EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 26th day of January, 2000, is by and between
COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the "Company"), and XXXXX
X. XxXXXXXXXX (the "Employee").
RECITALS
WHEREAS, the Employee is willing to be employed by the Company upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in order to set forth the terms and conditions of the Employee's
employment with the Company and in consideration of the covenants and agreements
of the parties herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT SERVICES
Subject to the terms and conditions hereinafter set forth, the Company
hereby employees the Employee as Chief Executive Officer commencing on
January 14, 2000 and ending on the last day of the Term (as defined below).
The Employee accepts such employment and agrees to perform all duties in a
conscientious, reasonable and competent manner and to devote his reasonable
best efforts to perform his duties pursuant to this Agreement and to
further the business of the Company, as directed by the Board of Directors.
Without further action of the Company, the Employee may engage in other
business, consulting, financial and other activities during the employment
hereunder subject to fulfilling his duties hereunder. The Employee has
disclosed in Schedule 1 attached hereto the names of his other business
affiliations as of the date hereof and agrees to promptly notify the
Company of any additional affiliations.
2. TERM AND TERMINATION
2.1 TERM
Subject to section 2.2 hereof, the employment of the Employee under this
Agreement will commence on January 14, 2000 (the "Effective Date") and
continue until the occurrence of the first of the following (the
"Termination Date"):
(a) January 14, 2003 (i.e., a term of three years);
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(b) The Employee's death; or
(c) The Employee's illness, physical or mental disability or other
incapacity resulting in the Employee's inability to effectively
perform his duties under this Agreement for an aggregate of
thirty (30) days during any period of six (6) consecutive months.
The period beginning on the Effective Date and ending on the
Termination Date is referred to herein as the "Term."
2.2 TERMINATION
The Employee may be terminated prior to the expiration of the Term
with or without "Cause" at the sole discretion of the Board of
Directors. "Cause" shall include any of the following occurrences:
(a) The Employee's conduct involving fraud or moral turpitude or the
Employee's dishonesty involving the Company's business;
(b) The Employee's chronic absence from work other than by reason of
illness, injury, vacation or business- related travel, which
continues after the Employee has received a written notice from
the Company to halt such chronic absence;
(c) Conviction of any felony;
(d) The Employee's conviction of any misdemeanor which is
substantially related to the Employee's services hereunder;
(e) The Employee's abuse of alcohol (whether or not on the job) after
receiving a written notice from the Company to halt such usage or
the Employee's conviction of a crime involving alcohol;
(f) The Employee's use of illegal drugs or other illegal substance
(whether or not on the job) after receiving a written notice from
the Company to halt such usage or the Employee's conviction of a
crime involving illegal drugs or other illegal substance, which
impairs the Employee's ability to perform his duties under this
Agreement or has an adverse effect (other than an insignificant
effect) on the Company, its business or its relationship with any
customer or supplier of the Company;
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(g) Conduct either within or outside the scope of the Employee's
employment which has an adverse effect (other than an
insignificant effect) on the Company, its business or its
relationship with any customer or supplier of the Company;
(h) A breach by the Employee of his obligations under sections 7, 8
or 9 hereof; and
(i) A material breach of any other provision of this Agreement by the
Employee, following written notice and failure to cure within a
reasonable time (which cure period shall be no less than five
days after Employee's receipt of such notice).
The Employee may resign and terminate this Agreement on five days
prior written notice to the Company for no reason or any reason
("Voluntary Termination"). In addition, the Employee may terminate
this Agreement if the Company has materially breached any provision of
this Agreement and the Company has not cured such breach within a
reasonable time (but no less than five days) after receipt of written
notice of such breach ("Termination for Good Cause").
2.3 EFFECT OF TERMINATION
If the Employee is terminated for "Cause" as defined above, or the
Employee effects a Voluntary Termination, then this Agreement shall
terminate and the Employee shall not be entitled to any unearned
compensation or benefits under this Agreement as of the date of
termination and any unvested options as of the date of termination
granted pursuant to section 3.2 shall be void and cancelled. If the
Employee is terminated without "Cause" as defined above, or the
Employee effects a Termination for Good Cause, then this Agreement
shall terminate and the Employee shall nevertheless be entitled to six
months of semi-monthly salary installments as set forth in section 3.1
and the stock options and vesting schedule of section 3.2 shall remain
in effect. The Employee's obligations in sections 6, 7, 8, 9 and 10
hereof shall survive the termination of employment hereunder for any
reason.
