EXHIBIT 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of August 16, 1999 between
OnHealth Network Company ("OnHealth") and Xxxxxx X. Xxxxxxx ("Xxxxxxx").
RECITALS
A. OnHealth is engaged in the business of providing health-related
information and analysis, products, services, applications and tools to the
general public through an Internet web site located at XXX.XXXXXXXX.XXX.
OnHealth may in the future expand its business to additional markets and media.
B. OnHealth intends to employ Xxxxxxx as Chief Financial Officer. This
Agreement is intended to memorialize the employment relationship between
OnHealth and Xxxxxxx, and to provide Xxxxxxx with various benefits, including
severance benefits, if his employment is terminated under certain circumstances.
C. As Chief Financial Officer, Xxxxxxx will hold a sensitive position
with access to, and requiring knowledge of, OnHealth's proprietary and
commercially valuable information, including trade secrets. Xxxxxxx also may
have contact with OnHealth's valued advertisers, licensees, licensors,
distributors, contributors and viewers (collectively, "OnHealth Business
Partners"). Unauthorized use or disclosure of such information, or interference
with OnHealth's relationships with OnHealth Business Partners, could cause
OnHealth irreparable injury. This Agreement also is intended to assure that
OnHealth's proprietary information and materials and relationships with OnHealth
Business Partners will be protected both during and after Xxxxxxx' employment.
Xxxxxxx understands the need for this commitment, and acknowledges that OnHealth
would not have entered into this Agreement without his consent to the
confidentiality provisions and restrictive covenants in this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of Xxxxxxx' employment by OnHealth,
Xxxxxxx' receipt of benefits under this Agreement and the other mutual covenants
in this Agreement, the parties agree as follows:
1. EMPLOYMENT OF XXXXXXX. OnHealth shall employ Xxxxxxx, and Xxxxxxx
shall serve as an employee of OnHealth, on the terms and conditions in this
Agreement.
2. POSITION AND DUTIES. Xxxxxxx shall serve as Chief Financial Officer
and shall perform such duties as OnHealth may from time to time assign and which
are ordinarily and customarily assigned to an employee occupying the position
held by Xxxxxxx. Xxxxxxx shall devote his full business time and attention and
best efforts to OnHealth's business and affairs, except with OnHealth's prior
approval in case of (a) leaves of absence and vacation, all in accordance with
OnHealth's employment policies in effect from time to time; and (b) service on
corporate, civil or charitable boards or committees involving no conflict of
interest with
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OnHealth's interests and not significantly interfering with the regular
performance of his OnHealth duties.
3. COMPENSATION AND RELATED MATTERS. During his employment under
this Agreement, Xxxxxxx shall receive the following compensation and benefits:
(a) BASE SALARY. Xxxxxxx shall receive a base salary ("Base
Salary") at an annual rate of $125,000. Xxxxxxx' Base Salary may be reviewed in
accordance with OnHealth's regular compensation practices. Base Salary shall be
paid in substantially equal periodic installments, but not less frequently than
monthly.
(b) BONUS. Xxxxxxx shall be entitled to be considered for an
annual cash bonus of up to $50,000, depending upon his achievement of milestones
to be agreed between OnHealth and Xxxxxxx within 60 days of the execution of
this Agreement; PROVIDED, that any cash bonus paid for achievement of 1999
milestones shall be one-third (1/3) of the annual amount determined by the
Board. Cash bonuses paid for subsequent years shall be determined on a calendar
year basis. Cash bonuses shall be payable within 90 days of the end of the
calendar year or at such time as cash bonuses are generally distributed to
eligible employees. In order to receive a cash bonus, Xxxxxxx must be actively
employed on the date bonuses are paid. The milestones for future years may be
adjusted in accordance with OnHealth's regular compensation and performance
evaluation practices.
(c) FRINGE BENEFITS. Xxxxxxx may participate in all benefit
programs that OnHealth from time to time makes available to other employees
holding positions similar to that of Xxxxxxx, subject to applicable eligibility
rules.
