EXHIBIT 10.1
EMPLOYMENT AGREEMENT
WATCHGUARD TECHNOLOGIES, INC.
XXXXX X. XXXXXX
Dated as of October 19, 1999
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of October 19, 1999,
between WatchGuard Technologies, Inc., a Delaware corporation ("Employer"), and
Xxxxx X. Xxxxxx ("Employee");
W I T N E S S E T H:
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WHEREAS, Employer is acquiring the assets of BeadleNet, LLC pursuant to an
Asset Purchase Agreement dated as of October 19, 1999 by and among BeadleNet,
LLC, Productivity Enhancement Products, Inc. ("PEP"), Employee and Employer (the
"Asset Purchase Agreement"); and
WHEREAS, Employer desires to retain the services of Employee upon the terms
and conditions set forth herein; and
WHEREAS, Employee is willing to provide services to Employer upon the terms
and conditions set forth herein;
A G R E E M E N T S:
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NOW, THEREFORE, for and in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, Employer and Employee hereby agree as follows:
1. EMPLOYMENT
Employer will employ Employee and Employee will accept employment by
Employer as its Vice President, General Manager of Employer's broadband Internet
security division. Employee will report directly to the chief executive officer
of Employer. Employee's duties shall include, but not be limited to, the
research, development and release to market of the Company's broadband Internet
security products and the management and supervision of the Company's broadband
Internet security division.
2. ATTENTION AND EFFORT
(a) Employee will devote all of his entire business time, ability,
attention and effort to Employer's business and will skillfully serve its
interests during the term of this Agreement; provided, however, that Employee
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may devote reasonable periods of time to (a) engaging in personal investment
activities, (b) serving on the Board of Directors of other corporations, if such
service would not otherwise be prohibited by
paragraph 8 hereof, and (c) engaging in charitable or community service
activities, so long as none of the foregoing additional activities materially
interfere with Employee's duties under this Agreement.
(b) Subject to Section 8.2, Employee shall sell, transfer or otherwise
dispose of his equity ownership in PEP to persons other than his Affiliates (as
defined in the Asset Purchase Agreement), or members of his family no later than
October 19, 2001.
3. TERM
Unless otherwise terminated pursuant to paragraph 6 hereof Employee's term
of employment under this Agreement shall expire on October 19, 2001.
4. COMPENSATION
During the term of this Agreement, Employer agrees to pay or cause to be
paid to Employee, and Employee agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
4.1 Base Salary
Employee's compensation shall consist of an annual base salary of One
Hundred Seventy-Five Thousand Dollars ($175,000) before all customary payroll
deductions. Such annual base salary shall be paid in substantially equal
installments and at the same intervals as other officers of Employer are paid.
The Board of Directors of Employer shall determine any increases in the amount
of the annual base salary in future years; provided that Employee shall receive
increases similar to those of Employer's other executives performing similar
functions at a similar level of performance.
4.2 Discretionary Bonus
Employee may be entitled to receive, in addition to the annual base salary
described above, a discretionary annual bonus of Fifty Thousand Dollars
($50,000), to be awarded by the Chief Executive Officer of Employer, in his sole
discretion.
4.3 Signing Bonus
Employee shall receive a signing bonus of Fifty Thousand Dollars ($50,000)
upon the commencement of the term of employment.
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4.4 Issuance of Stock
Employee shall also receive a number of shares of unregistered common stock
of Employer determined by dividing Seven Hundred Fifty Thousand Dollars
($750,000) by the Fair Market Value of Employer's common stock on the date of
Closing (the "Reserved Shares"). The terms "Fair Market Value" and "Closing"
shall have the meanings assigned to them in the Asset Purchase Agreement.
Notwithstanding the foregoing, pursuant to the Stock Vesting Agreement attached
hereto as Exhibit A, to be executed by the Employee and Employer concurrent
herewith, the Reserved Shares shall be held by Employer and shall be subject to
forfeiture to Employer in the event Employee's employment with Employer is
terminated prior to October 19, 2001, in accordance with the terms of the Stock
Vesting Agreement.