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3. COMPENSATION
3.1 SALARY
The Company agrees to pay the Employee for each full fiscal year of
the term of this Agreement an annual salary, payable in 24 equal
semi-monthly payments, at a rate equal to $160,000 per year.
3.2 STOCK OPTIONS
The Employee shall be entitled to receive five-year stock options of
the Company for 750,000 shares of the Company's common stock at an
exercise price of $5.00/share (the "Options"), with vesting as set
forth below:
Number of Options/Shares Vesting
300,000 Immediate
100,000 January 14, 2001, provided, however, such vesting shall
be accelerated if the closing price of the Company's common
stock on the Nasdaq National Market is equal to or greater
than $8.00/share for 20 consecutive trading days
150,000 January 14, 2002, provided, however, such vesting shall
be accelerated if the closing price of the Company's common
stock on the Nasdaq National Market is equal to or greater
than $12.00/share for 20 consecutive trading days
200,000 January 14, 2003, provided, however, such vesting shall
be accelerated if the closing price of the Company's common
stock on the Nasdaq National Market is equal to or greater
than $16.00/share for 20 consecutive trading days
All Options must be exercised on or before the earlier of (i) January
14, 2006 or (ii) the date which is three (3) years after termination
of the Employee's employment with the Company for any reason.
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Notwithstanding the foregoing, all stock options granted to the
Employee above shall immediately vest in the event of any transaction
in which substantially all of the assets of the Company are acquired
or 50% or more of the issued and outstanding common stock of the
Company is acquired by a single person, entity or group of such
persons or entities.
The Employee hereby acknowledges that the stock options set forth
above and the shares underlying such stock options have not been
registered or qualified for sale under the Securities Act of 1933, as
amended (the "Act"), or any state securities law and may not be sold,
hypothecated, pledged, assigned or otherwise transferred, nor will any
assignee, vendee or other transferee be recognized as having an
interest in such stock options or shares of stock, unless a
registration statement under the Act and any applicable state
securities laws is then in effect with respect to such stock options
or shares of stock or the availability of an exemption from such
registration is established to the satisfaction of the Company.
The Employee further acknowledges that the Company must amend its
Certificate of Incorporation (the "Charter Amendment") to authorize
the shares underlying such Options to permit the Employee to exercise
any such Options. The Company will use all commercially reasonable
efforts to obtain the approval of its stockholders and take such other
actions as are necessary to effect the Charter Amendment. Subject to
the effectiveness of the Charter Amendment, the Company shall at all
times prior to by which all such options must be exercised reserve and
keep available, solely for issuance and delivery upon the exercise of
such Options, a number of authorized shares of common stock equal to
the number of shares of common stock which may be purchased upon
exercise of such Options.
3.3 ADJUSTMENT
The Company and the Employee hereby agree that at the earlier of six
(6) months from the date hereof or upon vesting of all of the options
set forth in section 3.2 above, the Employee will meet with the Audit
Committee of the Board of Directors for the purpose of increasing or
adjusting the Employee's compensation hereunder. The focus of such
meeting shall be an assessment of the granting of additional stock
options and salary to the Employee.
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3.4 ACKNOWLEDGEMENT
The Company acknowledges (i) that the Options being granted hereunder
are granted to the Employee in his individual capacity and not in
payment of the Employee providing any finder, broker, dealer,
placement agent or other investment banking or advisory services and
(ii) the Options as awarded and vested are in no way dependent on the
Employee introducing or causing any particular person or entity to
invest in the Company or effect any given transaction with the
Company.
