EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of June 28,
1999 (the "Effective Date") by and between The XxxXxx.xxx, Inc., a Florida
corporation (the "Company"), and Xxxxxxx Xxxxxxxx (the "Executive") under the
following terms and conditions:
RECITALS:
WHEREAS, the Company and Executive desire to set forth the terms and
conditions on which (i) the Company shall employ Executive, (ii) Executive shall
render services to the Company, and (iii) the Company shall compensate Executive
for such services; and
WHEREAS, in connection with the employment of Executive by the Company, the
Company desires to restrict Executive's rights to compete with the business of
the Company;
WHEREAS, the parties acknowledge that the Executive's abilities and
services are unique and essential to the prospects of the Company; and
WHEREAS, in light of the foregoing, the Company desires to employ the
Executive as Executive Vice President and Chief Operating Officer and the
Executive desires to accept such employment.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive and Executive hereby accepts
employment with the Company upon the terms and conditions hereinafter set forth.
2. TERM.
The term of this Agreement (the "Term") shall be for a period commencing on
the Effective Date of this Agreement and shall continue for a period of twenty-
four (24) months from the date thereof, unless sooner terminated as provided in
Paragraph 6. Upon termination of this two (2) year period, the Agreement shall
be renewed for successive two (2) year periods at the option of the Executive.
This two (2) year period, as the same may be extended or terminated pursuant
hereto, is hereinafter referred to as the "Term".
3. COMPENSATION.
3.1 For all services rendered by Executive under this Agreement, the
Company shall pay Executive a base salary of Two Hundred Forty Thousand Dollars
($240,000) per annum in equal
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semi-monthly installments on the 15th and last day of each month (the "Base
Salary"). The amount of the Base Salary shall be reviewed on an annual basis by
the Compensation Committee of the Company. No such change shall in any way
abrogate, alter, terminate or otherwise effect the other terms of this
Agreement.
3.2 In addition to the Base Salary, the Company shall pay Executive a one-
time sign-on bonus of One Hundred Thousand Dollars ($100,000) payable upon the
Company's having raised a minimum of $4,000,000 under its private placement,
which bonus shall be to cover relocation and transition costs..
3.3 In addition to the Base Salary, Executive shall be eligible for an
annual incentive bonus ("Incentive Bonus") in an amount not to exceed 100% of
the Base Salary. The Incentive Bonus shall be based upon goals mutually agreed
upon by the President/Chief Executive Officer and the Executive, within 30 days
of the Effective Date. The Incentive Bonus shall be paid, if earned, within 30
days after the Company's year-end operating results have been determined by the
Company's accountants. Executive's Incentive Bonus for each of the first two
years shall be a guaranteed minimum of 25% of Base Salary.
3.4 In addition to the compensation payable to the Executive by the
Company pursuant to the terms hereof, at such time as Executive shall begin
providing consulting services to The XxxXxxxx.xxx, Inc., Executive shall be
granted an option to purchase 50,000 shares of The XxxXxxxx.xxx, Inc.'s common
stock at an exercise price of $0.01 per share. The option shall vest over a
period of four (4) years, with 25% vesting on the first anniversary of the date
of grant and the remaining 75% vesting as to one-thirty sixth (1/36th) per month
each month thereafter for the next three (3) years. The option shall have a term
of ten (10) years. The option shall be subject to the terms and conditions of
the XxxXxxxx.xxx, Inc's 1999 Stock Incentive Plan established by its Board of
Directors and the Stock Option Agreement. The option shall immediately vest in
full upon a merger or sale of the XxxXxxxx.xxx, Inc., or a change in control (as
defined in the Plan).
3.5 In addition to the Base Salary, the Company shall pay to Executive an
automobile allowance of One Thousand Dollars ($1,000) per month during the term
of this agreement. Executive shall pay all expenses relating to the use of an
automobile in furtherance of business of the Company, including liability
insurance, maintenance, repairs, gasoline, and oil.
3.6 In addition to the Base Salary, Executive shall be entitled to all
other benefits of employment provided to the other employees of the Company
holding comparable positions within the Company, including but not limited to
paid vacation, paid health insurance for the Executive and his spouse, paid life
insurance to a maximum of base salary, keyman life insurance in the amount of
$2,000,000, paid mobile telephone expense for business use, and participation in
retirement and investment programs as instituted by the Company. Health
insurance coverage for other dependents shall be paid by the Executive.