4.5 Withholding
The Company may withhold from any amounts payable under this Agreement
(including the Reserved Shares) such federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
5. BENEFITS; LOCATION; TRAVEL
(a) During the term of this Agreement, Employee will be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in fringe benefit programs may detail such programs here as shall
be provided from time to time by, to the extent required, action of the Board of
Directors of Employer.
(b) Employer shall not require the Employee to move his principal office
from South Orange County, California.
(c) Employer shall not require Employee to travel more frequently than is
reasonable for his position, duties and responsibilities.
6. TERMINATION
Employment of Employee pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of paragraph 8 hereof shall survive the
termination of this Agreement and the termination of Employee's employment
hereunder:
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6.1 By Employer
With or without Cause (as defined below), Employer may terminate the
employment of Employee at any time during the term of employment upon giving
Notice of Termination (as defined below).
6.2 By Employee
Employee may terminate his employment at any time, for any reason, upon
giving Notice of Termination.
6.3 Automatic Termination
This Agreement and Employee's employment hereunder shall terminate
automatically upon the death or total disability of Employee. The term "total
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disability" as used herein shall mean Employee's inability to perform the duties
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set forth in paragraph 1 hereof for a period or periods aggregating 120 calendar
days in any 12-month period as a result of physical or mental illness, loss of
legal capacity or any other cause beyond Employee's control, unless Employee is
granted a leave of absence by the Board of Directors of Employer. Employee and
Employer hereby acknowledge that Employee's ability to perform the duties
specified in paragraph 1 hereof is of the essence of this Agreement. Termination
hereunder shall be deemed to be effective (a) at the end of the calendar month
in which Employee's death occurs or (b) immediately upon a determination by the
Board of Directors of Employer of Employee's total disability, as defined
herein.
6.4 Notice
The term "Notice of Termination" shall mean at least 10 days' written
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notice of termination of Employee's employment, during which period Employee's
employment and performance of services will continue; provided, however, that
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Employer may, upon notice to Employee and without reducing Employee's
compensation during such period, excuse Employee from any or all of his duties
during such period. The effective date of the termination of Employee's
employment hereunder shall be the date on which such 10-day period expires.
7. TERMINATION PAYMENTS
In the event of termination of the employment of Employee, all compensation
and benefits set forth in this Agreement shall terminate except as specifically
provided in this paragraph 7:
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7.1 Termination by Employer
If Employer terminates Employee's employment without Cause prior to the end
of the term of this Agreement, Employee shall be entitled to receive (a)
termination payments equal to the lesser of (i) twelve (12) months' annual base
salary and (ii) the annual base salary Employee would have received if his
employment hereunder had continued until six (6) months after the end of the
term of this Agreement, (b) any unpaid annual base salary which has accrued for
services already performed as of the date termination of Employee's employment
becomes effective and (c) the medical benefits pursuant to Section 5(a), for a
term equal to the shorter of (i) twelve (12) months and (ii) six (6) months
after the end of the term of this Agreement. If Employee is terminated by
Employer for Cause, Employee shall not be entitled to receive any of the
foregoing benefits, other than those set forth in clause (b) above.
7.2 Termination by Employee
In the case of the termination of Employee's employment by Employee,
Employee shall not be entitled to any payments hereunder, other than those set
forth in clause (b) of subparagraph 7.1 hereof.
7.3 Expiration of Term
In the case of a termination of Employee's employment on or after the
expiration of the term of this Agreement, Employee shall not be entitled to
receive any payments hereunder, other than those set forth in clause (b) of
subparagraph 7.1 hereof.
7.4 Termination Because of Death or Total Disability
In the event of a termination of Employee's employment because of his death
or total disability, Employee or his personal representative shall receive
termination payments equal to seventy-five percent (75%) of the annual base
salary Employee would have received if his employment had continued during the
remaining term of this Agreement.
7.5 Payment Schedule
All payments under this paragraph 7 shall be made to Employee at the same
interval as payments of salary were made to Employee immediately prior to
termination.
