EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of February 9, 1998, by and among
XXXXXX XXXX (the "Employee"), SCIENT CORPORATION, a California corporation (the
"Company") and XXXX XXXXXXXXX.
1. Term of Employment.
(a) Basic Rule. The Company agrees to employ the Employee, and the
Employee agrees to be employed by the Company, from the date of this Agreement
until the date when the Employee's employment terminates pursuant to Subsection
(b), (c) or (d) below. Either the Employee or the Company shall be entitled to
terminate the Employee's employment at any time and for any reason, with or
without Cause without liability or obligation to the other party except as
expressly set forth herein. Any contrary representations which may have been
made by one party to another shall be superseded by this Agreement. This
Agreement shall constitute the full and complete agreement between the Employee
and the Company on the nature of the Employee's employment, which may only be
changed in an express written agreement signed by the Employee and a duly
authorized officer of the Company.
(b) Without Cause. Subject to Section 6, the Company may terminate
the Employee's employment, with or without Cause, by giving the Employee thirty
(30) days' advance notice in writing. The Employee may terminate his employment
by giving the Company thirty (30) days' advance notice in writing. The
Employee's employment shall terminate automatically in the event of his death.
Any waiver of notice shall be valid only if it is made in writing and expressly
refers to the applicable notice requirement of this Section 1.
(c) Cause. Employee may be terminated for Cause if, an only if, in
the reasonable determination of the Company's Board of Directors, Employee is
convicted of a felony involving the Company or its property, or participates in
any fraud against the Company, or willfully breaches his duties to the Company,
or intentionally damages any property of the Company, or wrongfully discloses
any trade secrets or other confidential information of the Company, or
materially breaches any material provision of the Proprietary Information and
Inventions Agreement, dated as of the date hereof, between Employee and the
Company (the "Proprietary Information and Inventions Agreement"). If Employee
resigns his employment within fifteen (15) days of a material reduction in
Employee's job duties which are inconsistent with the position initially
assigned to Employee by the Company, such resignation will be the equivalent of
a termination of Employee's employment by the Company without Cause. The
exercise of the Company's right to terminate this Agreement pursuant to this
Subsection (c) shall not abrogate the rights and remedies of the Company
regarding the breach, if any, giving the rise to such termination.
(d) Permanent Disability. The Company may terminate the Employee's
active employment due to Permanent Disability by giving the Employee thirty (30)
days' advance notice in writing. For all purposes under this Agreement,
"Permanent Disability"
shall mean that the Employee, at the time notice is given, has failed to perform
substantially all of his duties under this Agreement for not less than 270 days
in the most recent fiscal year of the Company as the result of his incapacity
due to physical or mental illness. The determination regarding whether the
Employee is physically unable to regularly perform his duties under this
paragraph shall be made by the Board of Directors. Employee's inability to be
physically present on the Company's premises shall not constitute a presumption
that he is unable to perform such duties.
(e) Rights Upon Termination. Except as expressly provided in
Section 7, upon the termination of the Employee's employment pursuant to this
Section 1, the Employee shall only be entitled to the compensation, benefits and
reimbursements described in Sections 3, 4 and 5 for the period preceding the
effective date of the termination. The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Employee. Upon a
termination of the Employee's employment by the Employee, the Employee shall
have no liability or obligation to the Company except as expressly provided
herein; specifically, the exercise of the Company's right to terminate this
Agreement pursuant to Subsection (c) above shall not abrogate the rights and
remedies of the Company regarding the breach, if any, giving the rise to such
termination.
(f) Termination of Agreement. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Employee's
obligations under Section 8.
(g) Notice. Any notice required to be given pursuant to this
Section 1 shall be given in accordance with the provisions of Section 14 (a)
hereof.