(d) STOCK OPTIONS. Xxxxxxx will receive options to purchase
150,000 shares of OnHealth's common stock with an exercise price per share equal
to OnHealth's closing price on the effective date of this Agreement. In
connection with these options, Xxxxxxx understands and agrees as follows:
i. the term of the options will be ten years;
ii. 37,500 of the 150,000 shares will vest after
completion of one year employment, and thereafter, the remaining 112,500 shares
will vest on a continuous basis over the subsequent three (3) years of
employment at a rate of 3,125 shares per month.
iii. in the event of a change in control such that any
individual, partnership, trust or other entity becomes after the effective date
of Xxxxxxx' employment with OnHealth the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of 50% or more of the
combined voting power of OnHealth's outstanding securities ordinarily having the
right to vote at elections of directors of OnHealth, this option and all of the
shares of common stock part of the option shall become immediately exercisable,
whether or not
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such option had become exercisable prior to the change of control transaction,
provided that such event does not preclude a "pooling of interest" transaction
by the parties;
iv. Xxxxxxx' rights under options are governed by the
1997 Stock Option Plan, as amended from time to time ("Plan"); and,
v. the Plan gives the Administrator (i.e.,
OnHealth's Board or designated Committee thereof) the power to administer and
interpret the Plan and to make and amend rules, regulations and guidelines for
administering the Plan.
If the Board approves a transaction which involves the issuance or transfer of
more than 50% of OnHealth's voting securities or if the Administrator otherwise
determines that a transaction constitutes a change of control, Xxxxxxx' unvested
options shall accelerate as provided in the Plan. OnHealth shall hold Xxxxxxx
harmless from any federal excise tax liability arising out of any such
acceleration and from any federal income tax liability on any payments made by
OnHealth in respect of such excise tax.
(e) EXPENSES. In accordance with OnHealth policies, Xxxxxxx
shall be reimbursed for all reasonable expenses he incurs in connection with his
OnHealth duties upon presentation of such documentation as OnHealth may require
from time to time.
4. TERMINATION. Xxxxxxx' employment under this Agreement shall
continue indefinitely, until terminated by OnHealth or Xxxxxxx as provided in
this Paragraph 4.
(a) DUE TO DEATH OR PERMANENT DISABILITY. Xxxxxxx' employment
shall terminate upon his death or permanent disability.
(b) BY ONHEALTH. OnHealth may terminate Xxxxxxx' employment at
any time, with or without Just Cause. OnHealth shall have "Just Cause" if its
Board of Directors determines that Xxxxxxx has committed an act or acts
constituting any of the following: (i) dishonesty or fraud in connection with
his duties for OnHealth; (ii) disclosure of confidential or private information
regarding OnHealth; (iii) sexual harassment or other violation of laws
prohibiting discrimination in connection with his duties for OnHealth; (iv)
materially aiding a competitor of OnHealth; (v) misappropriation of a business
opportunity of OnHealth; (vi) misconduct or negligence in the performance of his
duties for OnHealth; or, (vii) a felony conviction.
(c) BY XXXXXXX. Xxxxxxx may terminate his employment at any
time, with or without Good Reason. Xxxxxxx shall have "Good Reason" to terminate
in the event of (i) a forced relocation of the place for Xxxxxxx' performance of
his duties reasonably requiring a move of more than 50 miles in Xxxxxxx'
residence; or, (ii) a material breach of a material provision of this Agreement,
which breach remains uncured thirty days after written notice of such breach is
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delivered to OnHealth. Good Reason shall not exist if OnHealth contemporaneously
has Just Cause to terminate Xxxxxxx' employment.
5. PAYMENTS UPON TERMINATION.
(a) If Xxxxxxx' employment is terminated (i) due to Xxxxxxx'
death or permanent disability; (ii) by OnHealth for Just Cause; or (iii) by
Xxxxxxx without Good Reason, OnHealth shall pay Xxxxxxx' Base Salary through the
date of termination, and provide such other payments and benefits as applicable
law may require.
