1
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), entered into as of the 11th
day of February, 1999, is by and between Xxxxxxxx.xxx Incorporated, a New York
corporation (the "Company") and Xxxxx X. High ("High").
WITNESSETH:
WHEREAS, the Company is engaged primarily in the business of hosting and
administering proprietary online enterprise learning solutions and related
services; and
WHEREAS, High is currently employed by the Company as President; and
WHEREAS, the Company desires that High continue in the employment of the
Company as President and High desires to continue to be employed by the Company
in such capacity.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties do hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
"BASE SALARY" means the aggregate annual amount paid by the Company for
base salary as provided in Section 3(a) hereof.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means, as determined in good faith by two-thirds of the Board, (1)
High's material and irreparable breach of this Agreement, (2) High's gross
negligence in the performance of any of his material duties and responsibilities
hereunder; (3) High's willful dishonesty or fraud with respect to the business
or affairs of the Company; (4) High's conviction of a felony crime; or (5)
chronic alcohol abuse or illegal drug abuse by High.
"CHANGE IN CONTROL" means (i) consolidation or merger of the Company with
or into any other corporation, or any other entity or person, other than a
wholly-owned subsidiary of the Company, excluding any transaction in which the
stockholders of the Company immediately prior to the transaction will maintain
voting control or own at least 50% (in each case, in substantially the same
proportion as before such event) of the resulting entity after the transaction;
(ii) any corporate reorganization, including an exchange offer, in which the
Company shall not be the continuing or surviving entity resulting from such
reorganization, excluding any transaction in which the stockholders of the
Company the transaction will maintain voting control or own at least 50% (in
each case, in substantially the same proportion as before such event) of the
resulting entity after the transaction; or (iii) the sale of a substantial
2
portion of the Company's assets, which shall be deemed to occur on the date that
any one person, or more than one person acting as a group, acquires (or has
acquired during the 12 month period ending on the date of the most recent
acquisition by such person or persons assets from the Company that have a total
fair market value equal to more than 75% of the total fair market value of all
the assets of the Company.
"COMPLETE DISABILITY" means High's qualification for benefits under the
long-term disability insurance policy described in Section 3(f) hereof.
"COMMON SHARES" means shares of the Company's common stock, $.001 par
value.
"DESIGNATED BENEFICIARY" means the person(s) designated by High to the
Board to be his beneficiary under this Agreement in the event of his death. If
no beneficiary has been designated, or the designated beneficiary has
predeceased High, the Designated Beneficiary shall be High's estate.
"EMPLOYMENT DATE" means February 11, 1999.
"GOOD REASON" means (i) a material and adverse change in High's title,
status, authority, duties, function or benefits; (ii) any reduction in High's
Base Salary or the failure to pay High's Base Salary for a period of more than
60 days; (iii) the relocation of High's principal place of employment to a
location outside of the State of Rhode Island; or (iv) a material breach by the
Company of its obligations hereunder.
"INITIAL TERM" means the three (3) year period beginning on the Employment
Date and ending on the third anniversary thereof.
"SEVERANCE" means (i) Base Salary at the rate in effect at the time of the
event triggering the Company's obligation to pay Severance, (ii) the
acceleration of vesting of all options held by High to purchase Company stock,
and the extension of the exercise period of all such options until the second
anniversary of the date of termination, and (iii) for as long as High shall be
living during the period for which he is entitled to Severance, the continuation
of the benefits described in Sections 3(d)-(g) hereof. In the event that High is
not eligible for continued participation in the health insurance plan in which
High was participating at the time of termination, the Company shall pay the
full cost of comparable coverage (determined without regard to cost).
"SUBSEQUENT TERM" means the three (3) year period beginning immediately
following the expiration of the Initial Term and ending on the third anniversary
thereof.
"TERRITORY" means the United States of America.
"TRADE SECRET, PROPRIETARY OR CONFIDENTIAL INFORMATION" means any and all
confidential, trade secret and/or proprietary information of the Company or its
clients, including without limitation financial information, projected budgets,
marketing strategies, past
2
3
performances, client lists, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, flowcharts,
software programs, data, systems, techniques, business acquisition plans,
inventions and research projects and other business affairs or any other
documents or materials, whether or not reduced to tangible form, pertaining to
the business of Company.
