EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into by
and between XXXXX COMMUNICATIONS, INC., a Delaware corporation (the "Company"),
and XXXX XXXXXXX, an individual resident of San Juan Capistrano, California (the
"Executive"), effective for all purposes as of the 1st day of December, 1998.
R E C I T A L S:
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WHEREAS, the Company desires to employ the Executive as the President
and Chief Executive Officer of the Company, and the Executive desires to accept
such employment, on the terms and conditions set forth in this Agreement.
WHEREAS, the Executive acknowledges that as the President and Chief
Executive Officer of the Company, he is one of the officers of the Company
charged with primary responsibility for the implementation of the Company's
business plans, and that he will have regular access to various confidential
and/or proprietary information relating to the Company. Further, the Executive
acknowledges that the Executive's proprietary covenants to the Company
hereinafter set forth, specifically including, but not limited to, the
Executive's covenant not to compete with any business of the Xxxxx Companies
(hereinafter defined), are being made in partial consideration for the Company's
compensation and severance benefit undertakings to the Executive created by the
provisions of this Agreement.
A G R E E M E N T:
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
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Agreement, the Company agrees to employ and does hereby employ the Executive,
and the Executive agrees to accept such employment and does hereby accept such
employment.
2. TERM. Subject to earlier termination as hereinafter provided, the
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Executive's employment hereunder shall be for an initial term (the "Initial
Term") commencing on the effective date hereof and continuing for a period of
one (1) year; provided, however, that the term of Executive's employment
hereunder shall be automatically extended for successive one (1) year periods
(each, a "Renewal Term") unless either party gives the other written notice of
termination at least sixty (60) days prior to the expiration of the Initial Term
or the then current Renewal Term. The Initial Term and the Renewal Terms are
collectively referred to herein as the "Term."
3. CAPACITY AND PERFORMANCE.
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(a) During the Term hereof, the Executive shall serve as
President and Chief Executive Officer of the Company and shall have the
responsibilities, duties and authorities reasonably assigned to him by
the Board of Directors of the Company (the "Board"). The Executive
shall report directly to the Board.
(b) During the Term hereof, the Executive shall devote the
Executive's full business time and the Executive's best efforts,
business judgment, skill and knowledge to the advancement of the
business and interests of the Company and its consolidated subsidiaries
(collectively, the "Xxxxx Companies") and to the discharge of the
Executive's duties and responsibilities hereunder; provided, however,
that the Executive shall be allowed a reasonable amount of time to meet
the Executive's obligations to Primal Systems, Inc. and Wireless21,
Inc. However, if the Company at any time identifies a conflict of
interest with respect to either Primal Systems, Inc. or Wireless21,
Inc., or both, and any of the Xxxxx Companies, the Company shall so
notify the Executive and, if a mutual agreement cannot be reached, this
Agreement may be terminated by the Company, provided that such
termination shall be deemed to be without Cause. In addition, the
Company encourages reasonable participation by the Executive in
community, industry, trade, professional, governmental, academic and
charitable activities generally considered to be in the Company's
and/or the public interest, but the Company shall have the right to
approve or disapprove the Executive's participation in such activities
if, in the reasonable judgment of the Company, such participation may
conflict with the Company's interests or with the Executive's duties or
responsibilities or the time required for the discharge of those duties
and responsibilities. The Executive shall use the Executive's best
efforts and skills to preserve the business of the Xxxxx Companies and
the goodwill of each of their employees and persons having business
relations with any of the Xxxxx Companies.
4. COMPENSATION AND BENEFITS. As compensation for all services
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performed by the Executive under and during the Term hereof:
(a) Base salary. The Company shall pay the Executive a base
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salary at the rate of not less than Two Hundred Thousand and No/100
Dollars ($200,000.00) per annum, payable in equal installments in
accordance with the payroll practices of the Company for its
executives, but not less frequently than monthly in arrears and subject
to federal, state and other tax withholdings.
(b) Additional Compensation. The Executive will be entitled to
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receive an aggregate bonus in an amount equal to $100,000 payable as
follows: $50,000 on the date which is the six (6) month anniversary of
the date of this Agreement and $50,000 on the date which is the twelve
(12) month anniversary of the date of this Agreement.
The Executive shall also be entitled to receive each year
additional bonus compensation as may be determined by the Board in its
sole discretion.