(b) If Xxxxxxx' employment is terminated (i) by OnHealth
without Just Cause; or (ii) by Xxxxxxx for Good Reason, then OnHealth shall
provide the following benefits, as liquidated damages or severance benefits, or
both:
i. OnHealth will continue to pay Xxxxxxx' Base
Salary for a period of 12 months (the "Severance Period").
ii. OnHealth will permit the unvested stock options
under Xxxxxxx' Stock Option Agreement which otherwise would vest during the
Severance Period to vest as if Xxxxxxx still were employed during that time.
As a condition to these benefits, Xxxxxxx shall provide consulting services to
OnHealth on a reasonable basis during the Severance Period. However, OnHealth's
obligations under Paragraph 5(b) shall immediately cease if Xxxxxxx breaches any
of the covenants in Paragraphs 6 through 9 of this Agreement, and Xxxxxxx shall
repay to OnHealth all amounts previously paid to Xxxxxxx during the period of
such breach. The amounts withheld and the amounts repaid are intended by the
parties as a reasonable forecast of only some of the damages that would result
from Xxxxxxx' breach of Paragraphs 6, 7, 8 or 9, and not as a penalty. Xxxxxxx'
repayment obligation in this Paragraph 5(b) shall not preclude OnHealth's
exercise of any other right or remedy available to it at law or in equity.
(c) Termination of Xxxxxxx' employment shall not waive any of
OnHealth's rights in Paragraphs 6 through 9.
6. CONFIDENTIALITY.
(a) "Confidential Information" means all information, and all
documents and other tangible things which record it, relating to or used in
OnHealth's business, whether or not a "trade secret", which is not generally
known to OnHealth's competitors and is disclosed to or developed by Xxxxxxx as a
result of employment with OnHealth. Confidential Information includes the
following especially sensitive information: (i) OnHealth's production processes
and techniques; (ii) OnHealth's marketing plans and strategies; (iii) OnHealth's
finances; (iv) the identity of and special business relations with, OnHealth
Business Partners; (v) OnHealth's
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software and business records, and (vi) any other information or documents which
Xxxxxxx is told or reasonably ought to know OnHealth regards as confidential.
(b) Xxxxxxx shall hold Confidential Information in the
strictest confidence, comply with all of OnHealth's instructions for preserving
its confidentiality, and use it only to further OnHealth's business. Except as
OnHealth may direct, Xxxxxxx shall not directly or indirectly copy, disclose or
use Confidential Information. Xxxxxxx' Paragraph 6 obligations shall remain in
effect with respect to particular information until the sooner of (i) the
longest time permitted by applicable law; and (ii) when that information has
been publicly disclosed by OnHealth, or otherwise is known to competitors
without Xxxxxxx' fault.
7. RETURN OF DOCUMENTS. At termination of employment, or earlier if
requested, Xxxxxxx (or if deceased, his personal representative) shall promptly
surrender to OnHealth, without retaining copies, all tangible things which are
or contain Confidential Information. Xxxxxxx also shall return all files,
correspondence, memoranda, computer software and print-outs, work papers, files,
client lists, telephone/address books, rolodex cards, appointment books,
calendars, and other tangible things which OnHealth gave to Xxxxxxx, or which
Xxxxxxx created in whole or part within the scope of his employment, even if
they do not contain Confidential Information.
8. INTELLECTUAL PROPERTY. "Intellectual Property" includes but is not
limited to discoveries, developments, concepts, marks, ideas, improvements to
existing processes, procedures, products, formulas and techniques, and all other
matters ordinarily intended by the words "intellectual property," whether or not
patentable or copyrightable, or otherwise able to be registered.