2. EMPLOYMENT AND DUTIES.
(a) Effective as of the Employment Date, the Company hereby agrees to
employ High as its President. As such, High shall have responsibilities, duties
and authority reasonably accorded to and expected of such position. High will
report directly to the Board and carry out its directives to him. High shall
serve as a director of the Company until such time as his successor is elected,
and shall serve as a member of Executive Committee of the Board and/or any other
committee of the Board as the Board may request.
(b) High hereby agrees to accept the employment and responsibilities and
duties described in subparagraph (a) above as of the Employment Date upon the
terms and conditions herein contained. High agrees to devote his full business
and productive time, skill, attention and efforts to promote and further the
business of the Company. In all aspects of his employment, High shall faithfully
adhere to, execute and fulfill all directives, policies and standards
established by the Company.
(c) High shall not, during the term of High's employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with High's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting High from making personal investments in such form or manner as will
neither require High's services in the operation or affairs of the companies or
enterprises in which such investments are made nor violate the terms of Section
4 hereof.
3. COMPENSATION. For all services rendered by High, the Company shall
compensate High as follows:
(a) BASE SALARY. Effective as of the Employment Date, Base Salary payable
to High shall be $175,000. Provided that the Company shall have raised in excess
of $7,000,000 of new equity capital after the Employment Date but before January
1, 2000, effective as of January 1, 2000, Base Salary shall be increased to
$200,000 and effective as of January 1, 2001, Base Salary shall be increased to
$225,000. Subsequent increases in Base Salary shall be determined by the Board.
Base Salary shall be paid in accordance with the Company's standard payroll
procedures.
(b) BONUS AND/OR PERFORMANCE COMPENSATION. Bonus and/or other performance
compensation may be payable to High at the discretion of the Board.
(c) STOCK OPTIONS. Effective as of the Employment Date, the Company agrees
to award High an option to purchase 400,000 Common Shares at an exercise price
equal to $4.00 per
3
4
share. Twenty-five percent (25%) of such option (i.e. 100,000 Common Shares)
(hereinafter referred to as the "Class A portion") shall become vested in 13
equal installments on the first day of each calendar quarter beginning April 1,
1999, except that the last installment shall vest on the third anniversary of
the Employment Date. Notwithstanding the foregoing, the Class A portion shall
become immediately exercisable in full if the closing bid of the Common Shares
equals or exceeds $15.00 for five consecutive trading days. The remaining
seventy-five percent (75%) of such option (i.e. 300,000 Common Shares)
(hereinafter referred to as the "Class B portion") shall become exercisable on
the third anniversary of the Employment Date; provided, however, if prior to the
third anniversary of the Employment Date, but after June 7, 1999, (i) the
closing bid of the Common Shares equals or exceeds $10.00 per share on any
trading day, then one third (1 /3) of such Class B portion shall become
immediately exercisable, (ii) the closing bid of the Common Shares equals or
exceeds $12.50 per share on any trading day, then two-thirds (2/3) of the Class
B portion (cumulatively) shall be immediately exercisable; and (iii) the closing
bid of the Common Shares equals or exceeds $15.00 per share, on any trading day,
then the Class B portion shall be immediately exercisable in full. In addition,
the option shall become immediately exercisable in full upon (xi) the
consummation of a Change in Control, (xii) the occurrence of an event resulting
in a Company obligation to pay High Severance as provided in Section 5 hereof,
(xiii) High's death, or (xiv),High's Complete Disability. The option shall have
a term of 10 years except as otherwise provided in Section 5 hereof. As soon as
practicable after the Employment Date, the Company shall cause the offering of
the option and the Common Shares covered by such option to be registered with
the Securities and Exchange Commission on a Form S-8 Registration Statement.