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7.6 Cause
Wherever reference is made in this Agreement to termination being with or
without Cause, "Cause" is limited to the occurrence of one or more of the
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following events:
(a) Repetitive, material and unjustified failure or refusal to carry
out the lawful duties of Employee described in Section 1 hereof or any
directions of the Board of Directors of Employer, which directions are
reasonably consistent with the duties herein set forth to be performed by
Employee;
(b) Violation by Employee of a state or federal criminal law
involving the knowing and intentional commission of a crime against
Employer or a felony;
(c) Current use by Employee of illegal substances; deception, fraud,
misrepresentation or dishonesty by Employee; any incident materially
compromising Employee's reputation or ability to represent Employer with
the public; any act or omission by Employee which substantially impairs
Employer's business, goodwill or reputation; or
(d) Any other material violation of any provision of this Agreement.
8. NONCOMPETITION AND NONSOLICITATION
8.1 Applicability
This paragraph 8 shall survive the termination of Employee's employment
with Employer or the expiration of the term of this Agreement.
8.2 Scope of Competition
Employee agrees that he will not, directly or indirectly, during his
employment and for a period of three (3) years from the date on which his
employment with Employer terminates for any reason, or this Agreement expires,
be employed by, consult with or otherwise perform services for, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of or be connected with, in any manner, any Competitor. A "Competitor"
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shall include any entity which, directly or indirectly, competes with Employer
or produces, markets, distributes or otherwise derives benefit from the
production, marketing or distribution of products or services which compete with
products then produced or services then being provided or marketed by Employer
or the feasibility for production of which Employer is then actually studying,
or which is preparing to market or is developing products or services that will
be in competition with the products or services then produced or
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being studied or developed by Employer, in each case within the Restricted Area
(as defined below), unless released from such obligation in writing by the Board
of Directors of Employer.
For purposes of this Agreement, "Restricted Area" shall mean worldwide.
Employee shall be deemed to be related to or connected with a Competitor if such
Competitor is
(a) a partnership in which he is a general or limited partner or employee;
(b) a corporation or association of which he is a shareholder, officer,
employee or director; or
(c) a partnership, corporation or association of which he is a member,
consultant or agent; provided, however, that nothing herein shall prevent (i)
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the purchase or ownership by Employee of shares which constitute less than five
percent of the outstanding equity securities of a publicly or privately held
corporation (including PEP), if Employee had no other relationship with such
corporation, and (ii) the ownership by Employee of shares which constitute less
than 20% of the outstanding equity securities of a PEP Successor Corporation (as
defined below). Notwithstanding the foregoing, subject to Section 2(b),
Employee shall be permitted to maintain his present equity ownership in PEP.
For purposes of this Section 8.2, "PEP Successor Corporation" shall mean
one person or an entity or one affiliated group that acquires or owns 95% of the
outstanding voting shares of common stock of PEP, or of an entity that may
succeed to all or substantially all of the assets of PEP, through merger,
reorganization, sale of all or substantially all assets or similar transaction.
8.3 Scope of Nonsolicitation
Employee shall not directly or indirectly solicit, influence or entice, or
attempt to solicit, influence or entice, any employee or consultant of Employer
to cease his relationship with Employer or solicit, influence, entice or in any
way divert any customer, distributor, partner, joint venturer or supplier of
Employer to do business or in any way become associated with any Competitor.
This subparagraph 8.3 shall apply during the time period described in
subparagraph 8.2 hereof and within the Restricted Area.