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3.7 Executive shall be reimbursed for all reasonable "out-of-pocket"
business expenses for business travel and business entertainment incurred in
connection with the performance of his or her duties under this Agreement (i) so
long as such expenses constitute business deductions from taxable income for the
Company and are excludable from taxable income to the Executive under the
governing laws and regulations of the Internal Revenue Code and (ii) to the
extent such expenses do not exceed the amounts allocable for such expenses in
budgets that are approved from time to time by the Company. The reimbursement of
Executive's business expenses shall be upon monthly presentation to and approval
by the Company of valid receipts and other appropriate documentation for such
expenses. Executive shall also be reimbursed for pre-approved family house
hunting trips, legal fee's associated with employment agreement documents, and
business travel during Executive's transition to Newport Beach, California.
3.8 All compensation shall be subject to customary withholding tax and
other employment taxes as are required with respect to compensation paid by a
corporation to an employee.
4. DUTIES AND RESPONSIBILITIES.
4.1 Executive shall, during the Term of this Agreement, devote his
full attention and expend his best efforts, energies, and skills, on a full-time
basis, to the business of the Company and any corporation controlled by the
Company. For purposes of this Agreement, the term the "Company" shall mean the
Company and all Subsidiaries. Executive shall not, during the term of this
Agreement, be engaged in any other business activity without the prior consent
of the Board of Directors of the Company; provided, however, that this
restriction shall not be construed as preventing Executive from investing his
personal assets in passive investments in business entities which are not in
competition with the Company or its affiliates. From time to time Executive may
be required to work with affiliated companies.
4.2 During the Term of this Agreement, Executive shall serve as the
Executive Vice President and Chief Operating Officer of the Company and in such
other capacity as may be determined by the President and Chief Executive
Officer. In the performance of all of his responsibilities hereunder, Executive
shall be subject to all of the Company's policies, rules, and regulations
applicable to its employees of comparable status and shall report directly to,
and shall be subject to the direction and control of, the President and Chief
Executive Officer and shall perform such duties as shall be assigned to him by
the President and Chief Executive Officer. In performing such duties, Executive
will be subject to and abide by, and will use his best efforts to cause other
employees of the Company to be subject to and abide by, all policies and
procedures developed by the President and Chief Executive Officer and/or the
Board of Directors.
4.3 Executive hereby agrees to promote and develop all business
opportunities that come to his attention relating to current or anticipated
future business of the Company, in a manner consistent with the best interests
of the Company and with his duties under this Agreement. Should Executive
discover a business opportunity that does not relate to the current or
anticipated future business of the Company, he shall first offer such
opportunity to the Company. Should the
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Board of Directors of the Company not exercise its right to pursue this business
opportunity within a reasonable period of time, not to exceed sixty (60) days,
then Executive with the consent of the Board of Directors may develop the
business opportunity for himself; provided, however, that such development may
in no way conflict or interfere with the duties owed by Executive to the Company
under this Agreement. Further, Executive may develop such business opportunities
only on his own time, and may not use any service, personnel, equipment,
supplies, facility, or trade secrets of the Company in their development. As
used herein, the term "business opportunity" shall not include business
opportunities involving investment in publicly traded stocks, bonds or other
securities, or other investments of a personal nature.
4.4 Without first obtaining the written permission of the Board of
Directors of the Company, Executive will not authorize or permit the Company to
engage the services of, or engage in any business activity with, or provide any
financial or other benefit to, any affiliate of Executive. The phrase "affiliate
of Executive" as used in this Paragraph shall mean and include Executive's
family by blood or marriage (including, without limitation, parents, spouse,
siblings, children and in-laws), and any business or business entity which is
directly or indirectly owned or controlled by Executive or any member of the
Executive's family or in which Executive or any member of the Executive's family
has any direct or indirect financial interest whatsoever.
4.5 To induce the Company to enter into this Agreement, the Executive
represents and warrants to the Company that except as set forth on Schedule 4.5,
(a) the Executive is not a party or subject to any employment agreement or
arrangement with any other person, firm, company, corporation or other business
entity, (b) the Executive is subject to no restraint, limitation or restriction
by virtue of any agreement or arrangement, or by virtue of any law or rule of
law or otherwise which would impair the Executive's right or ability (i) to
enter the employ of the Company, or (ii) to perform fully his duties and
obligations pursuant to this Agreement, and (c) to the best of Executive's
knowledge no material litigation is pending or threatened against any business
or business entity owned or controlled or formerly owned or controlled by
Executive. Should any legal action be taken against Executive, the Company will
provide legal support at the cost of the Company. The Company shall also
indemnify Executive for all acts and omissions within the scope of Executive's
employment.