(c)
(d) WELFARE AND RETIREMENT BENEFITS. During the term of High's employment
with the Company, at no cost to High, the Company shall provide High with family
coverage under the health insurance plan chosen by High from the plans offered
to the Company's regular full-time employees. High may participate in such
additional employee benefit plans, including but not limited to 401 (k),
pension, and dental insurance plans, as the Company makes available generally to
executives of the Company.
(e) LIFE INSURANCE. During the term of High's employment with the Company,
the Company shall make premium payments for a permanent whole life insurance
policy on the life of High, such policy to be secured and owned by High or
any other person designated by High, up to a maximum annual amount of $14,850.
(f) LONG-TERM DISABILITY INSURANCE. During the term of High's employment
with the Company, the Company will secure and maintain a long-term disability
insurance policy with respect to High providing for benefits of not less than
$5,000 per month for 60 months.
(g) AUTOMOBILE. During the term of High's employment with the Company,
the Company will provide High with a monthly automobile allowance of $ 1,000.
4
5
(h) VACATION. During the term of High's employment with the Company,
High will be allowed up to five (5) weeks of paid vacation during each calendar
year. Unused vacation during any calendar year may not be carried over into a
succeeding calendar year.
(i) DIRECTORS AND OFFICERS INSURANCE. During the term of High's
employment with the Company, the Company shall use its best efforts to insure
High for all acts and services he performs and provides hereunder and agrees to
indemnify him for any losses, costs, claims, damages and expenses that he may
incur as a result of his employment activities hereunder which are neither
willful nor grossly negligent to the fullest extent permitted under law.
(j) BUSINESS EXPENSES. During the term of High's employment with the
Company, the Company will reimburse High for the costs of cell phone and home
fax operation, and an internet telephone line. The Company will reimburse High
for the ordinary and necessary business travel, lodging, meal and entertainment
expenses he reasonably incurs in furtherance of the business activities of the
Company. The Company's agreement under this subparagraph (j) is subject to
High's substantiation and reporting of such expenses in accordance with Company
policy and applicable federal and state income tax laws.
4. NON-COMPETITION AGREEMENT.
(a) High will not, during the period of High's employment by or with the
Company, and for a period of one (1) year immediately following the termination
of High's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for High or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, stockholder, owner, partner,
joint venturer, or in a managerial, consulting or advisory capacity, whether as
an employee, independent contractor, consultant or advisor, or as a sales
representative, in any business which offers any services or products in direct
competition with Company within the Territory;
(ii) call upon any person who is, at that time, within the Territory,
an employee of the Company in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of Company;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a client of Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with Company within the Territory;
(iv) call upon any prospective acquisition candidate, on High's own
behalf or on behalf of any competitor, which candidate was, to High's actual
knowledge after due inquiry, either called upon by Company or for which Company
made an acquisition analysis, for the purpose of acquiring such entity; or
5
6
(v) induce or attempt to induce any person known by High to be a
customer, supplier, or business relation of the Company to cease doing business
with the Company or in any way interfere with the relationship between the
Company and any person known by High to be a customer, supplier, licensee, or
business relation of the Company.
Notwithstanding the above, the foregoing covenants shall not be deemed to
prohibit High from acquiring as an investment not more than one percent (1%) of
the capital stock of a competing business, whose stock is traded on a national
securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to Company as a
result of a breach of the foregoing covenants, and because of the immediate and
irreparable damage that could be caused to Company for which Company would have
no other adequate remedy, High agrees that the foregoing covenants may be
enforced by Company in the event of breach by High, by injunctions and
restraining orders.
(c) The covenants in this Section 4 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 restrictions 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 this
Agreement shall thereby be reformed.
(d) High acknowledges that the covenants in this Section 4 (i) are agreed
to by High as an inducement for and in consideration of the Company's entering
into this Agreement, and (ii) contain limitations as to time, geographic area
and scope of activity to be restrained that are reasonable and do not impose a
greater restraint than is necessary to protect the goodwill or other business
interests of Company.