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(c) Other benefits. During the Term hereof and subject to any
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contribution therefor generally required of executives of the Xxxxx
Companies, the Company shall either procure for the Executive health
insurance coverage, life insurance coverage and disability insurance
coverage in such amounts as the Board shall determine in its absolute
discretion, or, at the option of the Executive if the Executive elects
to provide the Executive's own comparable insurance coverage, reimburse
the Executive in an amount not to exceed $1,200.00 per month for
premiums paid by the Executive for providing such health insurance
coverage, life insurance coverage and disability insurance coverage;
provided, however, that in either event, the types and amounts of such
coverage shall be of a type and in the amounts which are comparable to
the types and amounts of such coverages which are provided by the Xxxxx
Companies to similarly situated executives. Further, the Executive
shall be entitled to receive such of the Company's other fringe
benefits as are being provided to other employees of the Company who
are officers of the Company. The Company may alter, modify, add to or
delete its benefit plans at any time as it determines to be
appropriate, without recourse by the Executive.
(d) Vacations. During the Term hereof, the Executive shall be
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entitled to four (4) weeks of vacation per annum, to be taken at such
times and intervals as shall be determined by the Executive, with the
consent of the Company, which consent shall not unreasonably be
withheld. Up to a maximum of two (2) weeks of unused vacation may be
carried forward to the next year.
(e) Business Expenses. The Company shall pay or reimburse the
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Executive for all reasonable and customary expenses incurred or paid by
the Executive in the performance of the Executive's duties and
responsibilities hereunder (including, payment of "mileage" for
business use of Executive's personal automobile, in accordance with the
policy of the Xxxxx Companies), subject to periodic review of the
amount of such expenses from time to time by the Company, and subject
to such reasonable substantiation and documentation as may be specified
by the Company from time to time.
(f) Options. Simultaneously with the execution of this
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Agreement, the Executive and the Company shall enter into an Option
Agreement, in form and substance satisfactory to the Executive and the
Company, providing for the issuance to the Executive of options to
purchase an aggregate of 925,000 shares of the common stock, par value
$0.01 per share, of the Company, on such terms and conditions as shall
be contained therein.
(g) California Office. The Company shall provide the Executive
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with a suitable office located in the Orange County metropolitan area
and such administrative support as the Company in its sole discretion
may deem necessary or appropriate. The location of such office in the
Orange County metropolitan area shall be reasonably geographically
convenient to the Executive's home as of the date of this Agreement.
The Company's obligation under this Paragraph shall be satisfied for
the first three calendar months of the Initial Term by the Company's
paying the rent on the Executive's existing office space for the first
three calendar months of the Initial Term, which rent shall not exceed
$1,500 per month.
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5. TERMINATION.
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(a) Death or Disability. This Agreement shall terminate upon
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the death or Disability (as hereinafter defined) of the Executive. The
term "Disability" shall mean the Executive is unable to perform the
Executive's duties under this Agreement on a full-time basis for 180
consecutive days or for 180 days out of 360 consecutive days due to the
Executive's physical or mental illness.
(b) Termination by the Company for Cause. The Company may
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terminate the Executive's employment hereunder for Cause, and, upon
such termination of Executive's employment for Cause, this Agreement
shall terminate. The following, as determined by the Company in its
reasonable judgment, shall constitute Cause for termination:
(i) The Executive's gross negligence or willful
misconduct in the performance of the Executive's duties and
responsibilities to any of the Xxxxx Companies, such duties
and responsibilities not to be unreasonably imposed;
(ii) Material breach by the Executive of any
provision of this Agreement;
(iii) Fraud, embezzlement or other dishonesty by the
Executive with respect to any of the Xxxxx Companies;
(iv) Conviction of, or a plea of nolo contendere to,
a felony by the Executive; or
(v) The Executive's intentional failure to comply
with any instructions of the Board, such instructions not to
be unreasonably imposed;
provided, however, in the case of subparagraphs (i), (ii) and (v), the
Executive shall have been informed in writing of the act, or failure to
act, constituting Cause for termination, and shall have been provided
with a reasonable opportunity, but in no event greater than sixty (60)
days, to cure such act or failure to act. Notwithstanding the foregoing
sentence, the Executive shall be entitled to written notification and
opportunity to cure an act, or failure to act, constituting Cause for
termination no more than one time. Subsequent to such initial
notification and cure period, the Executive shall have no right to cure
any subsequent act, or failure to act, and the Company may proceed with
termination for Cause as defined herein without further notice to the
Executive.
