EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement") is dated as of July 1, 1999 (the
"Effective Date") by and between InterPacket Group, Inc., a California
corporation (the "Company"), and Xxxxxxxx Xxxx, an individual (the
"Executive"), relating to the exclusive professional services of Executive.
WHEREAS, the Company desires to obtain the continued professional
services of Executive; and
WHEREAS, Executive desires to continue to provide such services to
Company upon the following terms and conditions;
NOW THEREFORE, in consideration of the mutual covenants contained
herein and other valuable consideration, the parties agree as follows:
1. TERM. Company hereby employs Executive in the position and with the
duties and responsibilities described in Paragraph 2 for the period commencing
on the Effective Date and ending three (3) years from the Effective Date (the
"Term"). The Term shall be extended by an additional period of one (1) year
unless either party shall give written notice to the other of its intent to
terminate the Agreement not less than 30 days prior to the expiration of the
Term. If the Term is so extended, all references to "the Term" in this Agreement
shall be deemed to include such the extension thereof.
2. POSITION, DUTIES, RESPONSIBILITIES. The Company hereby agrees to
employ Executive, and Executive agrees to serve, as Chief Executive Officer of
the Company during the Term. Subject to the terms hereof, Executive shall serve
on an exclusive and full time basis at the Company's principal place of business
in Santa Monica, California or such other place to which Executive shall
consent, which shall be reasonably granted. Executive shall have the full
authority and responsibility prescribed by the Company's Bylaws relating to or
otherwise normally attendant to an officer of a corporation holding such
position and shall have, subject to the periodic review and approval of the
Board of Directors of the Company or any committee thereof, general supervision,
direction and control of the business and affairs of the Company, including
without limitation the authority to hire, fire and establish the compensation,
benefits, bonuses and rewards for the Company's employees. Executive shall
devote his best efforts and attention to the performance of his duties as the
Chief Executive Officer of the Company.
3. COMPENSATION. Executive shall be paid the following compensation
while employed by the Company pursuant to this Agreement:
3.1 SALARY. The Company agrees to pay or cause to be paid to
Executive a base salary at the annual rate of no less than Two Hundred Ninety
Five Thousand Dollars ($295,000) per year during the first year of the Term
("Base Salary"). Base Salary shall be increased by no less than 10% per annum
("Annual Salary") on January 1 of each calendar year during the Term, and shall
be paid in accordance with the Company's payroll policy as in effect from time
to time.
3.2 BENEFITS; STOCK OPTIONS. Executive shall entitled to
medical and all other benefits made available generally to executives of the
Company. Executive shall also be entitled to participate in the Company's stock
option plans (the "Option Plans") as determined by the Board of Directors or any
committee thereof, in its discretion.
3.3 TRAVEL AND OTHER EXPENSES. The Company shall reimburse
Executive for reasonable and ordinary expenses relating to the performance of
his duties hereunder including without limitation all travel, accommodation,
meals, entertainment and other necessary business expenses. Such expenses shall
be supported by reasonable documentation and shall be subject to reasonable
audit by the Company.
3.4 VACATION. Executive shall be entitled to four (4) weeks of
vacation for each calendar year during which Executive is employed by the
Company. Executive shall also be entitled to all paid Company holidays. If
Executive ceases to be employed during any calendar year, the total number of
vacation days accruing shall be prorated based on the number of months, or
portion thereof, that Executive was employed by the Company. Such vacation time
shall accrue and cumulate to the extent not actually taken by the Executive
until the Executive is entitled to eight (8) weeks of accrued vacation.
Executive shall be entitled to customary flexibility in using such vacation time
without strict regard to the actual accrual of vacation.
3.5 BONUS. Executive shall be entitled to a year end bonus
(payable in cash within 30 days after the end of each calendar year during the
Term) equal to a minimum of $100,000. The Board of Directors may consider an
additional payment of a cash bonus to the Executive based on the Company's
performance and such other incentives or bonuses as the Board of Directors may
in its discretion determine to award.
3.6 INDEMNIFICATION. The Company shall indemnify Executive
pursuant to a separate Indemnification Agreement, such indemnification to
survive the termination of this agreement and be effective until the expiration
of all statutes of limitations applicable to any and all Proceedings (as defined
in the Indemnification Agreement).