(e) High agrees that all of the covenants in this Section 4 shall be
construed as an agreement independent of any other provision in this Agreement,
that Company shall be the beneficiary of and have the right to enforce such
covenants, and that the existence of any claim or cause of action of High
against Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Company of such covenants. It is
specifically agreed that the period of one (1) year following termination of
employment stated at the beginning of this Section 4, during which the
agreements and covenants of High made in this Section 4 shall be effective,
shall be computed by excluding from such computation any time during which High
is in violation of any provision of this Section 4.
5. TERM AND TERMINATION.
(a) TERM. High's employment pursuant to this Agreement shall begin on the
Employment Date, and shall terminate upon the expiration of the Initial Term,
unless extended as provided in subparagraph (b) below. Notwithstanding the
foregoing, this Agreement shall immediately terminate upon the occurrence of the
following events: (i) High's death; (ii) High's
6
7
Complete Disability; (iii) High's resignation with or without Good Reason; or
(iv) termination of High's employment by the Company with or without Cause.
(b) EXTENSION OF AGREEMENT. If neither the Company nor High have given
written notice to the other that this Agreement shall not be renewed at the end
of the Initial Term at least sixty (60) days prior to the expiration thereof,
then High's employment under this Agreement shall be automatically extended for
the Subsequent Term unless sooner terminated as herein provided. In the event
that the Company does not renew this Agreement through the Subsequent Term,
Executive will receive Severance for one (1) year after expiration of the
Initial Term. That portion of Severance attributable to Base Salary shall be
paid, at the election of the Company, in equal monthly installments through the
end of the one (1) year severance period, or in a single lump sum payment made
not more than 30 days after the expiration of the Initial Term. In the event
that High does not renew this Agreement through the Subsequent Term, any
unvested portion of the option described in Section 3(c) hereof shall terminate
upon the expiration of the Initial Term, and any vested portion of such option
shall terminate if not exercised within 90 days of the expiration of the Initial
Term.
(c) DEATH. If High dies while in the employ of the Company, the Company
will pay to High's Designated Beneficiary Base Salary accrued through the date
of death. The option described in Section 3(c) hereof shall become immediately
exercisable in full. Such option shall terminate if not exercised within one (1)
year after the date of death.
(d) COMPLETE DISABILITY. In the event of High's Complete Disability, the
Company will pay High Base Salary accrued through the date of Complete
Disability. The option described in Section 3(c) hereof shall become immediately
exercisable in full. Such option shall terminate if not exercised within one (1)
year after the date of Complete Disability.
(e) EXECUTIVE RESIGNATION; COMPANY TERMINATION WITHOUT CAUSE.
(i) Either High or the Company may terminate this Agreement for any reason
without Cause by providing the other party at least five (5) business days
advance written notice of termination.
(ii) Upon termination of this Agreement by High other than for Good Reason,
High shall be entitled to receive Base Salary accrued through the date of
termination. Any unvested portion of the stock option described in Section 3(c)
hereof shall terminate immediately, and any vested portion of such option shall
terminate if not exercised within 90 days of termination.
(iii) Upon termination of this Agreement by High for Good Reason, or by the
Company without Cause, High will receive Severance until the later of (i) the
expiration of the Initial Term or Subsequent Term, as applicable, or (ii) two
(2) years after the date of termination. That portion of Severance attributable
to Base Salary shall be paid in a single lump sum payment not more than thirty
(30) days after termination of this Agreement. High shall have no obligation to
seek or obtain other employment and the failure to seek or obtain other
employment shall not reduce in any way the Company's obligations under this
Section 5(e)(iii).
7
8
(f) TERMINATION FOR CAUSE. In the event the Company terminates High's
employment for Cause, High shall be entitled to Base Salary accrued through the
date of termination, but shall be entitled to no further rights or benefits
hereunder. Any unvested portion of the stock option described in Section 3(c)
hereof shall terminate immediately, and any vested portion of such option shall
terminate if not exercised within 90 days of termination.
6. RETURN OF COMPANY PROPERTY. All records, files, business plans,
financial statements, manuals, memoranda, lists, designs, patents, and other
property delivered to or compiled by High by or on behalf of Company or any of
its representatives, vendors or clients which pertain to the business of Company
shall be and remain the property of Company and be subject at all times to its
discretion and control. Likewise, all correspondence, reports, records, charts,
advertising materials and other similar data pertaining to the business,
activities or future plans of Company which is collected by High shall be
delivered promptly to the Company without request by it upon termination of
High's employment.
