Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of January 13,
2004, by and between Northgate Innovations, Inc., a Delaware corporation (the
"Company"), and Xxxx X. Xxxxxx, a resident of Austin, Texas ("Employee").
WHEREAS, the Company desires to continue to obtain the services of
Employee, and Employee desires to continue to provide services to the Company,
in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Employee agree as
follows:
1. Employment. Effective on the Effective Date (as defined in Section
2) and subject to the terms and conditions of this Agreement, the Company agrees
to employ Employee as the Company's Chief Executive Officer, and Employee agrees
to perform the duties associated with that position diligently and to the
reasonable satisfaction of the Company. From the Effective Date until
termination of this Agreement, Employee will devote Employee's full business
time, attention and energies to the business of the Company. Nothing in this
Agreement, however, will prohibit Employee from engaging in trade association or
charitable activities, including serving as a board member or committee member
to trade associations or charities; provided, that, none of such activities
interfere with the performance of Employee's duties and responsibilities to the
Company under this Agreement. Employee's principal place of employment will be
Austin, Texas; provided, however, that Employee will travel to the extent
reasonably requested by the Company's Board of Directors for Employee to perform
his duties as Chief Executive Officer of the Company.
2. Term and Termination. Employee will be employed under this Agreement
for an initial term of two years (the "Initial Term"), beginning on the date of
the Agreement (the "Effective Date"). This Agreement will renew for successive
one year periods after the completion of the Initial Term, unless either party
gives prior written notice to the contrary to the other party no less than 30
days prior to the end of the Initial Term or renewal period, as the case may be.
The Agreement may be sooner terminated by either party in accordance with
Section 3 of this Agreement.
3. Termination Benefits. If, prior to the end of the Initial Term or
any renewal period, as the case may be, (a) the Company terminates this
Agreement other than for Cause (as defined below), or (b) Employee terminates
his employment for Good Reason (as defined below), then the Company will be
obligated to pay Employee in a lump sum, within thirty (30) days after such
event, an amount equal to Employee's base salary and maximum discretionary
incentive bonus in effect on the date of such termination for the remainder of
the Initial Term or any renewal period, as the case may be. As used in this
Agreement (i) termination for "Cause" means any termination of Employee for (a)
the commission of an act of fraud or embezzlement against the Company, (b) the
conviction of, or a plea of "guilty" or "no contest" to, a felony under the laws
of the United States or any state, (c) consistent willful misconduct or gross
negligence in performing Employee's duties hereunder, or (d) a material breach
of any of the terms of this Agreement or any other agreement between the Company
and Employee relating to
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Employee's employment, if such breach causes material harm to the Company, after
written notice of such breach and reasonable opportunity to cure; (ii) "Good
Reason" means any of the following that occurs without Employee's express prior
written consent: (a) an adverse change by the Company in Employee's title,
function, duties or responsibilities (including reporting responsibilities), (b)
Employee's base salary is reduced by the Company, or there is a material
reduction in the benefits that are in effect for Employee, (c) relocation of
Employee's principal place of employment to a place located more than 50 miles
outside of Austin, Texas, (d) a Change in Control (as defined below), or (e)
other material breach of this Agreement by the Company after written notice of
such breach and reasonable opportunity to cure; and (iii) a "Change in Control"
means any of the following that occurs in a single transaction or series of
related transactions: (a) the direct or indirect sale or exchange by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company (other than the sale or exchange of such voting stock to (A) a
trustee or other fiduciary holding stock under one or more employee benefit
plans maintained by the Company, or (B) any entity that, immediately prior to
such sale or exchange, is owned directly or indirectly by the stockholders of
the Company in approximately the same proportion as their ownership of voting
stock in the Company immediately prior to such sale or exchange); (b) a merger
or consolidation in which the shareholders of the Company immediately before the
transaction do not retain, immediately after the transaction, direct or indirect
beneficial ownership of more than fifty percent (50%) of the total combined
voting power of the outstanding voting stock of the Company; (c) the sale,
exchange, lease or transfer of all or substantially all of the assets of the
Company (unless, following such transaction, such assets are owned by a company
or other entity and the shareholders of the Company immediately before the
transaction have direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of such company or entity) or
(d) the complete liquidation or dissolution of the Company.
