Exhibit 10.5
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into by and between FREEI NETWORKS,
INC., a Washington corporation (the "Company"), and Xxxxx Xxxxx the undersigned
individual ("Executive").
RECITAL
The Company and Executive desire to enter into an Employment Agreement
setting forth the terms and conditions of Executive's employment with the
Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. EMPLOYMENT.
(a) TERM. The Company hereby employs Executive to serve as Chief Technical
Officer of the Company and to serve in such additional or different position
or positions as the Company may determine in its sole discretion. The term of
employment shall be for a period of three (3) years ("Employment Period"), to
commence on the date hereof. The term shall be for the Employment Period unless
earlier terminated as set forth herein.
(b) DUTIES AND RESPONSIBILITIES. Executive will be reporting to the
Company's Chief Executive Officer. Within the limitations established by the
By-laws of the Company, the Executive shall have each and all of the duties and
responsibilities listed on Schedule I hereto and such other or different duties
on behalf of the Company, as May be assigned from time to time by the Company's
Chief Executive Officer.
(c) LOCATION. The initial principal location at which Executive shall
perform services for the Company shall be 000 X. 000xx Xxx Xxxxx #000 Xxxxxxx
Xxx, Xxxxxxxxxx 00000.
2. COMPENSATION.
(a) BASE SALARY. Executive shall be paid a base salary ("Base Salary") at
the annual rate of $100,008 payable in biweekly installments consistent with
Company's payroll practices. The annual Base Salary shall be reviewed on or
before January 1 of each year, unless Executive's employment hereunder shall
have been terminated earlier pursuant to this Agreement, by the Board of
Directors of the Company to determine if such Base Salary should be increased
for the following year in recognition of services to the Company.
1
(b) PAYMENT. Payment of all compensation to Executive hereunder shall be
made in accordance with the relevant Company policies in effect from time to
time, including normal payroll practices, and shall be subject to all applicable
employment and withholding taxes.
3. OTHER EMPLOYMENT BENEFITS.
(a) BUSINESS EXPENSES. Upon submission of itemized expense statements in
the manner specified by the Company, Executive shall be entitled to
reimbursement for reasonable business and travel expenses duly incurred by
Executive in the performance of his duties under this Agreement.
(b) BENEFIT PLANS. Executive shall be entitled to participate in the
Company's medical and dental plans, life and disability insurance plans and
retirement plans pursuant to their terms and conditions. Executive shall be
entitled to participate in any other benefit plan offered by the Company to its
employees during the term of this Agreement (other than stock option or stock
incentive plans, which are governed by Section 3(d) below). Nothing in this
Agreement shall preclude the Company or any affiliate of the Company from
terminating or amending any employee benefit plan or program from time to
time.
(c) VACATION. Executive shall be entitled to three (3) weeks of vacation
each year of full employment, exclusive of legal holidays, as long as the
scheduling of Executive's vacation does not interfere with the Company's normal
business operations.
(d) FOUNDER' STOCK. Executive shall be entitled to retain his founder's
stock, subject to the following terms:
(i) Executive initially owned 400,000 shares of founders stock. 100,000
shares vested on August 13, 1999 when the Company executed a stock purchase
agreement, with Sequoia Capital and its affiliates. The remaining 300,000 shares
will fully vest in the event of an initial public offering, Executive's
termination of employment by the Company, the sale of substantially all the
Company's assets or the merger of the Company into another entity (each a
"Vesting Event"). In the absence of a Vesting Event, the 300,000 shares will
vest in equal amounts of 8,333.3 per month.
(e) NO OTHER BENEFITS. Executive understands and acknowledges that the
compensation specified in Sections 2 and 3 of this Agreement shall be in lieu
of any and all other compensation, benefits and plans.
4. EXECUTIVE'S BUSINESS ACTIVITIES. EXecutive shall devote the substantial
portion of his entire business time, attention and energy exclusively to the
business and affairs of The Company and its affiliates, as its business and
affairs now exist and as they hereafter may be changed. Executive may serve as
a member of the Board of Directors of other organizations that do not compete
with
2
the Company, and may participate in other professional, civic, governmental
organizations and activities that do not materially affect his ability to carry
out his duties hereunder.
