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Exhibit 10.02
EMPLOYMENT AGREEMENT
This Agreement between Xxxx X. Xxxxx (the "Executive") and ViewStar
Corporation, a California corporation (the "Company") is entered into as of May
18, 1994.
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept employment with the Company on the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and the Executive agree as follows:
1. Employment and Duties. The Executive shall be employed as
President and Chief Executive Officer of the Company effective May 18, 1994,
reporting to the Board of Directors of the Company (the "Board"), and assuming
and discharging such responsibilities as are mutually agreed upon by the
Executive and the Board commensurate with such office and position. The
Executive shall perform faithfully the executive duties assigned to him to the
best of his ability. After the Executive commences employment with the
Company, the Board shall nominate the Executive to serve as a director of the
Company, and the Executive shall serve in such capacity without additional
compensation.
2. Base Salary. In consideration of the Executive's services,
the Executive shall be paid a minimum base salary at the rate of $180,000 per
year during the employment term, to be paid in installments in accordance with
the Company's standard payroll practices. This base compensation shall be
reviewed annually by the Board on the same basis as the Board shall review the
compensation of other executive officers of the Company and the Board, in
performing its annual review, shall consider changes in relevant cost of living
indices as well as the Company's performance during the preceding year
including, without limitation, the growth in the Company's revenues, operating
income and overall performance according to the Company's operating plan.
3. Bonus. In addition to base salary, the Executive shall
participate in an annual executive incentive bonus program under which the
Executive shall be entitled to earn incentive bonus compensation of up to a
specified percentage of the Executive's base salary, based upon the
satisfaction of certain performance goals. For the current fiscal year, the
specified percentage shall be 40% of the base salary paid to the Executive
during such fiscal year; for fiscal year 1995, the specified percentage will
increase to 50%. These performance objectives will be mutually determined and
reviewed annually by the Board in consultation with the Executive, and will
concern such matters as revenue, pre-tax profitability and return on
shareholders' equity. To the extent the Executive's employment is terminated
pursuant to Section 7(a) hereof, the Executive shall be entitled to his pro
rata share of any bonus to which he would have been entitled but for such
termination. To the extent the Executive's employment is terminated pursuant
to Section 7(b) hereof, the Executive shall be entitled to the full amount of
any bonus to which he would have been entitled, including during the
Continuation Period, but for such termination.
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4. Benefits; Expenses. The Executive shall be permitted, to the
extent eligible, to participate in any group medical, dental, life insurance
and disability insurance plans, or similar benefit plans of the Company that
are available to other comparable employees. Participation in any such plan
shall be consistent with the Executive's rate of compensation to the extent
that compensation is a determinative factor with respect to coverage under any
such plan.
The Company shall reimburse the Executive for all reasonable business
and travel expenses actually incurred or paid by the Executive in the
performance of his services on behalf of the Company, in accordance with the
Company's expense reimbursement policy as from time to time in effect.
5. Stock Options.
(a) Option Grants. Effective upon the commencement date
of the Executive's employment with the Company (the "Grant Date"), the
Executive shall be granted three stock options (the "Options"): (i) an
"incentive stock option," within the meaning of Section 422 of the Internal
Revenue Code (the "ISO"); and (ii) two "nonqualified stock options" (the "First
NQSO" and the "Second NQSO"). The ISO, the First NQSO and the Second NQSO
shall all be granted under the Company's Senior Executive Stock Plan (the
"Plan"). The ISO and the First NQSO shall permit the Executive to purchase up
to 650,000 shares of the Company's Common Stock (the "ISO and First NQSO Option
Shares"). The Second NQSO shall permit the Executive to purchase up to 50,000
shares of the Company's Common Stock (the "Second NQSO Option Shares"). The
Options shall have ten (10)-year terms, subject to earlier termination as
provided in the Plan and shall have exercise prices equal to the fair market
value of the Common Stock on the Grant Date, as determined by the Board but
which option exercise prices shall be no greater than $1.50 per share. The ISO
and First NQSO Option Shares shall be allocated to the ISO and to the First
NQSO so as to maximize the number of shares covered by the ISO, subject to the
limitation on exercisability imposed on incentive stock options under Section
422(d) of the Internal Revenue Code.
(b) Vesting.