4. REIMBURSEMENT FOR EXPENSES
The Company agrees to reimburse the Employee for all reasonable
business expenses incurred by him in connection with the performance
of his obligations under this Agreement, subject to established
reimbursement policies of the Company in effect from time-to-time
regarding expense reimbursement, including, without limitation,
reasonable travel, entertainment, cell phone, long distance charges
and other customary expenses the Employee incurs in the performance of
his duties hereunder, and to further reimburse the Employee for any
reasonable legal or accounting fees incurred by Employee in connection
with his entry into this Agreement or the performance of his duties up
through the date hereof.
5. BENEFITS
The Employee shall be entitled to the following benefits during the
term of his employment under this Agreement, and shall be offered any
additional benefits typically offered or provided any other executive
officers of the Company.
5.1 VACATION
The Employee shall be allowed three (3) weeks of vacation per year
during the term of this Agreement, with full pay and without loss of
any other compensation of benefits, in accordance with established
Company policies. The Employee shall coordinate the schedule of his
vacations with other executives and the personnel of the Company at
its affiliates so as to provide sufficient managerial and executive
coverage for the Company's operations.
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5.2 MOVING ALLOWANCE
The Employee shall be entitled to reimbursement from the Company in an
aggregate amount of $20,000 for expenses relating to his initial
relocation to the Company's headquarters.
5.3 OTHER BENEFITS
The Employee may receive such other benefits, if any, as the Board of
Directors may from time-to-time make available to the Employee in the
Board of Directors' sole discretion; provided, however, the Employee
shall be eligible for any benefits offered to any other member of the
Company's senior executive team on terms no less favorable that those
offered to other members of the senior executive team.
5.4 PAYMENTS
All cash payments due to the Employee hereunder shall be paid promptly
(no later than two business days after the due date) in immediately
available funds to the account specified by the Employee or by check
made payable to the order of the Employee.
6. DEFINITIONS
(a) As used in this Agreement, the following words have the meanings
specified:
(b) "Proprietary Ideas" means ideas, suggestions, inventions and work
relating in any way to the business and activities of the Company
which may be subjects of protection under applicable laws,
including common law, respective patents, copyrights, trade
secrets, trademarks, service marks or other intellectual property
rights.
(c) "Invention" means inventions, designs, discoveries, improvements
and ideas, whether or not patentable, including without
limitation, upon the generality of the foregoing, novel or
improved products, processes, machines, software, promotional and
advertising materials, business data processing programs and
systems, and other manufacturing and sales techniques, which
either (a) relate to (i) the business of the Company as conducted
from time-to-time or (ii) the Company's actual or demonstrably
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anticipated research or development, or (b) result from any work
performed by the Employee for the Company.
(d) "Confidential Information" means Proprietary Ideas and also
information related to the Company's business, whether or not in
written or printed form, not generally known in the trade or
industry of which the Employee has or will become informed during
the period of employment by the Company, which may include but is
not limited to product specifications, manufacturing procedures,
methods, equipment, compositions, technology, formulas, trade
secrets, know-how, research and development programs, sales
methods, customer lists, mailing lists, customer usage and
requirements, software and other confidential technical or
business information and data; provided, however, that
Confidential Information shall not include any information which
is in the public domain by means other than disclosure by the
Employee or which the Employee must disclose by operation of law
or legal or administrative process.
(e) As used in sections 7, 8, 9 and 10 only, the term "the Company"
shall include all entities affiliated with the Company.
7. DISCLOSURE AND ASSIGNMENT OF INVENTIONS
The Employee agrees to disclose to the Company, and hereby assigns to
the Company all of the Employee's rights in and, if requested to do
so, provide a written description of, any Inventions conceived or
reduced to practice at any time during the Employee's employment by
the Company, either solely or jointly with others and whether or not
developed on the Employee's own time or with the Company's resources.
The Employee agrees that Inventions first reduced to practice within
one (1) year after termination of the Employee's employment by the
Company shall be treated as if conceived during such employment unless
the Employee can establish specific events giving rise to the
conception which occurred after such employment. Further, the Employee
disclaims and will not assert any rights in Inventions as having been
made, conceived or acquired prior to employment by the Company except
such as are specifically listed at the conclusion of this Agreement.
The Employee shall cooperate with the Company and shall execute and
deliver such documents and do such other acts and things as the
Company may request, at the Company's expense, to obtain and maintain
letters patent or registrations covering any Inventions and to vest in
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the Company all rights therein free of all encumbrances and adverse
claims.