8.4 Assignment of Intellectual Property
All concepts, designs, machines, devices, uses, processes, technology,
trade secrets, works of authorship, customer lists, plans, embodiments,
inventions,
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improvements or related work product (collectively "Intellectual Property")
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which Employee develops, conceives or first reduces to practice during the term
of his employment hereunder or within one year after the termination of his
employment hereunder or the expiration of this Agreement, whether working alone
or with others, shall be the sole and exclusive property of Employer, together
with any and all Intellectual Property rights, including, without limitation,
patent or copyright rights related thereto, and Employee hereby assigns to
Employer all of such Intellectual Property. "Intellectual Property" shall
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include only such concepts, designs, machines, devices, uses, processes,
technology, trade secrets, customer lists, plans, embodiments, inventions,
improvements and work product which (a) relate to Employee's performance of
services under this Agreement, to Employer's field of business or to Employer's
actual or demonstrably anticipated research or development, whether or not
developed, conceived or first reduced to practice during normal business hours
or with the use of any equipment, supplies, facilities or trade secret
information or other resource of Employer or (b) are developed in whole or in
part on Employer's time or developed using Employer's equipment, supplies,
facilities or trade secret information, or other resources of Employer, whether
or not the work product relates to Employer's field of business or Employer's
actual or demonstrably anticipated research.
8.5 Disclosure and Protection of Inventions
Employee shall disclose in writing all concepts, designs, processes,
technology, plans, embodiments, inventions or improvements constituting
Intellectual Property to Employer promptly after the development thereof. At
Employer's request and at Employer's expense, Employee will assist Employer or
its designee in efforts to protect all rights relating to such Intellectual
Property. Such assistance may include, without limitation, the following: (a)
making application in the United States and in foreign countries for a patent or
copyright on any work products specified by Employer; (b) executing documents of
assignment to Employer or its designee of all of Employee's right, title and
interest in and to any work product and related intellectual property rights;
and (c) taking such additional action (including, without limitation, the
execution and delivery of documents) to perfect, evidence or vest in Employer or
its designee all right, title and interest in and to any Intellectual Property
and any rights related thereto.
8.6 Nondisclosure; Return of Materials
During the term of his employment by Employer and following termination of
such employment, he will not disclose (except as required by his duties to
Employer), any concept, design, process, technology, trade secret, customer
list, plan, embodiment, or invention, any other Intellectual Property or any
other confidential
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information, whether patentable or not, of Employer of which Employee becomes
informed or aware during his employment, whether or not developed by Employee.
In the event of the termination of his employment with Employer or the
expiration of this Agreement, Employee will return all documents, data and other
materials of whatever nature, including, without limitation, drawings,
specifications, research, reports, embodiments, software and manuals to Employer
which pertain to his employment with Employer or to any Intellectual Property
and shall not retain or cause or allow any third party to retain photocopies or
other reproductions of the foregoing.
8.7 Equitable Relief
Employee acknowledges that the provisions of this paragraph 8 are essential
to Employer, that Employer would not enter into this Agreement if it did not
include this paragraph 8 and that damages sustained by Employer as a result of a
breach of this paragraph 8 cannot be adequately remedied by damages, and
Employee agrees that Employer, notwithstanding any other provision of this
Agreement, including, without limitation, paragraph 15 hereof, and in addition
to any other remedy it may have under this Agreement or at law, shall be
entitled to injunctive and other equitable relief to prevent or curtail any
breach of any provision of this Agreement, including, without limitation, this
paragraph 8.
8.8 Effect of Violation
Employee and Employer acknowledge and agree that additional consideration
has been given for Employee entering into this paragraph 8, such additional
consideration including, without limitation, the termination payments pursuant
to paragraph 7 hereof and a portion of the common stock issued pursuant to
Section 4.3 hereof. Violation by Employee of this paragraph 8 shall relieve
Employer of any obligation it may have to make such termination payments, but
shall not relieve Employee of his obligations, as required hereunder, not to
compete.
8.9 Definition of Employer
For purposes of subparagraph 8.2 and subparagraph 8.3 hereof, "Employer"
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shall include all subsidiaries of Employer, Employer's parent corporation and
any business ventures in which Employer, its subsidiaries or its parent
corporation may participate.
8.10 Relation to Other Agreements
In connection with Employee's employment, Employee shall also execute and
deliver Employer's Proprietary Information, Inventions and Noncompetition
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Agreement. The parties agree that Employee's obligations under such agreement
shall be in addition to, and shall not qualify in any respect, the provisions of
this Section 8.