4. [intentionally omitted]
5. TERMINATION OF EMPLOYMENT; COMPENSATION DUE.
2
5.1 DEATH.
5.1.1 TERMINATION. Other than the obligations
contained in Section 5.1.2 hereof, this Agreement shall terminate automatically
upon the death of Executive.
5.1.2 COMPENSATION. Following the death of
Executive, the Company shall pay to Executive's beneficiary or estate, as
instructed by Executive in writing on file with Company, or if no one has been
so designated, to his estate, (i) the Annual Salary to which Executive is
entitled through the date of termination, (ii) all accrued but unused vacation
pay, and (iii) the pro rata portion of Executive's annual minimum guaranteed
bonus based upon the number of expired months (calculated using the last day of
the month in which his death or, with respect to Sections 5.2.2 and 5.3.1(b),
the termination of his employment occurs) in the calendar year in which his
death or termination occurs (the sum of (i), and (ii) and (iii) hereunder being
referred to as "Accrued Compensation"). Following the death of Executive, the
Company shall make any payments required under any death benefit policy, benefit
plan or then existing life insurance policy maintained by the Company to the
beneficiary thereof. Thereafter, the Company's obligations hereunder shall
terminate.
5.2 DISABILITY.
5.2.1 TERMINATION. Should Executive be prevented
from properly performing Executive's duties hereunder by reason of any physical
or mental incapacity for a period of more than 180 days in the aggregate during
any twelve (12) month period, then, to the extent permitted by law, at the
Company's discretion, the Company may terminate its obligations hereunder except
for (i) any Accrued Compensation through the date of such termination, and (ii)
any rights Executive may have under any disability plan in which Executive is a
participant.
5.2.2 COMPENSATION. During any period that
Executive is disabled under this Agreement, but terminating upon any termination
of this Agreement pursuant to Section 5.2.1, Executive shall continue to receive
an amount equal to his Annual Salary minus any compensation received by
Executive under any disability insurance policy the premiums for which have been
paid by the Company. Following the termination of Executive's employment under
Section 5.2.1, the Company shall pay Executive an amount equal to his Accrued
Compensation through the date on which his employment is terminated, and the
Company shall have no further obligations to the Executive under this Agreement.
5.3 BY COMPANY.
5.3.1 FOR CAUSE. (a) The Company may terminate, without
liability, this Agreement For Cause (as defined in this paragraph), an any time
upon written notice to Executive. "Cause" is defined as (i) the breach by
Executive of any material term of this
3
Agreement, provided such breach, if capable of a cure, is not cured within
thirty (30) days after Executive received written notice of such breach and
demand for a cure by the Company, which notice identifies such breach with
particularity, (ii) the engaging by the Employee in conduct materially
adverse to the Company and inconsistent with his duties and responsibilities
under Section 2 above and the failure to cease such conduct within thirty
(30) days after written demand therefor by the Company identifying with
reasonable particularity such conduct and harm or (iii) the conviction (by
trial or upon a plea) of Executive of a misdemeanor involving moral turpitude
or a felony.
(b) In the event the Company terminates Executive For
Cause, the Company shall pay Executive an amount equal to his Accrued
Compensation through the date on which his employment is terminated, and the
Company shall have no further obligations to the Executive under this Agreement.
5.3.2 WITHOUT CAUSE. If the Company terminates Executive for
any reason other than due to his death, disability (as determined pursuant to
Section 5.2.1) or as a result of those reasons listed in Section 5.3.1 hereof
("Without Cause"), the Company shall (i) continue to pay Executive his Annual
Salary, (ii) pay to Executive, pursuant to Section 3.5 hereof, the greater of
(A) his minimum guaranteed bonus, (B) his actual bonus paid during the preceding
year, and (C) the average of the actual bonuses paid during the two preceding
years, and (iii) continue to provide the health and other benefits described in
Sections 3.2 and 3.4 hereof (clauses (i), (ii) and (iii) hereof collectively,
"Termination Without Cause Obligations"); the Termination Without Cause
Obligations shall be provided for a period of time equal to the greater of (i)
the remainder of the unexpired Term calculated as if no premature termination of
this Agreement had occurred, or (ii) if the Term has less than one year
remaining at the time of such termination, such remaining amount of time plus
twelve months. In addition, at the time of any termination Without Cause, all of
Executive's outstanding options granted pursuant to any of the Option Plans
shall immediately vest and the time period during which such options may be
exercised shall be extended for two (2) years.