(c) Termination by Executive With or Without Good Reason. The
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Executive may terminate the Executive's employment with the Company for
"Good Reason" or without "Good Reason" at any time, and, upon the
termination by the Executive of Executive's employment with the Company
for "Good Reason" or without "Good Reason," this Agreement shall
terminate. For purposes of this Agreement, "Good Reason" shall mean (i)
any breach by the Company of any material provision of this Agreement
or any failure by
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the Company to carry out any of its material obligations hereunder, and
the failure to cure such breach or failure within sixty (60) days'
written notice thereof from the Executive; (ii) relocation of the
Executive outside of the Orange County metropolitan area; (iii) a
reduction in the Executive's annual base salary; (iv) assignment to the
Executive of duties materially inconsistent with the Executive's role
as President and Chief Executive Officer of the Company; (v)the removal
(but not the resignation) from the Board; or (vi) the failure to elect
the Executive to the position of Chairman of the Board of the Company
within twelve (12) months following the date of this Agreement.
(d) Notice of Termination. Any termination of the Executive's
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employment under this Agreement, other than as a result of the
Executive's death, including, without limitation, any termination of
Executive's employment under this Paragraph 6, other than as a result
of the Executive's death, or Paragraph 7, shall be communicated by a
"Notice of Termination" to the other parties to this Agreement. For
purposes of this Agreement, a "Notice of Termination" shall mean a
notice in writing given pursuant to Paragraph 13, which shall indicate
the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's
employment under the provisions so indicated.
(e) Date of Termination. If the Executive's employment under
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this Agreement is terminated for any reason other than a non-renewal of
this Agreement after the Term of this Agreement has expired, the date
of termination of this Agreement (the "Date of Termination") shall mean
(i) if the Executive's employment is terminated under this Agreement as
a result of death, the date of the Executive's death; (ii) if the
Executive's employment is terminated as a result of the Executive's
Disability, or if Executive's employment with the Company is terminated
by the Company without Cause or for Cause, the date Notice of
Termination is delivered to the Executive; (iii) if the Executive
terminates the Executive's employment with the Company, the earlier of
ten (10) days following the date on which a Notice of Termination is
delivered pursuant to Paragraph 13 or the date specified in the Notice
of Termination; or (iv) if the Executive's employment is terminated for
any other reason, then ten (10) days following the date on which a
Notice of Termination is delivered pursuant to Paragraph 13.
6. EFFECTS ON COMPENSATION UPON DEATH, DISABILITY OR TERMINATION
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OF EMPLOYMENT.
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(a) Death. If the employment of the Executive terminates
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because of the Executive's death, the Company shall pay the Executive's
estate the Executive's base salary pursuant to Paragraph 4(a) through
the date of the Executive's death.
(b) Disability. During any period in which the Executive fails
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to perform the Executive's duties under this Agreement as a result of a
Disability, the Company shall continue to pay the Executive the
Executive's base salary pursuant to Paragraph 4(a) until the Date of
Termination.
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(c) Termination for Cause or Without Good Reason. If the
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Executive voluntarily terminates employment with the Company without
Good Reason or if the Executive's employment is terminated by the
Company for Cause, the Company shall pay the Executive the Executive's
base salary pursuant to Paragraph 4(a) through the Date of Termination.
(d) Termination for Good Reason, without Cause or Non-Renewal
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Following the Initial Term. If the Executive terminates employment with
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the Company for Good Reason, if employment of the Executive is
terminated without Cause by the Company, or if this Agreement is not
renewed by the Company following the Initial Term pursuant to the
provisions of Paragraph 2, then, unless otherwise mutually agreed by
the parties, the Executive shall be entitled to the continuation of
base salary and benefits pursuant to Paragraphs 4(a) and (c) for a
period of twelve (12) months following the Date of Termination. If such
termination occurs within the Initial Term, the Executive shall be
entitled to receive the additional compensation provided pursuant to
the first paragraph of Paragraph 4(b) in accordance with its terms.
(e) Additional Compensation. Following the Initial Term,
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should the employment of the Executive terminate as a result of a death
or Disability, or should the Executive terminate employment for Good
Reason, or if the employment of the Executive is terminated by the
Company without Cause, in addition to the compensation set forth in
subparagraphs (a), (b) or (d) of this Paragraph 6, whichever is
applicable, the Executive (or the Executive's estate, if applicable)
shall also be entitled to the additional compensation, if any, under
Paragraph 4(b), calculated on the Partial Period Amount (hereinafter
defined) of the year in which the Date of Termination occurs. For
purposes of this Agreement, the term "Partial Period Amount" shall be
an amount equal to the additional compensation to which the Executive
would have otherwise been entitled had the employment of the Executive
not terminated, times a fraction, the numerator of which is the number
of days from the first day of the year in which such termination occurs
to and including the Date of Termination, and the denominator of which
is 365.