9. REPRESENTATIONS AND WARRANTIES
In order to induce Employer to enter into this Agreement, Employee
represents and warrants to Employer as follows:
9.1 No Violation of Other Agreements
Neither the execution nor the performance of this Agreement by Employee
will violate or conflict in any way with any other agreement by which Employee
may be bound, or with any other duties imposed upon Employee by corporate or
other statutory or common law.
9.2 Patents, Etc.
Employee has prepared and attached hereto as Schedule 1 a list of all
inventions, patent applications and patents made or conceived by Employee prior
to the date hereof which are subject to prior agreement or which Employee
desires to exclude from this Agreement, or, if no such list is attached,
Employee hereby represents and warrants to Employer that there are no such
inventions, patent applications or patents.
10. NOTICE AND CURE OF BREACH; BOARD OF DIRECTORS
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to Sections 7.6(b) or 7.6(d) hereof,
before such action is taken, the party asserting the breach of this Agreement
shall give the other party at least 10 days' prior written notice of the
existence and the nature of such breach before taking further action hereunder
and shall give the party purportedly in breach of this Agreement the opportunity
to correct such breach during the 10-day period. In the case of termination by
Employer for Cause, the action shall be approved by Employer's board of
directors and, in the case of events of Cause defined in Sections 7.6(b) or
7.6(d), Employee shall have an opportunity during the 10-day notice period
provided in this Section 10 to appear before Employer's board of directors by
telephone conference or in person to argue that no event of Cause has occurred.
11. FORM OF NOTICE
All notices given hereunder shall be given in writing, shall specifically
refer to this Agreement and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by registered or certified mail,
return receipt
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requested, at the address set forth below or at such other address as may
hereafter be designated by notice given in compliance with the terms hereof:
If to Employee: Xxxxx X. Xxxxxx
00000 Xxxxxxxx
Xxxxxxx Xxxxx, XX 00000
If to Employer: WatchGuard Technologies, Inc.
Xxxxx 000
000 Xxxxxxxxxx Xxxxxx Xxxxx
000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Copy to: Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxx
If notice is mailed, such notice shall be effective upon mailing, or, if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
12. ASSIGNMENT
This Agreement is personal to Employee and shall not be assignable by
Employee. Employer may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation or other reorganization to which
Employer is a party or (b) any corporation, partnership, association or other
person to which Employer may transfer all or substantially all of the assets and
business of Employer existing at such time. All the terms and provisions of
this Agreement shall be binding on and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
13. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
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14. ARBITRATION
Subject to the provisions of subparagraph 8.7 hereof, any controversies or
claims arising out of or relating to this Agreement shall be fully and finally
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect (the "AAA Rules"), conducted
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by one arbitrator either mutually agreed upon by Employer and Employee or chosen
in accordance with the AAA Rules, except that the parties thereto shall have any
right to discovery as would be permitted by the Federal Rules of Civil Procedure
for a period of 90 days following the commencement of such arbitration and the
arbitrator thereof shall resolve any dispute which arises in connection with
such discovery. The prevailing party shall be entitled to costs, expenses and
reasonable attorneys' fees, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
15. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, or consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by Employer
and Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
16. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
17. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as
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may be possible, (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision hereof,
and (c) any court or arbitrator having jurisdiction thereover shall have the
power to reform such provision to the extent necessary for such provision to be
enforceable under applicable law.
18. HEADINGS
All headings used herein are for convenience only and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Agreement.
19. COUNTERPARTS
This Agreement, and any amendment or modification entered into pursuant to
paragraph 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
20. ENTIRE AGREEMENT
This Agreement on and as of the date hereof constitutes the entire
agreement between Employer and Employee with respect to the subject matter
hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between Employer and Employee with respect to such
subject matter are hereby superseded and nullified in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
EMPLOYEE:
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/s/ Xxxxx X. Xxxxxx
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EMPLOYER:
By /s/ Xxxxxx X. Xxxxx
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Its CFO
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