8. CONFIDENTIAL INFORMATION
The Employee shall not disclose to the Company or induce the Company
to use any secret or confidential information belonging to persons not
affiliated with the Company, including any former employer of the
Employee. In addition to all duties of loyalty imposed on the Employee
by law, the Employee shall maintain Confidential Information in strict
confidence and secrecy and shall not at any time, during or at any
time after termination of employment with the Company, directly or
indirectly, use or disclose to others any Confidential Information, or
use it for the benefit of any person or entity (including the
Employee) other than the Company, without the prior written consent of
any authorized officer of the Company (except for disclosures to
persons acting on the Company's behalf with a need to know such
information). The Employee shall carefully preserve any documents,
records, tangible data relating to Inventions or Confidential
Information coming into the Employee's possession and shall deliver
the same and any copies thereof to the Company upon request and, in
any event, upon termination of the Employee's employment by the
Company.
9. NON-SOLICITATION
(a) The Employee agrees that he will not, during the one-year period
following termination of his employment with the Company, be
connected in any way with the solicitation of any then current or
potential (defined as persons or companies with pending quotes to
or from the Company) customers or suppliers of the Company if
such solicitation is likely to result in a loss of business for
the Company.
(b) The Employee agrees that he will not, during the one year period
following termination of his employment with the Company, solicit
for employment, employ or engage as a consultant any person who
had been an employee of the Company at any time in the two year
period prior to the Employee's termination of employment with the
Company.
(c) In the event the covenants set forth in this section 9 are found
to be unenforceable or invalid by reason of being overly broad,
the parties hereto intend that such covenants shall be limited to
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such scope, geographic area and duration as shall make such
covenants valid and enforceable.
10. ENFORCEMENT OF SECTION 7, 8 AND 9
Recognizing that compliance with the provisions of sections 7, 8 and 9
of this Agreement is necessary to protect the goodwill and other
proprietary interests of the Company, and that breach of the
Employee's agreements thereunder will result in irreparable and
continuing damages to the Company for which there will be no adequate
remedy at law, the Employee hereby agrees that in the event of any
breach of such agreements, the Company shall be entitled to seek
injunctive relief and such other and further relief, including
damages, as may be proper.
11. LAWS, REGULATIONS AND CONTRACTS
The Employee agrees to comply, and to do all things necessary for the
Company to comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and operations of
the Company, and with any contractual obligations, including, without
limitation, confidentiality obligations, which may be applicable to
the Company or Executive under any contracts between the Company and
its customers, suppliers or third parties.
12. MISCELLANEOUS
12.1 AMENDMENT AND MODIFICATION
The Company (by action of the Board of Directors) and the Employee may
amend, modify and supplement this Agreement only in such manner as may
be agreed upon by the Company and the Employee in writing.
12.2 ENTIRE AGREEMENT
This instrument embodies the entire agreement between the parties
hereto with respect to the employment relationship created hereby and
supersedes and replaces any prior agreements pertaining to employment
between the Employee and the Company. There have been and are no
agreements, representations or warranties between the parties other
than those set forth or provided for herein relating to such
employment relationship.
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12.3 ASSIGNMENT
This Agreement shall not be assigned by the Employee without the
written consent of the Company. Any attempted assignment without such
written consent shall be null and void and without legal effect;
provided, however, nothing herein shall prevent the Employee from
assigning and of his rights to payment hereunder to any third company
in full compliance with all state and federal laws. This Agreement may
be assigned by the Company to a successor corporation or a good-faith
purchaser of the Company's stock or assets only in connection with a
sale of all or substantially all of the Company's assets or as a
result of a merger or other business combination involving the Company
and any such assignment shall not terminate or modify this Agreement,
except that the employing party to which the Employee shall have been
transferred shall, for the purposes of this Agreement, be construed as
standing in the same place and stead as the Company as of the date of
the assignment.