5. TERMINATION OF EMPLOYMENT.
(a) FOR CAUSE. Notwithstanding anything herein to the contrary, the
Company may terminate Executive's employment hereunder for cause for any one
of the following reasons: (i) conviction of a felony, or a misdemeanor where
imprisonment is imposed, (ii) commission of any act of theft, fraud,
dishonesty, or falsification of any employment or Company records, (iii)
improper disclosure of the Company's confidential or proprietary information,
(iv) any action by the Executive which has a detrimental effect on the
Company's reputation or business, (v) Executive's failure or inability to
perform any reasonable assigned duties after written notice from the Company
of, and a reasonable opportunity to cure, such failure or inability, (vi) any
breach of this Agreement, which breach is not cured within ten (10) days
following written notice of such breach, (vii) a course of conduct amounting
to gross incompetence, (viii) chronic and unexcused absenteeism, (ix)
unlawful appropriation of a corporate opportunity, or (x) misconduct in
connection with the performance of any of Executive's duties including,
without limitation, misappropriation of funds or property of the Company,
securing or attempting to secure personally any profit in connection with any
transaction entered into on behalf of the Company, misrepresentation to the
Company, or any violation of law or regulations on Company premises or to
which the Company is subject. Upon termination of Executive's employment with
the Company for cause, the Company shall be under no further obligation to
Executive, except to pay all accrued but unpaid base salary and accrued
vacation to the date of termination thereof; and to fully vest Executive's
founder shares.
(b) WITHOUT CAUSE. The Company may terminate Executive's employment
hereunder at any time without cause, provided, however, that Executive shall be
entitled to severance pay in the amount of One Year (12) months of Base Salary
in addition to accrued but unpaid Base Salary and accrued vacation, less
deductions required by law, but if, and only if, Executive executes a valid and
comprehensive release of any and all claims that the Executive may have against
the Company in a form provided by the Company and Executive executes such form
within seven (7) days of tender.
(c) COOPERATION. After notice of termination, Executive shall cooperate
with the Company, as reasonably requested by the Company, to effect a transition
of Executive's responsibilities and to ensure that the Company is aware of all
matters being handled by Executive.
6. DISABILITY OF EXECUTIVE. The Company may terminate this Agreement
without liability if Executive shall be permanently prevented from properly
performing his essential duties hereunder with reasonable accommodation by
reason of illness or other physical or mental incapacity for a period of more
than 120 consecutive days. Upon such termination, Executive shall be entitled
to all accrued but unpaid Base Salary and vacation.
3
7. DEATH OF EXECUTIVE. In the event of the death of Executive during the
Employment Period, the Company's obligations hereunder shall automatically cease
and terminate; provided, however, that within 15 days the Company shall pay to
the Executive's heirs or personal representatives Executive's Base Salary and
accrued vacation accrued to the date of death.
8. CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENTS. Executive is
simultaneously executing a Confidential Information and Invention Assignment
Agreement (the "Confidential Information and Invention Assignment
Agreement"). The obligations under the Confidential Information and Invention
Assignment Agreement shall survive termination of this Agreement for any
reason.
9. EXCLUSIVE EMPLOYMENT. During employment with the Company, Executive will
not do anything to compete with the Company's present or contemplated business,
nor will he or she plan or organize any competitive business activity. Executive
will not enter into any agreement which conflicts with his duties or obligations
to the Company. Executive will not during his employment or within one (1) year
after it ends, without the Company's express written consent, directly or
indirectly, solicit or encourage any employee, agent, independent contractor,
supplier, customer, consultant on any other person or company to terminate or
alter a relationship with the Company.
10. ASSIGNMENT AND TRANSFER. Executive's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, and any
purported assignment, transfer or delegation thereof shall be void. This
Agreement shall inure to the benefit of, and be binding upon and enforceable by,
any purchaser of substantially all of Company's assets, any corporate successor
to Company or any assignee thereof
11. NO INCONSISTENT OBLIGATIONS. Executive is aware of no obligations,
legal or otherwise, inconsistent with the terms of this Agreement or with his
undertaking employment with the Company. Executive will not disclose to the
Company, or use, or induce the Company to use, any proprietary information or
trade secrets of others. Executive represents and warrants that he or she has
returned all property and confidential information belonging to all prior
employers.
12. MISCELLANEOUS.
(a) ATTORNEYS' FEES. Should either party hereto, or any heir, personal
representative, successor or assign of either party hereto, resort to legal
proceedings in connection with this Agreement or Executive's employment with the
Company, the party or parties prevailing in such legal proceedings shall be
entitled, in addition to such other relief as may be granted, to recover its or
their reasonable attorneys' fees and costs in such legal proceedings from the
non-prevailing party or parties; provided, however, that nothing herein is
intended to affect the provisions of Section 13(l).
(b) GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of Washington without regard to conflict
of law principles.
4
(c) ENTIRE AGREEMENT. Except for the attached exhibits and the Confidential
Information and Invention Assignment Agreement, this Agreement contains the
entire agreement and understanding between the parties hereto and supersedes any
prior or contemporaneous written or oral agreements, representations and
warranties between them respecting the subject matter hereof.
(d) AMENDMENT. This Agreement may be amended only by a writing signed by
Executive and by a duly authorized representative of the Company.