4.6 During each year, Executive in the performance of his duties
under this Agreement shall comply or cause compliance with the applicable Annual
Plan and shall not (except for emergency expenditures or special circumstances
requiring an unanticipated expenditure) deviate materially from any budget
category set forth in the Annual Plan, incur any material additional expense or
change materially the manner of operation of the Company without the approval of
the Board of Directors.
5. RESTRICTIVE COVENANTS.
5.1 Executive acknowledges that (i) he has a major responsibility for
the operation, administration, development and growth of the Company's business,
(ii) his work for the
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Company has brought him and will continue to bring him into close contact with
confidential information of the Company and its customers, and (iii) the
agreements and covenants contained in this Paragraph 5 are essential to protect
the business interest of the Company and that the Company will not enter into
this Agreement but for such agreements and covenants. Accordingly, the Executive
covenants and agrees as follows:
5.1(a) Except as otherwise provided for in this Agreement, during the
Term of this Agreement and, if this Agreement is terminated for any reason
during the Term, for eighteen (18) months following such date of termination
(the "Termination Period"), the Executive shall not, directly or indirectly,
compete with respect to any services or products of the Company which are either
offered or are being developed by the Company; or, without limiting the
generality of the foregoing, be or become, or agree to be or become, interested
in or associated with, in any capacity (whether as a partner, shareholder,
owner, officer, director, Executive, principal, agent, creditor, trustee,
consultant, co-venturer or otherwise) with any individual, corporation, firm,
association, partnership, joint venture or other business entity, which competes
with respect to any services or products of the Company which are either offered
or are being developed by the Company; provided, however, that the Executive may
own, solely as an investment, not more than one percent (1%) of any class of
securities of any publicly held corporation in competition with the Company
whose securities are traded on any national securities exchange in the United
States of America, and may retain his ownership interest in those entities
referred to in Subparagraph 4.1.
5.1(b) During the term of this Agreement and, if applicable, during
the Termination Period, the Executive shall not, directly or indirectly, (i)
induce or attempt to influence any employee of the Company to leave its employ,
(ii) aid or agree to aid any competitor, customer or supplier of the Company in
any attempt to hire any person who shall have been employed by the Company
within the one (1) year period preceding such requested aid, or (iii) induce or
attempt to influence any person or business entity who was a customer or
supplier of the Company during any portion of said period to transact business
with a competitor of the Company in Company's business.
5.1(c) During the Term of this Agreement, the Termination Period, if
applicable, and thereafter, the Executive shall not other than in the
performance of his duties disclose to anyone any information about the affairs
of the Company, including, without limitation, trade secrets, trade "know-how",
inventions, customer lists, business plans, operational methods, pricing
policies, marketing plans, sales plans, identity of suppliers or customers,
sales, profits or other financial information, which is confidential to the
Company or is not generally known in the relevant trade, nor shall the Executive
make use of any such information for his own benefit. Any technique, method,
process or technology used by the Company shall be considered a "trade secret"
for the purposes of this Agreement.
5.1(d) Executive hereby agrees that all know-how, documents, reports,
plans, proposals, marketing and sales plans, client lists, client files and
materials made by him or by the Company are the property of the Company and
shall not be used by him in any way adverse to the Company's interests.
Executive shall not deliver, reproduce or in any way allow such documents
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or things to be delivered or used by any third party without specific direction
or consent of the Board of Directors of the Company. Executive hereby assigns to
the Company any rights which he may have in any such trade secret or proprietary
information.
5.2 If any of the Restrictive Covenants, or any part thereof, is held
to be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties hereto agree that the court making such termination shall
have the power to reduce the duration and/or area of such provision and, in its
reduced form, such provision shall then be enforceable.