5.4 BY EXECUTIVE.
5.4.1 FOR GOOD REASON. Executive may terminate, without
liability, this Agreement "For Good Reason" if (i) the Company breaches any
material term of this Agreement, provided that, if such breach is capable of
cure, such breach continues for a period of thirty (30) days after the Company
receives written notice of such breach by Executive identifying such breach with
particularity, (ii) if the Company assigns to the Executive, or if another
employee of the Company assumes, duties and responsibilities substantially
inconsistent with the duties and responsibilities described in Section 2 of this
Agreement or (iii) upon a Change in Control (as defined below).
A "Change in Control" means the happening of any of the
following: (i) when any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act
4
of 1934, as amended (the "Act"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities, or (ii)
the occurrence of a transaction requiring shareholder approval and involving
the sale of all or substantially all of the assets of the Company or the
merger of the Company with or into another corporation in which (A) the
Company is not the surviving corporation, or (B) the shareholders of the
Company immediately prior to such merger are the owners of less than fifty
percent (50%) of the combined voting power of the Company and such other
corporation immediately after such merger, or (iii) the election of the Board
of Directors in any special or annual election or shareholders' consent where
the incumbent directors immediately prior to such election or consent do not
constitute a majority of the Board of Directors immediately after such
election.
In the event Executive terminates this Agreement For Good
Reason, the Company shall fulfill the obligations set forth in Section 5.3.2
hereof and all of Executive's outstanding options granted pursuant to any of the
Option Plans shall immediately vest and the time period during which such
options may be exercised shall be extended for two (2) years.
6. EXECUTIVE COVENANTS.
6.1 CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder he will occupy a position of trust and confidence.
Executive shall not, except as may be required to perform his duties hereunder
or as required by applicable law, for a period of two (2) years following the
termination of this Agreement or until such information shall have become public
other than by the Executive's unauthorized disclosure, disclose to others or
use, whether directly or indirectly, any Confidential Information regarding the
Company, its subsidiaries and affiliates. "Confidential Information" shall mean
information about the Company, its subsidiaries and affiliates, and their
respective clients and customers and that was learned by Executive in the course
of his employment by the Company, its subsidiaries and affiliates, including
without limitation any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and records
(including computer records) of the documents containing such Confidential
Information. Executive acknowledges that such Confidential Information is
specialized, unique in nature and of great value to the Company, its
subsidiaries and affiliates, and that such information gives the Company a
competitive advantage. Executive agrees to deliver or return to the Company, at
the Company's request at any time or upon termination or expiration of his
employment or as soon thereafter as possible, (i) all documents, computer tapes
and disks, records, lists, data, drawings, prints, notes and written information
(and all copies thereof) furnished by the Company, its subsidiaries and
affiliates, or prepared by the Executive during the term of his employment with
the Company, its subsidiaries and affiliates, and (ii) all notebooks and other
data relating to research or experiments or other work conducted by Executive in
the scope of employment.
5
6.2 NON-COMPETITION. During the term of this Agreement,
Executive shall not, directly or indirectly, without the prior written consent
of the Company, provide consultative services or otherwise provide services to
(whether as an employee or a consultant, with or without pay), own, manage,
operate, join, control, participate in, or be connected with (as a stockholder,
partner or otherwise), any business, individual, partner, firm, corporation, or
other entity that is then a competitor of the Company, its subsidiaries or
affiliates (each such competitor a "Competitor of the Company"); provided that
nothing herein shall prevent Executive from the beneficial ownership of up to 5%
of the publicly traded securities of any person who may be deemed to be a
Competitor of the Company, and provided, further, that if the Company terminates
the Employee's employment hereunder Without Cause or the Employee terminates his
employment For Good Reason prior to the expiration of the term of this
Agreement, the provisions of this Section 6.2 shall not apply from and after the
date of such termination of employment. The Company acknowledges that Executive
has been non-executive Chairman and CEO of DFR Consulting Group, Inc. dba
Ideabase since 1992, and, subject to this Section 6.2, may continue in such
position throughout the Term.
