior to
the date of termination. In the event that Employees participation in any
such plan or program is barred, Company shall arrange to provide Employee
with benefits substantially similar to those which Employee would otherwise
have been entitled to receive under such plans and programs from which his
continued participation is barred.
8
C. Except as required above, Company shall not be required to maintain in
force for the benefit of Employee any employee benefit plans or programs
following the date of termination.
D. Employee shall not be required to mitigate the amount of any payment
provided for in this Section 5.05 by seeking other employment or otherwise.
5.07 Company's Option to Repurchase Shares. In the event of Employee's
termination for any reason, and under any circumstance, Company shall have the
option (the "Option") to purchase not less than all of the shares of the
Company's Common Stock held by Employee at the per share price of $10 or the
average closing price of Common Stock within the 30 days prior to Company's
exercise of the Option, whichever amount is greater. This right to purchase
shall be exercised on written notice to Employee delivered within 30 days of
such termination and shall provide for payment as follows: one third within 30
days of the notice to Employee: one third within 180 days of the notice and the
remaining third within one year of the notice. If Company does not give Employee
notice of its exercise of the Option within the limits stated, the Option and
Employee's obligations under Section 3.02 will expire without further notice.
ARTICLE VI
Representations of Employee
-------------------------
6.01 Restrictions from Prior Employment. Employee hereby represents and warrants
to Company that he is not subject to any trade secret restriction or
non-competition covenant in favor of a former employer or any other persons or
entity, other than those listed in Exhibit A attached hereto and incorporated
herein by this reference. Employee further represents that the execution of this
Agreement by Employee and his employment by Company or its affiliates; and the
performance of his duties described herein will not violate or be a breach of
any of the agreements listed in Exhibit A or any other agreement with a former
employer or any other person or entity.
6.02 Non Disclosure of Trade Secrets. Employee agrees not to disclose to
Con4xu3y or use in the course of his employment by the Company, any information
to the extent that such information constitutes a trade secret of prior
employers. Employee further agrees not to use in the course of his employment by
the Company, any documentation containing proprietary information, or equipment
that may have been obtained by Employee from former employers.
6.03 Remedies. Employee agrees to indemnify Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against Company or its affiliates based upon or arising
out of any non-competition agreement or invention and secrecy agreement between
Employee and such third party.
9
ARTICLE VII
Miscellaneous
-------------
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with Company or
any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between Company and Employee
and of all the terms of this Agreement and it cannot be varied, contradicted or
supplemented by evidence of any prior or contemporaneous oral or written
agreements. Upon the effective date of this agreement, the Prior Agreement shall
be terminated and superseded in its entirety. This written agreement may not be
later modified except by a further writing signed by Company and Employee, and
no term of this Agreement may be waived except by writing signed by the party
waiving the benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
7.03 Assignment: Binding Effect. Employee understands that he has been selected
for employment by Company on the basis of his personal qualifications,
experience and skills per IA, preceding. Employee agrees, therefore, that this
Agreement and the rights to his services may be assigned by Company at any time
without notice to him, provided that such Assignee may not direct employee to
relocate from Northern California or assume other duties than described in
Section 1A. Employee agrees that he cannot assign all or any portion of this
Agreement. Subject to the preceding two sentences, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, and assigns. It is further understood and agreed that Company
may be merged or consolidated with another entity and that any such entity shall
automatically success to the rights, powers and duties of Company hereunder.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To Company: Enterprise Solutions Inc.
0000 X. Xxxxx Xxxxxxx
Xxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx
To Employee: Xxxxx Xxxxxx
0000 Xxxxx 000 Xxxx
Xxxx, XX 00000
with a copy to: Xxxxx X. Xxxxxxxx
Xxxxxxxx & Xxxxxx
10
X.X. Xxx 0000
Xxxxxx, XX 00000
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class mail
certified, return receipt requested, or when actual1y received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Section 7.04.
7.05 Attorneys Fees. In the event of litigation or arbitration to enforce or
interpret this Agreement, the court or arbitrator shall award the prevailing
party his reasonable attorneys' fees and costs of suit, including the costs of
expert witnesses.
7.06 Severability: Heading. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of Calfornia.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISE SOLUTIONS INC.
WITNESSED BY:
/s/ Xxxx Xxxxx /s/ Xxxxxxx X. Xxxxxx
----------------- -------------------------
Xxxxxxx X. Xxxxxx
Dated: 7/29/99 Corporate Treasurer
EMPLOYEE:
WITNESSED BY:
/s/ XxXxxx Xxxxxx /s/ Xxxxx Xxxxxx
----------------- -------------------------
Xxxxx Xxxxxx
Dated: 7/30/99
11
EXHIBIT A TO
EMPLOYMENT AGREEMENT
A. Non-Compete Agreements.
None.
B. Other companies entrusting Employee with restricted intellectual property
that may not be used by others:
1. Novell, Inc.
2. Hewlett Packard.
3. Sistex, Inc.
12