7. INVENTIONS AND WORKS. High shall disclose promptly to the Company any
and all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, and any and all works of
authorship (including computer software), whether copyrightable or not, which
are conceived or made by High, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of Company and which High conceives as a result of
High's employment by the Company. High hereby assigns and agrees to assign all
High's interests therein to the Company or its nominee. Whenever requested to do
so by the Company, High shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
copyright registration or Letters Patent of the United States or any foreign
country or to otherwise protect the Company's interest therein.
8. TRADE SECRET, PROPRIETARY AND CONFIDENTIAL INFORMATION. High
acknowledges and agrees that during the course of High's employment with the
Company, High may learn about, develop or be entrusted with Trade Secret,
Proprietary and Confidential Information. The Company has in the past and will
in the future use reasonable efforts to keep secret the Trade Secret,
Proprietary and Confidential Information. High expressly acknowledges and agrees
that unless the Trade Secret, Proprietary and Confidential Information becomes
publicly known through legitimate means not involving an act or omission by
High: (i) the Trade Secret, Proprietary and Confidential Information is, and at
all times shall remain, the sole and exclusive property of the Company unless it
shall become publicly known in the Company's business without any involvement on
High's part; (ii) High shall use the utmost diligence to guard and protect the
Trade Secret, Proprietary and Confidential Information from disclosure to any
other person or entity except in the scope of the discharge of his duties to the
Company; (iii) High shall not use for his own benefit, or for the benefit of any
other person or entity other than the Company, and shall not disclose, directly
or indirectly, to any other person or entity, any of the Trade Secret,
Proprietary and Confidential Information except in the scope of the discharge of
his duties to the Company; and (iv) except in the scope of the discharge of his
duties to the Company, High shall not seek or accept any of the Trade Secret,
Proprietary and Confidential Information from any former, present, or future
employee of the Company.
8
9
9. NO PRIOR AGREEMENTS. High hereby represents and warrants to the
Company that the execution of this Agreement by High and High's employment by
the Company and the performance of High's duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, High agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between High and such third party
which was in existence as of the date of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. High understands that High has been
selected for employment by the Company on the basis of High's personal
qualifications, experience and skills. High agrees, therefore, that High cannot
assign all or any portion of High's performance under this Agreement. Subject to
the preceding two (2) sentences, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
11. NO GUARANTEE OF EMPLOYMENT. This Agreement does not create any
obligation of the Board to accept any proposed venture capital investment, or
any guarantee that an Employment Date will occur. In the event that High is
employed by the Company in any capacity prior to an Employment Date, the terms
of this Agreement shall not apply.
12. COMPLETE AGREEMENT . This Agreement is not a promise of future
employment. High has no oral representations, understandings or agreements with
the 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 the
Company and High 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. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and High, and no term of this Agreement may be waived except by writing signed
by the party waiving the benefit of such term.
13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Xxxxxxxx.xxx Incorporated
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
9
10
To High: Xxxxx X. High
Xxx Xxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received if earlier.
Either party may change the address for notice by notifying the other party of
such change in accordance with this Section 13.
14. SEVERABILITY; HEADINGS. 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.
15. ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or the breach or performance hereof will be settled
by arbitration in accordance with the laws of the State of Rhode Island by an
arbitrator mutually agreed upon by the Company and High. If an arbitrator cannot
be agreed upon, the Company and High shall each choose an arbitrator, and these
two together shall select a third arbitrator. If the first two arbitrators
cannot agree on the appointment of a third arbitrator, then the third arbitrator
will be appointed by the American Arbitration Association in Providence, Rhode
Island[?]. Such arbitration will be conducted in the City of Providence in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall be
as provided in this Section 15. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Delaware.
17. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
XXXXXXXX.XXX INCORPORATED
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Title: Chairman of the Board
10
11
XXXXX X. HIGH
/s/ Xxxxx. J. High
----------------------------
Xxxxx X. High
11