(i) ISO and First NQSO Options. Subject to
Sections 7(b) and 8, the Executive's right to exercise the Options shall vest
cumulatively over a period of fifty (50) months based upon the Executive's
continuous employment with the Company, with 2% of the Option Shares vesting
for each month after the Grant Date.
(ii) Second NQSO Option. Subject to Sections 7(b)
and 8, the Executive's right to exercise the Second NQSO shall vest 100% upon
the completion of eight years of employment with the Company. In the event of
either an IPO (defined below) or the Company entering into a strategic
corporate relationship involving an equity investment in the Company of not
less than $5 million, the Executive's right to exercise the Second NQSO shall
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accelerate so that, at the time of either of such events, the Second NQSO shall
become vested in the same percentage as the First NQSO and shall vest going
forward from such time at the same rate as the First NQSO.
(iii) Vesting Upon Termination. Upon termination
of the Executive's employment with the Company, the Options shall be
exercisable (to the extent then vested) for a period of ninety (90) days after
termination (twelve (12) months in the event the Executive's employment
terminates by reason of the Executive's death or Disability); provided,
however, that in the case of a termination described in Section 7(b), the
Options shall continue to vest in accordance with that Section and shall remain
exercisable for a period of ninety (90) days after the expiration of the
Continuation Period (as defined in that Section), subject to the option term.
6. Early Exercise. The Executive may, at his election, exercise
the First and Second NQSO as to option shares that are not yet vested under the
vesting schedule described in Sections 5(a) and 5(b) above (the "Unvested
Shares"). The Executive may purchase option shares, including Unvested Shares,
by delivering to the Company a promissory note (the "Promissory Note"), which
shall be a non-interest bearing full-recourse note that is due and payable in
full upon the earliest of (i) five (5) years, (ii) 18 months following an
initial public offering of the Company's Common Stock to the public registered
under Form S-1 (or any successor form) with the Securities and Exchange
commission under the Securities Act of 1933, as amended (an "IPO"), or (iii) in
the event of a Change of Control (as defined herein) of the Company in which
the Executive receives either cash or marketable securities for his Common
Stock, thirty (30) days after such Change of Control, provided that if the
securities received are subject to restrictions on transfer, thirty (30) days
after such restrictions no longer apply.
Unvested Shares shall be subject to the Company's right to repurchase
such Shares at the Executive's original cost upon the Executive's termination
of employment for any reason (the "Repurchase Right"). Subject to applicable
laws, the Repurchase Right shall be mandatory in the event the fair market
value of the Unvested Shares at the time of the Executive's termination of
employment (or expiration of the Continuation Period, whichever is applicable)
is less than the Executive's original cost therefor. The Repurchase Right
shall be exercisable for a period of twelve (12) months, commencing with the
Executive's termination of employment with the Company; provided, however, that
in the case of a termination described in Section 7(b), the twelve (12)-month
period shall commence upon the expiration of the Continuation Period (as
described in that Section). Subject to Section 8 below (regarding a Change of
Control of the Company), the Repurchase Right shall lapse at the rate specified
in Sections 5(a) and 5(b) above, as applicable, with respect to option
exercisability. Unvested Shares shall be issued in the Executive's name but
shall be placed in escrow with the Company pending completion of the vesting
periods. Vesting of the Unvested Shares is dependent upon the Executive's
continued employment with the Company, except as otherwise provided in this
Agreement.
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7. Termination.
(a) Termination for Cause; Voluntary Resignation. In the
event that (i) the Company terminates the Executive's employment for "Cause"
(as defined herein), or (ii) the Executive terminates his employment with the
Company voluntarily, then the Executive shall not receive any compensation or
benefits under this Agreement on account of such termination. The Executive's
rights under the Company's benefit plans upon such a termination shall be
determined under the provisions of those plans. For purposes of this
Agreement, termination for "Cause" shall mean (i) the willful failure by the
Executive to substantially perform his material duties within 10 days after
written demand for substantial improvement in performance is delivered to the
Executive by the Board which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed his duties,
(ii) the Executive's failure (in a material respect) to follow reasonable
policies or directives established by the Board within 10 days after written
notice to the Executive by the Board that the Executive is not following such
policies or directives, (iii) bad faith conduct that is materially detrimental
to the Company, or (iv) the conviction of the Executive of any crime involving
the property or business of the Company.