(a) All Intellectual Property that Xxxxxxx conceives or
creates, or to which he contributes, within the scope of his employment (whether
or not during regular working hours) shall be considered "work made for hire" so
that OnHealth will be the sole author and owner under copyright, trademark,
patent, trade secret, or other applicable laws. Xxxxxxx waives any rights he may
have in such Intellectual Property, and will sign documents or take other
actions reasonably necessary or convenient for OnHealth to document, obtain,
maintain or assign its rights to such Intellectual Property.
(b) Xxxxxxx will own all Intellectual Property that he
creates, develops and expresses in tangible medium that (i) is not within the
scope of his employment, (ii) is not related to any project of OnHealth, (iii)
is not created or developed during regular working hours, and (iv) does not use
OnHealth' computer systems or other equipment, facilities, Intellectual
Property, materials, personnel, or Confidential Information. If Xxxxxxx seeks to
exploit commercially any Intellectual Property owned by him that he creates
while employed with OnHealth, OnHealth shall have the right of first refusal to
license or assign such Intellectual Property for commercial exploitation, on
such terms as OnHealth and Xxxxxxx may mutually agree. If Xxxxxxx delivers,
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discloses, or otherwise makes any Intellectual Property available to OnHealth,
OnHealth will be deemed to own it unless Xxxxxxx gives prior written notice of
any claim of ownership.
9. RESTRICTIVE COVENANTS.
(a) A "Competitor" means any person or entity making plans to
engage or engaged in the business of providing consumer health-related
information, analysis, products, services, applications or tools to the general
public through the Internet.
(b) In consideration of OnHealth's commitments to provide the
benefits in Paragraphs 3(d) and 5(b), Xxxxxxx agrees as follows: During his
employment with OnHealth and continuing after the termination of employment for
any reason for the lesser of 12 months or the longest time permitted by
applicable law, Xxxxxxx shall not, unless OnHealth gives its prior written
consent: (i) manage, operate, control, or be employed by any Competitor; (ii)
consult with, act as agent for, or otherwise assist any Competitor to compete or
prepare to compete with OnHealth; (iii) own any interest (other than a passive
investment interest in a publicly traded company) in any Competitor; (iv) take
any action which might divert from OnHealth any opportunity within the scope of
its then business; (v) solicit, hire or otherwise engage any person employed by
OnHealth within 6 months before Xxxxxxx' termination, to perform services for
Xxxxxxx or any other person; or (vi) solicit, divert, or in any other manner
persuade or attempt to persuade any OnHealth Business Partner to alter or
discontinue its relationship with OnHealth.
(c) The covenants contained in parts (i), (ii) and (iii) of
Paragraph 9(b) shall be limited in geographical area to the United States, which
Xxxxxxx recognizes as the area where most of the entities and persons described
in this Paragraph 9 are or may be found from time to time. Xxxxxxx acknowledges
that the covenants in this Paragraph 9 are reasonable in scope, area and
duration and are necessary to further OnHealth's legitimate interests in
protecting Confidential Information, and, if applicable, relationships with
OnHealth Business Partners. Xxxxxxx represents that he has sufficient means of
support so that observing these covenants will not prevent him from earning a
livelihood or supporting his dependents.
10. REMEDIES.
(a) FOR ALLEGED BREACH OF PARAGRAPH 6, 7, 8 OR 9. Xxxxxxx
acknowledges that OnHealth would be greatly injured by, and would have no
adequate remedy at law for, Xxxxxxx' breach of Paragraph 6, 7, 8 or 9. Xxxxxxx
therefore consents that if such breach occurs or is threatened, OnHealth may, in
addition to all other remedies, enjoin Xxxxxxx (together with all persons acting
in concert with him) from such breach or threatened breach. If an injunction is
granted, the periods in Paragraphs 9 shall be extended so as to commence when
such injunction is entered.
(b) FOR ANY OTHER BREACH. For a dispute arising out of the
alleged breach of any other provision of this Agreement, the following
procedures shall apply.