12.4 BINDING
Subject to section 12.3 hereof, this Agreement shall be binding upon
and insure to the benefit of the respective parties hereto and their
successors, assigns, heirs, executors, administrators and personal
representatives. The parties hereto shall be entitled, at their
option, to the remedy of specific performance to enforce any of the
provisions of this Agreement.
12.5 ARBITRATION
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by binding
arbitration in Los Angeles, California administered by the American
Arbitration Association under its Employment Dispute Resolution, and
judgment on the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
12.6 AGREEMENT SEVERABLE; WAIVER
This is a severable Agreement and in the event that any part of this
Agreement shall be held to be unenforceable, all other parts of this
Agreement shall remain valid and fully enforceable as if the
unenforceable part or parts had not been included herein. No waiver of
any provision of this Agreement shall be binding unless executed in
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writing by the party to be bound hereby. No waiver of a breach of any
of the provisions of this Agreement shall be deemed to be or shall
constitute a waiver of a breach of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a
continuing waiver of such breach unless otherwise expressly provided.
No failure or delay in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.
12.7 NOTICES
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to EMPLOYEE, to: Xxxxx X. XxXxxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
If to COMPANY, to: Coyote Network Systems, Inc.
Attn: President
0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
or to such other address as either party may have furnished to the
other in writing in accordance herewith except that notices of a
change of address shall be effective only upon receipt.
12.8 AFFILIATED PARTIES
The Employee hereby represents to the Company that he has ownership
interests in the companies or entities listed on Schedule 1 attached
hereto which may from time to time enter into transactions or other
business relationships with the Company. The Employee hereby agrees he
will update Schedule 1 immediately if there are changes. No contract,
transaction or other business relationship involving the Company and
any such company or entity affiliated with Employee as of the date of
such proposed contract, transaction or business relationship may be
authorized solely by the Employee.
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12.8 GOVERNING LAW
This Agreement shall be governed and construed under the laws of the
State of California.
12.9 INDEMNIFICATION; INSURANCE
The Company represents and warrants to the Employee that it has and
will maintain adequate directors and officers' liability insurance
coverage and that it will indemnify the Employee to the full extent
permitted by the General Corporation Law of the State of Delaware, as
provided in the Certificate of Incorporation of the Company.
12.10 CORPORATE AUTHORITY; ENFORCEABILITY
The Company represents and warrants to the Employee that it is a
corporation duly organized and validly existing under the laws of the
State of Delaware and that the execution and delivery of this
Agreement, and the performance by the Company of its obligations
hereunder, have been duly authorized by proper corporate action on the
part of the Company. This Agreement is a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
THE EMPLOYEE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A COPY OF THIS
AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES THAT, WITH RESPECT TO
THE SUBJECT MATTER HEREOF, IT CONSTITUTES THE EMPLOYEE'S ENTIRE AGREEMENT
WITH THE COMPANY, SUPERSEDING ANY PREVIOUS ORAL OR WRITTEN COMMUNICATIONS,
REPRESENTATIONS, UNDERSTANDINGS OR AGREEMENTS WITH THE COMPANY OR ANY OF
ITS OFFICIALS OR REPRESENTATIVES.
Notwithstanding anything to the contrary in section 7 hereof, this
Agreement does not apply to an Invention for which no equipment, supplies,
facility, or trade secret information of the Company was used and which was
developed entirely on the Employee's own time, unless (a) the Invention
relates (i) to the business of the Company as conducted from time-to-time
or (ii) to the Company's actual or demonstrably anticipated research or
development, or (b) the Invention results from any work performed by the
Employee for the Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
COYOTE NETWORK SYSTEMS, INC.
BY: /s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxx
-------------------- --------------------
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
Chairman President
/s/ Xxxxx X. XxXxxxxxxx
-----------------------
XXXXX X. XxXXXXXXXX
SCHEDULE 1
AFFILIATIONS OF XXXXX X. XxXXXXXXXX
IN OTHER BUSINESS VENTURES
A. Ownership Interests:
Name of Business Ownership Interest
Xxxxxxx Corporate Finance, Inc. 50%
First Venture Leasing 25%
KJR, LLC 33-1/3%
B. Directorships: None.
C. Officer Positions in other Companies: None other than various positions
with the entities listed in section A above.