(b) Involuntary Termination. In the event that the
Company terminates the Executive's employment other than for Cause or
Disability (pursuant to Section 7(d) below), provided the Executive has not
violated the covenant described in Section 9, the Executive shall be entitled
to continuation of base salary, bonus, benefits and stock vesting for a twelve
(12)-month period (the "Continuation Period"). For this purpose, (A)
"benefits" shall mean continued participation in the Company's group medical,
dental and life insurance coverage for the duration of the Continuation Period;
and (B) "stock vesting" shall mean continued option exercisability with respect
to Option Shares and lapse of the Repurchase Right with respect to Unvested
Shares at the rate described in Sections 5 and 6 above.
(c) Death. The Executive's employment shall terminate in
the event of his death. The Company shall have no obligation to pay or provide
any compensation or benefits under this Agreement on account of the Executive's
death. The Executive's rights under the Company's benefit plans in the event
of the Executive's death shall be determined under the provisions of those
plans.
(d) Disability. The Company may terminate the
Executive's employment for Disability by giving the Executive thirty (30) days'
advance notice in writing. For all purposes under this Agreement, "Disability"
shall mean that the Executive, at the time notice is given, has been unable to
substantially perform his duties under this Agreement for a period of not less
than six (6) consecutive months as the result of his incapacity due to physical
or mental illness. In the event that the Executive resumes the performance of
substantially all of his duties hereunder before the termination of his
employment under this subsection (d) becomes effective, the notice of
termination shall automatically be deemed to have been revoked. No
compensation or benefits
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will be paid or provided to the Executive under this Agreement on account of
termination for Disability. The Executive's rights under the Company's benefit
plans shall be determined under Section 5(d) hereof and the provisions of those
plans.
8. Change of Control.
(a) Vesting. Upon any Change of Control (as defined
herein) of the Company, the Options and Unvested Shares shall be accelerated to
become immediately exercisable or vested for 50% of the total number of the
then unvested Option Shares or Unvested Shares, respectively; provided,
however, that in the event the Change of Control occurs within three (3) months
after the Executive's commencement of employment with the Company, then the
Options and Unvested Shares shall be accelerated to become immediately
exercisable or vested for 25% of the total number of the then unvested Option
Shares or Unvested Shares. The Options and Unvested Shares whose vesting shall
have been accelerated pursuant to this Section 8(a) shall be those Options and
Unvested Shares which, but for the accelerated vesting, would have last vested.
(b) Definition. For purposes of the foregoing, a "Change
of Control" of the Company shall be deemed to have occurred if (i) the Company
sells or otherwise disposes of all or substantially all of its assets; (ii)
there is a merger or consolidation of the Company with any other corporation or
corporations, provided that the shareholders of the Company, as a group, do not
hold, immediately after such event, at least 50% of the voting power of the
surviving or successor corporation; or (iii) any person or entity, including
any "person" as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), becomes the "beneficial
owner" (as defined in the Exchange Act) of Common Stock of the Company
representing 50% or more of the combined voting power of the voting securities
of the Company (exclusive of persons who are now officers or directors of the
Company).
(c) Notwithstanding Section 7(a) hereof, if there shall
have occurred a Change of Control pursuant to which the Company shall have
become a subsidiary or division of another company and if the Executive elects
to terminate his employment following such a Change of Control, the Executive
shall be entitled upon such termination to receive a lump sum payment equal to
6 months base salary. The Executive shall also be entitled to receive his pro
rata share of any bonus to which he would have been entitled but for such
termination.
9. Covenant Not To Solicit.
Beginning with the Executive's termination of employment with
the Company as described in Section 7(b) and for a period of one (1) year
thereafter, the Executive agrees that he will not
(i) solicit, encourage, or take any other action
which is intended to induce any other employee of the Company to terminate his
employment with the Company, or
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(ii) interfere in any manner with the contractual
or employment relationship with the Company, or
(iii) interfere in any manner with the contractual
or employment relationship between the Company and any such employee of the
Company.
The foregoing shall not prohibit the Executive or any entity
with which the Executive may be affiliated from hiring a former employee of the
Company, provided that such hiring results exclusively from such employee's
affirmative response to a general recruitment effort carried out through a
public solicitation or a general solicitation.