5.3 The parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Restrictive Covenants. In the event that the courts
of any one or more of such jurisdictions shall hold such Restrictive Covenants
wholly unenforceable by reason of the breadth of such scope or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of any
other jurisdictions within the geographical scope of such Restrictive Covenants,
as to breaches of such covenants in such other respective jurisdictions, the
above covenants as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
6. TERMINATION.
6.1 The Company, through a vote of a majority of the Board of
Directors, may terminate the Executive's employment under this Agreement at any
time for Cause. "Cause" shall exist for such termination if Executive (i) is
adjudicated guilty of a felony by a court of competent jurisdiction, (ii)
commits any material act of fraud or intentional misrepresentation in connection
with his employment by the Company, (iii) has, in the reasonable judgment of,
and after a good faith investigation by, the Company's Board of Directors, (a)
engaged in serious and willful misconduct, which conduct has, or would if
generally known, materially adversely affect the goodwill or reputation of the
Company and which conduct the Executive has not cured or altered to the
satisfaction of the Board of Directors within ten (10) days following written
notice by the Board of Directors to the Executive regarding such conduct, or (b)
willfully and intentionally failed to perform his duties as specified to him by
the Board of Directors, which has not cured or rectified to the satisfaction of
the Board of Directors within ten (10) days following written notice by the
Board of Directors, or (iii) has made any material misrepresentation to the
Company under Paragraphs 4 and 5 hereof.
6.2 If the Company terminates the Executive's employment under this
Agreement pursuant to the provisions of Paragraph 6.1 hereof, the Executive
shall not be entitled to receive any compensation following the date of such
termination.
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6.3 This Agreement shall automatically terminate on the last day of
the month in which Executive dies or becomes permanently incapacitated.
"Permanent incapacity" as used herein shall mean mental or physical incapacity,
or both, reasonably determined by the Company's Board of Directors based upon a
certification of such incapacity by, in the discretion of the Company's Board of
Directors, either Executive's regularly attending physician or a duly licensed
physician selected by the Company's Board of Directors, rendering Executive
unable to perform substantially all of his or her duties hereunder and which
appears reasonably certain to continue for at least six (6) consecutive months
without substantial improvement. Executive shall be deemed to have "become
permanently incapacitated" on the date the Company's Board of Directors has
determined that Executive is permanently incapacitated and so notifies
Executive.
6.4 If Executive's employment is terminated for any reason (whether
by Executive or the Company) within thirty (30) days following a "Change in
Control of the Company" (as defined below), Executive shall be entitled to the
benefits provided in Section 6.5 below. For purposes of this Agreement, a
"Change in Control of the Company" shall mean, at such time as the Company's
Board of Directors becomes fully constituted (e.g., the number of directors
reaches five (5)), a cumulative change in the identity of a majority of the
members of the Company's first fully constituted Board of Directors (provided,
however, that the appointment of a new director upon the death or resignation of
a director by the remaining directors then in office shall not constitute a
change in identity with respect to such departed director).
6.5 Executive's employment may be terminated by the Company, through
a vote of a majority of the Board of Directors, "without cause" (for any reason
or no reason at all) at any time by giving Executive sixty (60) days prior
written notice of termination, which termination shall be effective on the 60th
day following such notice. If Executive's employment under this Agreement is so
terminated, the Company shall make a lump sum cash payment to Executive on the
date of termination of an amount equal to (i) two (2) years' Base Salary, plus a
pro rata portion of any Incentive Compensation, if any, earned for the year in
which termination occurs prorated to the date of termination, plus (ii) any
unreimbursed expenses accruing to the date of termination. The Company shall
also continue Executive's benefits through the remainder of the Term.
6.6 Executive may terminate his or her employment hereunder by giving
the Company sixty (60) days prior written notice, which termination shall be
effective on the 60th day following such notice. Voluntary termination shall not
entitle the Executive to receive any compensation following the date of
termination.
6.7 At the Company's option, Executive shall immediately leave the
Company's premises on the date notice of termination is given by either
Executive or the Company. If the Company requests Executive to leave the Company
following notice under Paragraph 6.6, it shall fully compensate Executive
(salary and benefits) through the 60th day following the date of Executive's
notice.
7. MISCELLANEOUS.
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7.1 The Company may, from time to time, apply for and take out, in
its own name and at its own expense, life, health, accident, disability or other
insurance upon the Executive in any sum or sums that it may deem necessary to
protect its interests, and the Executive agrees to aid and cooperate in all
reasonable respects with the Company in procuring any and all such insurance,
including without limitation, submitting to the usual and customary medical
examinations, and by filling out, executing and delivering such applications and
other instruments in writing as may be reasonably required by an insurance
company or companies to which an application or applications for such insurance
may be made by or for the Company. In order to induce the Company to enter this
Agreement, the Executive represents and warrants to the Company that to the best
of his knowledge the Executive is insurable at standard (non-rated) premiums.