2. Duties and Scope of Employment.
(a) Position. The Company will employ Employee in an executive
capacity as President and Chief Executive Officer, or such other executive
position as shall be mutually agreed upon, and perform the duties customarily
associated with such capacity from time to time and at such place or places as
the Company shall reasonably designate or as shall be reasonably appropriate and
necessary in connection with such employment. Employee will report directly to
the Company's Board of Directors, and all employees of the Company, other than
Xxxx Xxxxxxxxx, will report to Employee. Employee will be the final decision
maker with regard to all hiring and employment issues. Any additional members to
be added to the Board of Directors will be subject to Employee's consent, which
consent shall not be unreasonably withheld, and which consent shall terminate
upon the Company's initial public offering of its securities.
(b) Obligations. Employee will, to the best of his ability, devote
his full time and best efforts to the performance of his duties hereunder and
the business and affairs of the Company. The Company shall cause Employee to be
elected to and to be a member of the Company's Board of Directors for so long as
Employee remains an employee, director or consultant of the Company. Employee
will duly, punctually, and faithfully perform and observe
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any and all rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
3. Cash and Incentive Compensation.
(a) Salary. The Company agrees to pay the Employee as compensation
for his services a base salary on a semi-monthly basis at a monthly rate of
$20,833.33. Such salary shall be payable in accordance with the Company's
standard payroll procedures. (The annual compensation specified in this
Subsection (a), together with any increases in such compensation that the
Company may grant from time to time, is referred to in this Agreement as "Base
Compensation.")
(b) Bonus Opportunity. The Employee shall have the opportunity to
earn an annual bonus. The amount and manner of payment of such bonus shall be
determined by the Board of Directors.
4. Employee Benefits. During the term of his Employment, the Employee
shall be eligible to participate in the employee benefit plans maintained by the
Company (the "Company Plans"), subject in each case to the generally applicable
terms and conditions of the plan in question and to the determinations of any
person or committee administering such plan.
5. Business Expenses. During the term of his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
6. Stock Purchases. Upon commencement of his employment, the Employee
will purchase from Xxxx Xxxxxxxxx and Xxxx Xxxxxxxxx shall sell to Employee
840,000 shares of the Company's Common Stock at a price of $.10 per share. Such
shares will be sold from Xxxx Xxxxxxxxx'x unvested portion of his Common Stock
free and clear of all claims, liens, restrictions and encumbrances and shall be
fully vested in the Employee's hands upon such purchase by Employee. In
addition, upon commencement of Employee's employment with the Company, the Board
of Directors will grant Employee a stock option for 1,200,000 shares (the
"Option Shares") of the Company's Common Stock under the Company's 1997 Stock
Plan (the "Plan"). The exercise price shall be the fair market value of the
Company's Common Stock on the date of grant, as determined by the Board of
Directors. The Company hereby notifies Employee that the fair market of value of
the Company's Common Stock on the date hereof is $.10 per share. Such options
will be immediately exercisable, but the Option Shares will be subject to
repurchase by the Company (the "Repurchase Right") at the price paid for such
stock as provided in the Plan. Such Repurchase Right shall lapse with respect to
25% of the Option Shares upon the twelve (12)-month anniversary of Employee's
employment with the Company, and the remaining Repurchase Right shall lapse with
respect to 1/36th of the remaining Option Shares for each additional month of
employment by the Employee thereafter. Further, the Repurchase Right shall lapse
(i) with respect to 25% of the Option Shares upon the termination by the Company
of the Employee's employment with the Company without Cause, and (ii) in its
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entirety upon a Change In Control (as defined below) of the Company if Employee
is not maintained in his current position after such Change In Control or if
Employee is terminated without Cause at any time after such Change In Control. A
"Change In Control" shall mean (A) the acquisition of the Company by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
any merger effected exclusively for the purpose of changing the domicile of the
Company) that results in the transfer of fifty percent (50%) or more of the
outstanding voting power of this corporation; or (B) a sale of all or
substantially all of the assets of this corporation; unless the Company's
shareholders of record as constituted immediately prior to such acquisition or
sale will, immediately after such acquisition or sale (by virtue of securities
issued as consideration for the Company's acquisition or sale or otherwise) hold
at least 50% of the voting power of the surviving or acquiring entity.