10. Proprietary Information Agreement. Upon commencement of the
Executive's employment, the Executive will sign the Company's standard employee
proprietary information agreement.
11. Successors. The Company shall require any successor or
assignee, in connection with any sale, transfer or other disposition of all or
substantially all of the Company assets or business, whether by purchase,
merger, consolidation or otherwise, expressly to assume and agree to perform
the Company's obligations under this Agreement in the same manner and to the
same extent that the Company would be required to perform if no such succession
or assignment had taken place. In such event, the term "Company," as used in
this Agreement, shall mean the Company as defined above and any successor or
assignee to the business and assets which by reason hereof becomes bound by the
terms and provisions of this Agreement.
12. Confidentiality. Except as required by applicable laws,
neither party shall disclose the contents of this Agreement without first
obtaining the prior written consent of the other party, provided, however, that
the Executive may disclose this Agreement to his attorney, financial planner
and tax advisor if such persons agree to keep the terms hereof confidential.
13. Arbitration. Any claim, dispute or controversy arising out of
this Agreement, the interpretation, validity or enforceability of this
Agreement or the alleged breach thereof shall be submitted by the parties to
binding arbitration by the American Arbitration Association in Santa Xxxxx
County, California; provided, however, that this arbitration provision shall
not preclude the Company from seeking injunctive relief from any court having
jurisdiction with respect to any disputes or claims relating to or arising out
of the misuse or misappropriation of the Company's trade secrets or
confidential and proprietary information. All costs and expenses of
arbitration or litigation, including but not limited to attorneys fees and
other costs reasonably incurred by the Executive, shall be paid by the party
who shall not have prevailed in the arbitration all as conclusively determined
by the arbitrators. Judgment may be entered on the award of the arbitration in
any court having jurisdiction.
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14. Legal and Accounting Fees. The Company will reimburse the
Executive for his reasonable legal expenses in connection with this Agreement
in an amount not to exceed $3,000.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
agreements made and to be performed entirely within such state.
16. Integration. This Agreement and any written Company plans
that are referenced herein represent the entire agreement and understanding
between the parties as to the subject matter hereof and supersede all prior or
contemporaneous agreements, whether written or oral. No waiver, alteration, or
modification, if any, of the provisions of this Agreement shall be binding
unless in writing and signed by duly authorized representatives of the parties
hereto.
17. Voluntary Execution; Conflict Waiver. The Executive has
received independent legal counsel regarding this Agreement, which was drafted
jointly by the Executive's and the Company's counsel. The Executive is signing
this Agreement knowingly and voluntarily. The Company and the Executive
acknowledge that Wilson, Sonsini, Xxxxxxxx & Xxxxxx ("WSGR") has acted as
counsel to the Company in negotiating this Agreement and will continue to serve
as the Company's general counsel in the future, acknowledge that each has
received full disclosure of any potential conflict of interest which may result
from such representation, and knowingly and voluntarily waive any such conflict
of interest.
18. Counterparts. This Agreement may be executed in counterparts,
which together will constitute one instrument.
EXECUTIVE VIEWSTAR CORPORATION
By:
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Xxxx X. Xxxxx
Title:
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Consent of Spouse: I hereby consent to this Agreement for purposes of any
community property interest I may have in the foregoing arrangements. I have
had the opportunity to seek independent counsel with regard to this consent and
knowingly and voluntarily waive the right to such counsel.
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Signature of Spouse
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Printed Name of Spouse
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Date Signed
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September 25, 1995
Mr. Xxxx Xxxxx
0000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
RE: AMENDMENT TO EMPLOYMENT AGREEMENT
Dear Xxxx:
On behalf of the Board of Directors of ViewStar Corporation
("Corporation"), this letter confirms the following amendments to and
clarifications of your existing Employment Agreement dated May 18, 1994, which
amendments and clarifications were mutually agreed to and approved by the Board
on August 25, 1995.
1. As of July 26, 1995, ("Effective Date") your assignment as
President and Chief Executive Officer of the Company has been terminated and
you have been appointed simultaneously Chairman of the Board.