7. CHANGE IN CONTROL.
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(a) Definitions. For purposes of this Paragraph 7, the
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following terms have the meanings set forth below:
(i) "Change in Control" shall mean (A) the
acquisition of more than 50% of the outstanding voting stock
of the Company by any person or group (other than stockholders
of the Company on the date of this Agreement) which is
accompanied by a change in the composition of the Board (as
constituted on the day immediately preceding such acquisition)
as to a majority of its members within thirty (30) days
following the occurrence of such acquisition or (B) a
transaction in which substantially all of the consolidated
assets of the Company are sold.
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(ii) "Justification" means that, following a Change
in Control and without the Executive's written consent, there
has been (A) any breach by the Company of any material
provision of this Agreement or any failure by the Company to
carry out any of its material obligations hereunder, and the
failure to cure such breach or failure within sixty (60) days'
written notice thereof from the Executive; (B) a relocation of
the Executive outside of the Orange County metropolitan area;
(C) a reduction in the Executive's annual base salary; (D) an
assignment to the Executive of duties materially inconsistent
with the Executive's role as President and Chief Executive
Officer of the Company; (E) the removal (but not the
resignation) of the Executive from the Board; or (F) if the
Executive has been elected as Chairman of the Board of the
Company, the removal of the Executive from the position of
Chairman of the Board of the Company.
(b) Termination Following a Change in Control. If a Change in
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Control occurs prior to the Date of Termination, and, within twelve
(12) months after such Change in Control, (i) the Executive's
employment is terminated by the Company without Cause or (ii) the
Executive terminates employment with Justification, then the Executive
shall be entitled to the continuation of base salary and benefits
pursuant to Paragraphs 4(a) and (c) for a period of twelve (12) months
from the Date of Termination and to the payment of any additional
compensation, in accordance with the terms of Paragraph 4(b) or as
shall have been determined by the Board pursuant to Paragraph 4(b), to
which the Executive is entitled pursuant to Paragraph 4(b).
8. NONDISCLOSURE COVENANTS. During the Term of this Agreement, the
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Executive will have access to and become familiar with various trade secrets and
other sensitive information belonging to any of the Xxxxx Companies consisting
of, but not limited to, processes, computer programs, compilations of
information, records, sales procedures, customer requirements, pricing
techniques, customer lists, technical data, know-how, market reports, consumer
investigations, methods of doing business and other confidential and proprietary
information (collectively, the "Confidential Information"), which are acquired,
developed and used by any of the Xxxxx Companies and regularly used in the
operation of any of their businesses. The Executive acknowledges and agrees all
Confidential Information is and shall remain the property of the Xxxxx
Companies. Except as hereinafter set forth in this Paragraph 8, the Executive
further agrees he shall not use in any way or disclose any of the Confidential
Information, directly or indirectly, either during the Term of this Agreement
and for a period of three (3) years after following the Date of Termination,
except as required in the course of the Executive's employment under this
Agreement or to the extent such Confidential Information is publicly known. All
files, records, documents, information, data, and similar items, which in any
way relate to the business of any of the Xxxxx Companies and are either
furnished to the Executive by the Xxxxx Companies, or prepared, compiled or
otherwise acquired by the Executive while the Executive was employed by the
Company, shall remain the exclusive property of the Xxxxx Companies and shall
not be removed from the premises of the Xxxxx Companies under any circumstances
without the prior written consent of the Board (except in the ordinary course of
business during the Executive's period of active employment under this
Agreement), and in any event shall be promptly delivered to the Company (without
the
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Executive retaining any copies) upon termination of this Agreement. The Company
expressly acknowledges and agrees that the term "Confidential Information"
excludes information which is (i) in the public domain or otherwise generally
known to the trade, or (ii) disclosed to third parties other than by reason of
the Executive's breach of the Executive's confidentiality obligation hereunder
or (iii) learned of by the Executive either prior to the commencement of or
subsequent to the termination of the Executive's employment hereunder from any
other party not then under an obligation of confidentiality to the Company.
9. NONCOMPETITION COVENANT. Upon the termination of the Executive's
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employment hereunder (except in the cases of the Executive's terminating
employment Executive's employment with the Company for Good Reason or with
Justification, or the termination of Executive's employment with the Company by
the Company without Cause), the Executive shall not, without the prior written
consent of the Company, for the period ending one (1) year following the Date of
Termination, directly or indirectly, as a director, officer, agent, employer,
employee, principal, proprietor, partner, consultant or independent contractor,
or in any other individual or representative capacity, (i) invest (other than
investments in publicly-owned companies which constitute not more than five
percent (5%) of the outstanding securities of any such company) or engage in any
business or activity that is directly competitive with any business of the Xxxxx
Companies as of the Date of Termination, or (ii) accept employment with or
render services to a direct competitor of any business of any of the Xxxxx
Companies.