7. Severance Benefits.
(a) Severance Payment. If, at any time during the term of this
Agreement, the Company terminates the Employee's Employment without his consent
for any reason other than Cause or Permanent Disability, then the Company shall
pay the Employee a lump sum equal to 100% of the greater of (i) his annual Base
Compensation (at the rate then in effect) or (ii) his actual Base Compensation
plus bonus for the most recent completed fiscal year of the Company.
(b) Employee Benefits. If the Employee becomes entitled to a
severance payment under Subsection (a) above, then the Employee shall also be
entitled to continue participating in each Company Plan which permits continuing
participation by former employees. The Employee's participation in such Company
Plan shall continue until the date 12 months following the termination of his
Employment.
(c) Computer Equipment. If the Employee becomes entitled to a
severance payment under Subsection (a) above, then the Company shall provide
Employee with a computer and peripherals substantially equivalent to his primary
working computer and peripherals as of the date of such termination.
(d) Communications. If the Employee becomes entitled to a severance
payment under Subsection (a) above, then the Employee shall also be entitled to
continuing access to the Company's telephone and e-mail systems until the date
six (6) months following the termination of his Employment.
8. Proprietary Information and Inventions; Employee Handbook. The
Employee will enter into the Proprietary Information and Inventions Agreement
with the Company in the form previously provided to Employee. Employee will
execute an acknowledgment that he has read and understood the company's rule of
conduct which will be included in a handbook to be distributed to the Employee.
9. Indemnification. The Company and Employee shall enter into an
Indemnification Agreement, which, among other things, will indemnify Employee
for claims and
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liabilities arising out of Employee's actions while an employee, director or
consultant of the Company regardless of when such claims or liabilities may
arise. Further, the Company hereby agrees to pay reasonable legal fees incurred
by Employee in defending any suit brought by Employee's immediate prior employer
("Prior Employer") arising out of Employee's employment with the Company or the
hiring by the Company of other employees of the Prior Employer. The Company
shall pay reasonable legal and accounting fees incurred by Employee in entering
into employment with the Company, not to exceed $10,000, so long as such legal
and accounting fees are substantiated with reasonably detailed billing records
for such services.
10. Lost Bonus. The Company agrees to pay Employee a bonus of
$330,000.00 due in February, 1998 if such bonus is not paid by Employee's Prior
Employer because Employee is entering into employment with the Company or if
such bonus has been paid to Employee and is required to be returned to
Employee's Prior Employer because Employee is entering into employment with the
Company.
11. Relocation; Tax Equalization. The Company will reimburse Employee
for all reasonable relocation expenses, including a tax gross-up. The Company
will pay any personal tax liabilities that the Employee shall incur which would
have been covered, or which have been paid to Employee and are required to be
returned to Employee's Prior Employer, by a Tax Equalization Agreement currently
in effect with Employee's Prior Employer but which the Prior Employer fails to
cover, or requires to be returned to Employee's Prior Employer, because Employee
is entering into employment with the Company.
12. Ability to Work in United States. Employee shall submit a Form I-9
and satisfactory documentation with regard to Employee's identification and
legal right to work in the United States to the Company no later than three (3)
days after the commencement of Employee's employment.
13. Successors.
(a) Company's Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
14. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered mail, return receipt
requested and postage prepaid.
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In the case of the Employee, mailed notices shall be addressed to him at the
home address which he most recently communicated to the Company in writing. In
the case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
(b) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Employee and by an authorized officer of the
Company (other than the Employee). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement; Modifications. No agreements, representations
or understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement and the
Proprietary Information and Inventions Agreement contain the entire
understanding of the parties with respect to the subject matter hereof. A
modification of this Agreement shall be valid only if it is made in writing and
executed by both parties hereto.