2. Pursuant to Section 7(b) of your Existing Agreement, you are
entitled to continuation of base salary, bonus, benefits and stock vesting for
12 months from July 26, 1995 ("Continuation Period"), provided you do not
violate the non-solicitation covenant contained in Section 9 of the Existing
Agreement. We have agreed to modify these provisions in the following manner:
(a) Your bonus entitlement pursuant to Section 7(b) of
your Existing Agreement is determined to be $50,000, payable over a ten-month
period at the rate of $5,000 per month, beginning October 1, 1995.
(b) You have agreed that, for the benefit of the
Corporation, and in the event that the Corporation has not entered into a
definitive agreement by October 15, 1995 to sell itself and/or all its assets
to a third party, you will defer the remainder of the base salary (but not
bonus) which you are otherwise entitled to receive between October 16, 1995 and
July 25, 1996 until the earlier of any one of the following: (i) the
Corporation is sold; or (ii) the Corporation enters into a definitive
agreement to be sold or for a transaction resulting in an equity investment in
the Corporation of at least $5 million; or (iii) the Corporation has achieved
positive net profit from operations for two consecutive quarters.
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When and if either (i) or (ii) or (iii) occurs, then the Corporation shall
resume the payment on a bi-monthly basis of the base salary which has been
deferred pursuant to this Letter Agreement until the full amount of such
deferred salary has been paid.
(c) In the event you remain as a director of the
Corporation beyond the termination of the Continuation Period, the corporation
may, at its option, extend the period for your stock vesting beyond the
Continuation Period so long as you continue to serve as a director.
3. In order to clarify the intent of your existing Employment
Agreement, and not as any modification, Section 8(a) of your Existing
Agreement is hereby clarified in its entirety to read as follows:
"(a) Vesting. Upon any Change of Control (as
defined herein) of the Company occurring more than three
months after your employment commenced and occurring within
the Continuation Period, 50% of any Options and/or Shares
which remain unvested as of the effective date of the Change
of Control shall accelerate to become immediately exercisable
(if Options) or immediately vested (if Shares). Moreover, the
number of shares and options remaining unvested immediately
following the Change of Control shall continue to vest at the
rate of 2% per month (calculated on the original amount of the
grant) for so long as you continue to provide services as a
consultant or employee, which services shall be at the option
of the acquiror following such Change of Control."
This is a clarification and not a modification of Section 8(a) of
your Existing Agreement.
4. We have asked for your active assistance on behalf of the
Company regarding several potential strategic alliances. We fully recognize
that your assistance in this regard is voluntary and not required under the
terms of your existing Employment Agreement. We also consider your active
assistance critical to achieving a transaction. In recognition thereof, and as
compensation for such additional services, we have agreed to pay the following:
(a) your reasonable expenses incurred during the Continuation Period in
providing such services in connection with the sale of the Company, payable
promptly and reasonably upon approved invoicing; plus (b) a fee of $200,000 in
the event that, during the Continuation Period, the Company is either sold or
enters into a definitive agreement to be sold which transaction yields to the
Company proceeds in an amount greater than $10 million. The fee is payable in
full upon closing of the transaction.
5. For your active assistance regarding several potential
strategic alliances and your continuation as the Company's Chairman and/or to
provide additional assistance as mutually agreed regarding other matters and
activities, the Company agrees to pay you at the rate of $1,000 per day plus
reasonable expenses for such services, with no minimum commitment, payable
promptly and reasonably upon approved invoicing.
6. With respect to the services to be provided pursuant to 5
above, you have agreed to provide up to five (5) days per month between the
Effective Date and December 31, 1995 for such
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services in the aggregate, and thereafter for the remainder of the Continuation
Period to provide up to two (2) days per month for such services in the
aggregate. There is no minimum commitment regarding providing any such
services.
7. You have agreed to execute, simultaneously with execution of
this Letter Amendment, the release attached as Exhibit A.
Xxxx, we are extremely pleased that you have agreed to continue to
provide services to the Company on this basis. Please indicate your agreement
with these amendments and clarifications by signing in the space provided
below. Except as amended or clarified herein, the remaining terms of the
existing Employment Agreement between you and the Company dated May 18, 1994
remain in full force and effect.
Very truly yours,
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X. Xxxxxx Xxxxx, Jr.
Chairman, Compensation Committee
Member, Board of Directors
Agreed to and accepted this 25th
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day of September , 1995.
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Date: 9/25/95 /S/
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Xxxx X. Xxxxx
cc: Xxxxxx Xxxxxxxxxxxx