(e) SEVERABILITY. If any term, provision, covenant or condition of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable or void, the remainder of this
Agreement and such term, provision, covenant or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
(f) CONSTRUCTION. The headings and captions of this Agreement are
provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement. The language in all parts of this
Agreement shall be in all cases construed according to its fair meaning and
not strictly for or against the Company or Executive.
(g) RIGHTS CUMULATIVE. The rights and remedies provided by this Agreement
are cumulative, and the exercise of any right or remedy by either party hereto
(or by its successor), whether pursuant to this Agreement, to any other
agreement, or to law, shall not preclude or waive its right to exercise any or
all other rights and remedies.
(h) NONWAIVER. No failure or neglect of either party hereto in any instance
to exercise any right, power or privilege hereunder or under law shall
constitute a waiver of any other right, power or privilege or of the same right,
power or privilege in any other instance. All waivers by either party hereto
must be contained in a written instrument signed by the party to be charged and,
in the case of the Company, by an officer of the Company (other than Executive)
or other person duly authorized by the Company.
(i) REMEDY FOR BREACH; ATTORNEYS' FEES. The parties hereto agree that, in
the event of breach or threatened breach of any covenants of Executive, the
damage or imminent damage to the value and the goodwill of the Company's
business shall be inestimable, and that therefor any remedy at law or in damages
shall be inadequate. Accordingly, the parties hereto agree that the Company
shall be entitled to injunctive relief against Executive in the event of any
breach or threatened breach of any of such provisions by Executive, in addition
to any other relief (including damages) available to the Company under this
Agreement or under law. The prevailing party in any action instituted pursuant
to this Agreement shall be entitled to recover from the other party its
reasonable attorneys' fees and other expenses incurred in such action.
(j) NOTICES. Any notice, request, consent or approval required or
permitted to be given under this Agreement or pursuant to law shall be
sufficient if in writing, and if and when sent by certified
5
or registered mail, with postage prepaid, to Executive's residence (as noted in
the Company's records), or to the Company's principal office, as the case may
be.
(k) ASSISTANCE IN LITIGATION. Executive shall, during and after termination
of employment, upon reasonable notice, furnish such information and proper
assistance to the Company as may reasonably be required by the Company in
connection with any litigation in which it or any of its subsidiaries or
affiliates is, or may become a party; provided, however, that such assistance
following termination shall be furnished at mutually agreeable times and for
mutually agreeable compensation.
(l) ARBITRATION. Any controversy, claim or dispute arising out of or
relating to this Agreement or the employment relationship, either during the
existence of the employment relationship or afterwards, between the parties
hereto, their assignees, their affiliates, their attorneys, or agents, shall be
settled by arbitration in Seattle, Washington. Such arbitration shall be
conducted in accordance with the then prevailing commercial arbitration rules of
the American Arbitration Association (but the arbitration shall be in front of
an arbitrator appointed by JAMS/Endispute ("JAMS")), with the following
exceptions if in conflict: (a) one arbitrator shall be chosen by JAMS; (b) each
party to the arbitration will pay its pro rata share of the expenses and fees of
the arbitrator(s), together with other expenses of the arbitration incurred or
approved by the arbitrator(s); and (c) arbitration may proceed in the absence of
any party if written notice (pursuant to the JAMS' rules and regulations) of the
proceedings has been given to such party. The parties agree to abide by all
decisions and awards rendered in such proceedings. Such decisions and awards
rendered by the arbitrator shall be final and conclusive and may be entered in
any court having jurisdiction thereof as a basis of judgment and of the issuance
of execution for its collection. All such controversies, claims or disputes
shall be settled in this manner in lieu of any action at law or equity; provided
however, that nothing in this subsection shall be construed as precluding the
Company from bringing an action for injunctive relief or other equitable relief
or relief under the Confidential Information and Invention Assignment Agreement.
The arbitrator shall not have the right to award punitive damages,
consequential damages, lost profits or speculative damages to either party. The
parties shall keep confidential the existence of the claim, controversy or
disputes from third parties (other than the arbitrator), and the determination
thereof, unless otherwise required by law or necessary for the business of the
Company. The arbitrator(s) shall be required to fellow applicable law. IF FOR
ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, THEN EACH PARTY, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER MATTER INVOLVING THE PARTIES HERETO.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set forth below.
6
FREEI NETWORKS, INC.
By: /s/ XXX XXXXXXXXXX
----------------------------------------
Xxxxxx (Xxx) XxXxxxxxxx
----------------------------------------
EXECUTIVE:
Name: /s/ [ILLEGIBLE]
-------------------------------------
Title: Chief Technical Officer
-------------------------------------
Date: 11-11-99
---------------------------------------
7
SCHEDULE I
List of Executive's Duties
Oversee the direction and implementation of all technically related functions of
the company.
8