(d) Withholding Taxes. All payments made under this Agreement shall
be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (except their provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled in San
Francisco, California, by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the parties, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The parties hereby agree that the arbitrator shall be empowered to
enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The Company and the Employee shall share equally all fees and
expenses of the arbitrator; provided, however, that the Company or the Employee,
as the case may be, shall bear all fees and expenses of the arbitrator and all
of the legal fees and out-of-pocket expenses of the other party if the
arbitrator determines that the claim or position of the Company or the Employee,
as the case may be, was without reasonable foundation. The Employee hereby
consents to personal jurisdiction of the state and federal courts located in the
State of California for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the parties are
participants.
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(h) No Assignment. This Agreement and all rights and obligations of
the Employee hereunder are personal to the Employee and may not be transferred
or assigned by the Employee at any time. The Company may assign its rights under
this Agreement to any entity that assumes the Company's obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
(i) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Remedies. Employee's duties under the Proprietary Information and
Inventions Agreement shall survive termination of his employment with the
Company. Employee acknowledges that a remedy at law for any breach or
threatened breach by Employee of the provisions of the Proprietary Information
and Inventions Agreement would be inadequate and therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.
16. Company Representations and Warranties.
(a) The Company agrees to maintain indemnification provisions in
its Articles of Incorporation and its Bylaws to fullest extent permissible under
California law. The Amended and Restated Articles of Incorporation and the
Bylaws of the Company currently in effect are in the form previously provided to
special counsel for the Employee.
(b) The capitalization of the Company as shown on the table
attached hereto as Exhibit A is true and complete as of the date hereof and
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the percentages thereon indicate the allocation of the Company's securities on a
fully-diluted basis.
(c) All corporate action on the part of the Company necessary for
the authorization, execution and delivery of this Agreement and the performance
of all obligations of the Company hereunder have been taken, and this Agreement
and the performance of all obligations of the company to be performed hereunder
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
(d) The 1997 Stock Plan in the form previously provided to special
counsel for the Employee has been approved by the Company's Board of Directors.
17. Employee Representations and Warranties. Without any obligation to
conduct an independent investigation, Employee has, to the best of his
knowledge, delivered to the Company copies of all material agreements between
Employee and Employee's Prior Employer. Without any obligation to conduct an
independent investigation, Employee, to the
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best of his knowledge, is not in any material violation of any such agreements
with Employee's Prior Employer.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
SCIENT CORPORATION
By
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Title:
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EMPLOYEE
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Xxxxxx Xxxx
XXXX XXXXXXXXX
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Xxxx Xxxxxxxxx
EXHIBIT A
Common Stockholders Shares %
--------------------------------- ---------------- -----------
Xxxx Xxxxxxxxx 4,266,666 35.56%
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Total Common Outstanding 4,266,666 35.56%
Series A Stockholders Shares %
--------------------------------- ---------------- ----------
Benchmark Capital Partners II, 2,844,445 23.70%
L.P.
Sequoia Capital VII 2,196,000 18.30%
Sequoia Technology Partners VII 96,000 0.80%
SQP 1997 44,544 0.37%
Sequoia 1997 25,056 0.21%
Sequoia International Partners 38,400 0.32%
Stanford University 88,889 0.74%
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Total Series A Outstanding 5,333,334 44.44%
Stock Option Plan Shares %
--------------------------------- ---------------- ----------
Shares Reserved 2,400,000 20.00%
Shares Granted 0 0.00%
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Shares Available 2,400,000 20.00%
SCIENT CORPORATION
Mr. Xxxxxx Xxxx
Dear Xxx:
Scient Corporation is pleased to offer employment to you on terms set
forth in the form Employment Agreement accompanying this letter. This offer
will remain open until January 20, 1998, at which time it will terminate unless
you and we have signed and delivered this Employment Agreement.
We understand that before signing this Employment Agreement you need
to resign your employment with your present employer. Once you have given that
resignation, it is our understanding that the terms of this Employment Agreement
are acceptable to you.
Please acknowledge that the foregoing reflects your understanding of
these matters by signing and returning to Scient a copy of this letter.
SCIENT CORPORATION
---------------------------------
Xxxx Xxxxxxxxx, President
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Xxxxxx Xxxx