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(i) The parties first will make a good faith
attempt to resolve the dispute through mediation in Seattle, Washington in
accordance with the then-current American Arbitration Association ("AAA")
National Rules for the Resolution of Employment Disputes. The mediator shall be
experienced in mediating general employment matters. If the parties cannot agree
on a mediator, then the AAA will select a mediator experienced in mediating
general employment matters. Within thirty days after selection of the mediator,
the parties and their attorneys will meet in good faith with the mediator for
one confidential mediation session. Nothing disclosed, and no document produced,
in the course of such discussions which is not independently discoverable may be
offered or received as evidence or used for impeachment or for any other purpose
in any arbitration or litigation. The request for mediation under this
sub-section must be sent within six (6) months of the time the dispute first
arises, or the claim will be barred.
(ii) If the dispute is not resolved by mediation,
then the parties shall within ninety (90) days submit the dispute to final and
binding arbitration in Seattle, Washington in accordance with the then-current
AAA National Rules for the Resolution of Employment Disputes. The sole neutral
arbitrator shall be experienced in arbitrating general employment matters. If
the parties cannot agree on an arbitrator, then the AAA will select an
arbitrator experienced in arbitrating general employment matters, provided that
no person may serve as both the mediator and arbitrator with respect to the same
dispute. The arbitrator must base his or her award on the provisions of this
Agreement and applicable law and must issue a written award, which must include
an explanation of the reasons for such award. Any court of competent
jurisdiction may enter judgment upon the
award.
(c) ATTORNEYS' FEES. In any lawsuit or arbitration arising out
of or relating to this Agreement, the prevailing party shall recover reasonable
his or its costs and reasonable attorneys' fees.
11. ASSIGNMENT. OnHealth may assign rights and duties under this
Agreement, but Xxxxxxx may not. This Agreement shall bind Xxxxxxx' heirs and
personal representatives, and inure to the benefit of OnHealth and its
successors and/or assigns.
12. CONTROLLING LAW/FORUM. Washington law shall govern this Agreement.
Subject to Paragraph 10, for any claim or cause of action arising under this
Agreement, OnHealth and Xxxxxxx consent to the exclusive jurisdiction of any
state or federal court within Seattle, Washington, and waive any objection based
on jurisdiction or venue, including FORUM NON CONVENIENS.
13. MISCELLANEOUS. This Agreement is the entire agreement between the
parties on its subject matters, and supersedes all prior and contemporaneous
discussions and understandings; provided, however, that except as specifically
stated in this Agreement, nothing in this Agreement is intended to alter any
rights of any party under the 1997 Stock Option Plan, as amended from time to
time. No waiver, modification or termination of any term of this
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Agreement shall be effective unless in writing and signed by all parties. If any
provision as written is deemed unlawful, overbroad or otherwise unenforceable,
the parties submit to the construction which will give OnHealth the maximum
protection which is reasonable and permissible under the circumstances
(including, if necessary, a reduction in the time and/or geographic scope of
nondisclosure and/or restrictive covenants), or if this is not possible, it
shall be deemed severed. OnHealth's failure, delay or forbearance to insist on
strict performance of any provision of this Agreement, or to exercise any right
or remedy, shall not be construed as a waiver. OnHealth's waiver of any right or
remedy in one or more instances shall not excuse Xxxxxxx' later strict
performance.
XXXXXXX HAS HAD AMPLE OPPORTUNITY TO REVIEW THIS AGREEMENT WITH AN ATTORNEY. IF
XXXXXXX DID NOT DO SO, IT IS BECAUSE HE UNDERSTOOD THE AGREEMENT, AND DID NOT
FEEL THAT HE NEEDED LEGAL ADVICE. XXXXXXX ACKNOWLEDGES THAT THE RESTRICTIONS IN
THIS AGREEMENT ARE FAIR AND REASONABLE UNDER THE CIRCUMSTANCES.
XXXXXX X. XXXXXXX ONHEALTH NETWORK COMPANY
\S\ XXXXXX XXXXXXX By \S\ XXXXXX XXXXXXX
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Its PRESIDENT AND CEO
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