6.3 NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
term of this Agreement and for a period of one (1) month thereafter, the
Employee shall not, directly or indirectly, influence or attempt to influence
customers or suppliers of the Company, or any of its subsidiaries or affiliates,
or to divert their business to any Competitor of the Company, provided, that if
the Company terminates the Employee's employment hereunder Without Cause or the
Employee terminates his employment For Good Reason prior to the expiration of
the term of this Agreement, the provisions of this Section 6.3 shall not apply
from and after the date of such termination of employment.
6.4 INJUNCTIVE RELIEF. It is expressly agreed that the Company
will or would suffer irreparable injury if the Executive were to disclose
Confidential Information, compete with the Company or solicit customers or
suppliers the Company in violation of this Section 6, that money damages would
be insufficient to compensate the Company and that the Company would be reason
of such competition or disclosure be entitled to injunctive relief in a court of
appropriate jurisdiction.
7. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without
the written consent of the non-assigning party, provided that Executive's rights
to payments hereunder shall, upon his death, inure to the benefit of the
Executive's personal or legal representatives, executors, administrators, heirs,
distributees, devisees and legatees. Any Change of Control shall be deemed to be
an assignment requiring consent of Executive.
8. NOTICES. All notices hereunder shall be in writing and shall be
either served by certified or registered mail, air courier, by hand, or by
facsimile, in each case with charges prepaid. Notices shall be deemed effective
when mailed, hand delivered, or faxed. Notices to Executive shall be given at
the address set forth in the records of the Company for Executive, with a copy
to _____________________________. Notices to the Company shall be
6
addressed to its principal place of business, currently 0000 Xxxx Xxxxxx,
Xxxx., Xxxxxx Xxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000, Fax No. (000) 000-0000,
Attn: General Counsel, with a copy to Xxxxxxx X. Xxxxxxxxx, Esq., Xxxxxxx &
XxXxxxxx, 000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000, Fax No.
(000) 000-0000. This notice provision may be changed with respect to any
party by such party notifying the other of such change in accordance with the
provisions of this Section.
9. PLACE OF PERFORMANCE. The primary place where Executive shall
perform his duties for Company shall be at the Company's principal place of
business in Santa Monica, California or such other place as Executive may agree
at his sole discretion. In addition, Executive agrees to render his services
away from such city from time to time in the ordinary course of business, as the
proper performance of his duties may require.
10. EQUITABLE REMEDIES. Executive and the Company agree that the
services to be rendered by Executive pursuant to this Agreement are of a
special, unique and extraordinary character which gives them a peculiar value,
the loss of which may not be reasonably or adequately compensated in damages in
any action at law, and that a breach by Executive of any of the terms of this
Agreement may cause the Company great and irreparable injury and damage.
Executive expressly agrees that the Company may apply for the remedies of
injunction, specific performance and other equitable relief to prevent a breach
of this Agreement by Executive. This provision shall not, however, be construed
as a waiver of any of the rights which the Company may have hereunder, at law,
for damages, or otherwise.
11. COMPLETE AGREEMENT. In entering into this Agreement, neither party
has relied upon any representation, warranty, assurance or statement of
intention not expressly set forth herein.
12. SEVERABILITY. If any provision of this Agreement is declared
invalid, illegal or incapable of being enforced by any court of competent
jurisdiction, all of the remaining provisions of this Agreement shall
nevertheless continue in full force and effect.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed in California. Only California Courts (state and
federal) shall have jurisdiction of any action, suit or proceeding brought
regarding this Agreement.
14. MODIFICATION AND WAIVER. No provision of this Agreement may be
modified, waived, or discharged unless agreed to in writing by both parties
hereto. The failure of a party to insist upon strict adherence to any term,
condition or other provision of this Agreement shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term, condition or other provision of this Agreement.
7
15. ATTORNEY FEES. In the event of any action, suit, or proceeding
arising from or based on this Agreement brought by either party hereto against
the other, the prevailing party shall be entitled to recover from the other its
reasonable, attorneys' fees and disbursements in connection therewith in
addition to the costs of such action, suit or proceeding.
16. HEADINGS. The headings in this Agreement are solely for the
convenience of reference and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
/s/ XXXXXX XXXXXX /s/ XXXXXXXX XXXX
----------------------------- ----------------------------
Name: Xxxxxx Xxxxxx Xxxxxxxx Xxxx
Title: Director/Chairman
Compensation Committee
8