4. Compensation. Beginning on the Effective Date and thereafter during
the term of Employee's employment, the Company will pay Employee a base salary
of not less than $200,000 per year, payable biweekly or semi-monthly in
accordance with the payroll practices of the Company in effect from time to
time. Such base salary may not be reduced and will be subject to review and
potential upward adjustment periodically, but at least on an annual basis, in
accordance with the compensation policies of the Company in effect from time to
time. Employee will also, during the term of this Agreement, be eligible for
discretionary incentive bonus payments, payable quarterly beginning on March 31,
2004, of up to $37,500 per quarter. Such bonus will be awarded in accordance
with the bonus policies established by the Company from time to time. All of
Employee's compensation under this Agreement will be subject to deduction and
withholding authorized or required by applicable law.
5. Stock Option. The Company will grant Employee a stock option to
purchase 3,309,587 shares of the Company's common stock, par value $0.03 per
share ("Common Stock"), which is equal to approximately 10.0% of the outstanding
Common Stock, on a fully diluted basis, as of the Effective Date. Such option
will be granted immediately after such grant is approved by the Compensation
Committee of the Board of Directors of the Company and the stockholders of the
Company, which approval will take place no later than January 21, 2004 (the
"Grant Date"). The exercise price per share of such option will be equal to the
fair market value of the Common Stock, as determined by the Board of Directors
of the Company, on the Grant Date. The term of such option will be ten (10)
years, subject to earlier termination as set forth in
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the applicable stock option agreement, and will vest in twenty-four (24) equal
monthly installments, beginning the month after the Grant Date. The option will
become fully vested upon a Change in Control.
6. Board Seat. The Company will cause Employee to be appointed as a
member of the Board of Directors of the Company at the next meeting of the Board
of Directors, to serve until such time as his employment under this Agreement
terminates.
7. Employee Benefits. Beginning on the Effective Date and thereafter
during the term of this Agreement, the Company will provide to Employee such
fringe benefits, perquisites, vacation and other benefits that the Company
generally provides to its executive employees. The Company will reimburse
Employee for reasonable out-of-pocket business expenses, including without
limitation travel expenses and temporary housing in the Los Angeles, California
area related to travel between Employee's principal place of employment in
Austin, Texas and the Company's current operations, incurred and documented in
accordance with the policies of the Company in effect from time to time. The
Company agrees that if Employee is made a party or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "Proceeding"), by reason of the fact that Employee is or was
a trustee, director or officer of the Company or any affiliate of the Company or
is or was serving at the request of the Company or any affiliate as a trustee,
director, officer, member, employee or agent of another corporation or a
partnership, joint venture, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a trustee,
director, officer, member, employee or agent while serving as a trustee,
director, officer, member, employee or agent, Employee shall be indemnified to
the fullest extent authorized by California law, as the same exists or may
hereafter be amended, against all expenses incurred or suffered by Employee in
connection therewith. If the Company maintains a directors' and officers'
insurance policy, Employee shall be covered to the same extent as other
employees.
8. No Obligation to Third Party. Employee represents and warrants that
Employee is not under any obligation to any person or other third party and does
not have any other interest that is inconsistent or in conflict with this
Agreement, or which would prevent, limit, or impair Employee's performance of
any of the covenants hereunder or Employee's duties as an employee of the
Company.
9. Confidentiality. In consideration of the benefits provided for in
this Agreement, Employee agrees not to, at any time, either during his
employment or thereafter, divulge, use, publish or in any other manner reveal,
directly or indirectly, to any person, firm, corporation or any other form of
business organization or arrangement and keep in the strictest confidence any
Confidential Information, except, (i) as may be necessary to the performance of
Employee's duties hereunder, (ii) with the Company's express written consent,
(iii) to the extent that any such information is in or becomes in the public
domain other than as a result of Employee's breach of any obligations hereunder,
or (iv) where required to be disclosed by court order, subpoena or other
government process and in such event, Employee shall cooperate with the Company
in attempting to keep such information confidential. Upon the request of the
Company, Employee agrees to promptly deliver to the Company the originals and
all copies, in whatever medium, of all such Confidential Information.