10. COVENANT NOT TO HIRE. For a period of one (1) year following the
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Date of Termination, the Executive shall not, on the Executive's own behalf or
on behalf of any other person, partnership, association, corporation or other
entity, hire, or solicit for employment, any employee of any of the Xxxxx
Companies, or in any manner attempt to influence or induce any employee of any
of the Xxxxx Companies to leave the employment of any of the Xxxxx Companies,
nor shall the Executive use or disclose to any person, partnership, association,
corporation or other entity any information obtained while an employee of the
Company concerning the names and addresses of the Xxxxx Companies' employees.
11. MEMBER OF BOARD. The Company agrees that the Executive shall be
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elected as a member of the Board on or before December 15, 1998, and shall
continue in such position through and including the Date of Termination.
12. SEVERABILITY. If any provision of this Agreement is held to be
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illegal, invalid or unenforceable under present or future laws effective during
the Term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part of this Agreement; and the remaining provisions
of this Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
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13. NOTICE. All notices, demands, requests or other communications
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which may be or are required to be given, served or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as set forth on the signature pages hereof. Each party may designate
by notice in writing a new address to which any notice, demand, request or
communication may thereafter be so given, served or sent. Each notice, demand,
request or communication which is mailed, delivered or transmitted in the manner
described above shall be deemed sufficiently given, served, sent and received
for all purposes at such time as it is delivered to the addressee with the
return receipt, the delivery receipt, the affidavit of messenger or (with
respect to a facsimile transmission) the answer back being deemed conclusive
evidence of such delivery, or at such time as delivery is refused by the
addressee upon presentation.
14. AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
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waived or amended unless such waiver, modification or amendment is agreed to in
writing and signed by the Executive and such officers as may be specifically
designated by the Board, and such provisions shall be modified, waived or
amended only to the extent set forth in such writing.
15. VALIDITY. The invalidity or unenforceability of any provision of
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this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. GENERAL CREDITOR. Nothing contained in this Agreement and no action
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taken pursuant to the provisions of this Agreement shall create or be construed
to create a trust relationship between the Company and the Executive or any
other person, nor shall any money or property of the Company be segregated for
the benefit of the Executive to satisfy the obligations of the Company
hereunder.
18. NO ASSIGNMENT. The right of the Executive or any other person to
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the payment of amounts or other benefits under this Agreement shall not be
assigned, alienated, hypothecated, placed in trust, disposed of, transferred,
pledged or encumbered (except by will or by the laws of descent and
distribution), and, to the extent permitted by law, no such amount or payment
shall in any way be subject to any legal process to subject the same to the
payments of any claim against the Executive or any other person.
19. INJUNCTIVE RELIEF. If there is a breach or threatened breach by a
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party to this Agreement of the provisions of this Agreement, any other party to
this Agreement shall be entitled to seek an injunction to prevent irreparable
injury to said party.
20. INTEGRATION. This Agreement represents the entire understanding and
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agreement between the parties with respect to the subject matter of this
Agreement, and all other written or oral agreements relating to the subject
matter hereof are hereby superseded.
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21. GOVERNING LAW. The terms and provisions of this Agreement shall be
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construed in accordance with, and governed by, the laws of the State of
Delaware.
22. EXECUTIVE'S LEGAL FEES. The Company shall reimburse the legal fees
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and related expenses incurred by the Executive in connection with the
negotiation, preparation and review of this Agreement and the related stock
options contemplated hereby in an amount not to exceed $5,000.00.
23. SURVIVAL. Notwithstanding the termination of this Agreement or the
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Executive's termination of employment, the provisions of Paragraphs 8 through 23
shall survive and continue in full force and effect in accordance with their
terms.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
THE COMPANY:
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XXXXX COMMUNICATIONS, INC.
a Delaware corporation
By: /s/ XXXXXXX X. XXXXXX, III
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Xxxxxxx X. Xxxxxx, III
Chairman of the Board, President and Chief
Executive Officer
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
EXECUTIVE:
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/s/ XXXX XXXXXXX
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Xxxx Xxxxxxx
00000 Xxx Xxxxxxx
Xxx Xxxx Xxxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