7.2 This Agreement is a personal contract, and the rights and
interests of the Executive hereunder may not be sold, transferred, assigned,
pledged or hypothecated except as otherwise expressly permitted by the
provisions of this Agreement. The Executive shall not under any circumstances
have any option or right to require payment hereunder otherwise than in
accordance with the terms hereof. Except as otherwise expressly provided herein,
the Executive shall not have any power of anticipation, alienation or assignment
of payments contemplated hereunder, and all rights and benefits of the Executive
shall be for the sole personal benefit of the Executive, and no other person
shall acquire any right, title or interest hereunder by reason of any sale,
assignment, transfer, claim or judgment or bankruptcy proceedings against the
Executive; provided, however, that in the event of the Executive's death, the
Executive's estate, legal representative or beneficiaries (as the case may be)
shall have the right to receive all of the benefit that accrued to the Executive
pursuant to, and in accordance with, the terms of this Agreement.
7.3 The Company shall have the right to assign this Agreement to any
successor of substantially all of its business or assets, and any such successor
shall be bound by all of the provisions hereof.
8. NOTICES.
All notices, requests, demands and other communications provided for
by this Agreement shall be in writing and (unless otherwise specifically
provided herein) shall be deemed to have been given at the time when mailed in
any general or branch United States Post Office, enclosed in a registered or
certified postpaid envelope, addressed to the parties stated below or to such
changed address as such party may have fixed by notice:
To the COMPANY: The XxxXxx.xxx, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Chief Executive Officer
Executive: Xxxxxxx Xxxxxxxx
________________
________________
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9. ENTIRE AGREEMENT.
This Agreement supersedes any and all Agreements, whether oral or
written, between the parties hereto, with respect to the employment of Executive
by the Company and contains all of the covenants and Agreements between the
parties with respect to the rendering of such services in any manner whatsoever.
Each party to this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that no
other agreement, statement or promise with respect to such employment not
contained in this Agreement shall be valid or binding. Any modification of this
Agreement will be effective only if it is in writing and signed by the parties
hereto.
10. PARTIAL INVALIDITY.
If any provision in this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
11. ATTORNEYS' FEES.
Should any litigation or arbitration be commenced between the parties
hereto or their personal representatives concerning any provision of this
Agreement or the rights and duties of any person in relation thereto, the party
prevailing in such litigation or arbitration shall be entitled, in addition to
such other relief as may be granted, to a reasonable sum as and for its or their
attorneys' fees in such litigation or arbitration which shall be determined by
the court or arbitration board.
12. ARBITRATION.
The parties agree that any disputes arising under this Agreement shall
be resolved in as expeditious a manner as possible through binding arbitration
administered by the American Arbitration Association in the County of Orange,
California, or such other place which is mutually agreed upon by the parties.
Further, the parties hereby waive any objection based on personal jurisdiction,
venue or forum non conveniens in any arbitration or action brought under this
paragraph. The decision and award rendered by the arbitrators shall be final and
binding. Judgment upon the award may be entered in any court having jurisdiction
thereof.
Notwithstanding the first paragraph of this paragraph, any dispute
involving an amount that is less than or equal to the maximum jurisdictional
amount for small claims court, as may be amended, shall be brought in the small
claims court for the County of Orange, State of California, or such other place
which is mutually agreed upon by the parties.
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13. GOVERNING LAW.
This Agreement will be governed by and construed in accordance with
the laws of the State of California.
14. BINDING NATURE.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, heirs, successors and
assigns.
15. WAIVER.
No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
16. CORPORATE APPROVALS.
The Company represents and warrants that the execution of this
Agreement by its corporate officer named below has been duly authorized by the
Board of Directors of the Company, is not in conflict with any Bylaw or other
agreement and will be a binding obligation of the Company, enforceable in
accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date above written.
THE COMPANY: THE XXXXXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------
Name:Xxxxx X. Xxxxx
--------------
Its:Chairman of the Board
---------------------
Executive:
/s/ Xxxxxxx Xxxxxxxx
--------------------
Xxxxxxx Xxxxxxxx
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SCHEDULE 4.5(a)
Executive: Xxxxxxx Xxxxxxxx
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