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"Confidential Information," as used in this Agreement, shall mean any
and all secret, proprietary and confidential information concerning the business
of the Company and its affiliates, including, without limitation, business and
marketing plans, strategies, models, codes, client information (including client
identity and contacts, client lists, client financial or personal information),
business relationships (including persons, corporations or other entities
performing services on behalf of or otherwise engaged in business transactions
with the Company and its affiliates or their clients), accounts, financial data,
know-how, computer software and related documentation, trade secrets, processes,
policies and/or personnel, and any other information, data or the like that is
labeled confidential or is treated as confidential by the Company.
10. Non-Solicitation. Employee acknowledges that by virtue of
Employee's position as CEO of the Company, and Employee's employment hereunder,
he will have advantageous familiarity with, and knowledge about, the Company and
will be instrumental in establishing and maintaining goodwill between the
Company and its customers, which goodwill is the property of the Company.
Therefore, Employee agrees that during his employment and for a twelve (12)
month period thereafter, Employee will not on behalf of himself or any other
person or entity, solicit, take away, hire, employ or endeavor to employ any of
the employees of the Company.
11. Non-Disparagement. Employee acknowledges and agrees that he will
not defame or publicly criticize the services, business, integrity, veracity or
personal or professional reputation of the Company and its officers, directors,
partners, executives or agents thereof in either a professional or personal
manner at any time during or following his employment with the Company.
12. Enforcement. If Employee commits a breach, or threatens to commit a
breach, of any of the provisions of Sections 9-11 of this Agreement, the Company
shall have the right and remedy to have the provisions specifically enforced by
any court having jurisdiction, it being acknowledged and agreed by Employee that
the services being rendered hereunder to the Company are of a special, unique
and extraordinary character and that any such breach or threatened breach will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company. Such right and remedy shall be in addition
to, and not in lieu of, any other rights and remedies available to the Company
at law or in equity. Accordingly, Employee consents to the issuance of an
injunction, whether preliminary or permanent, consistent with the terms of this
Agreement. In addition, the Company shall have the right to cease making any
payments or provide any benefits to Employee under this Agreement in the event
he breaches or threatens to breach any of the provisions hereof.
13. Blue Pencil. If, at any time, the provisions of Sections 9-11 shall
be determined to be invalid or unenforceable under any applicable law, by reason
of being vague or unreasonable as to area, duration or scope of activity, this
Agreement shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter and Employee and the Company agree that this Agreement as so
amended shall be valid and binding as though any invalid or unenforceable
provision had not been included herein.
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EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ SECTIONS 9-11 OF THIS AGREEMENT
AND HAS HAD THE OPPORTUNITY TO REVIEW ITS PROVISIONS WITH ANY ADVISORS AS HE
CONSIDERED NECESSARY AND THAT EMPLOYEE UNDERSTANDS THIS AGREEMENT'S CONTENTS AND
SIGNIFIES SUCH UNDERSTANDING AND AGREEMENT BY SIGNING BELOW.
14. Entire Agreement. This Agreement constitutes the complete agreement
of the parties with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that relates in any way to the subject matter hereof. This
Agreement may be amended only in writing executed by the Company and Employee.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the respective heirs, executors, administrators, legal
representatives and successors of the Company and Employee.
16. Notice. Any notice required or permitted under this Agreement must
be in writing and will be deemed to have been given when delivered personally,
by telecopy or by overnight courier service or three days after being sent by
mail, postage prepaid, to (a) if to the Company, to the Company's principal
place of business, or (b) if to Employee, to Employee's residence or to
Employee's latest address then contained in the Company's records (or to such
changed address as such person may subsequently give notice of in accordance
herewith).
17. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT
REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
IN WITNESS WHEREOF, the Company and Employee have executed and
delivered this Agreement as of the date first above written.
NORTHGATE INNOVATIONS, INC.
By:
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Name:
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Title:
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/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
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