Addendum to Employment Agreement
Exhibit
10.6
Addendum
to Employment Agreement
This
Addendum dated February 28, 2006, to the Employment Agreement by and between
IXI
Mobile (R&D) Ltd. (the “Company”)
(a
subsidiary of IXI Mobile Inc., the “Corporation”)
and
Xxxxxx Xxxxx (“Employee”)
entered into effective as of January 1, 2006 (the “Employment
Agreement”)
is
entered into by and between Company and Employee
(the
“Addendum”).
| Whereas: |
Employee
has been engaged by Company since 2000, and since January 1, 2006
is
engaged pursuant to the Employment Agreement;
|
| Whereas: |
The
parties have agreed that, as of the date of the closing of the
contemplated merger transaction (the “Addendum
Effective Date”
and the “Closing”,
respectively), among the Corporation, the Israel Technology Acquisition
Corp., and the ITAC Acquisition Subsidiary Corp. (the “Group”)
and subject thereto, the terms and position of the Employee’s employment
shall automatically be modified and the Employment Agreement amended,
in
accordance with the terms set forth below.
|
Therefore,
it
is
hereby stipulated and agreed between the parties as follows:
| 1. |
The
preface to this Addendum constitutes an indivisible and integral
part
thereof.
|
| 2. |
Unless
otherwise defined herein, the capitalized terms appearing herein
shall
have the meanings attributed to them in the Employment Agreement
or, where
expressly so indicated, in the Agreement and Plan of Merger entered
into
as of February 28, 2006 (the “Merger
Agreement”).
|
| 3. |
Starting
on the Addendum Effective Date the position of the Employee shall
change
to co-Chairman of the Group and any reference to Chairman in Employee’s
Employment Agreement shall as of the Addendum Effective Date change
to
“co-Chairman”. Employee agrees that changing his position to “co-Chairman”
will not be considered as a just cause for termination by the Employee.
|
| 4. |
As
of the Addendum Effective Date, the terms of Employee’s engagement shall
be modified as follows:
|
| 4.1. |
Annual
Bonus
|
| 4.1.1. |
In
addition to the Salary and all other rights and benefits provided
for
under Exhibit A of the Employment Agreement, and commencing with
the 2006
calendar year, the Employee shall be entitled to an annual bonus
for each
calendar year in which he was employed in a gross amount calculated
as
follows(the “Annual
Bonus”):
|
A
gross
amount equal to 2% (two percent) of that portion of the Group’s net income (as
such term is defined in Section 2.15 of the Merger Agreement) which exceeds
the
amount of the net incomeof the Group in the immediately preceding calendar
year
(the “Profit
Increase”).
For
the
removal of doubt, it is hereby clarified that the baseline for the calculation
of the Profit Increase for the 2006 calendar year shall be the net income of
the
Corporation in 2005 calendar year and if the financial statements of the
Corporation for 2005 show no net income then the baseline amount shall be
zero.
| 4.1.2. |
The
Annual Bonus shall be paid within five (5) Business Days following
the
filing of the Parent’s Annual Report on Form 10K with the Securities and
Exchange Commission for the relevant year. Subject to the provisions
of
Section 4.3 of this Addendum, in the event of a termination of the
Employment Agreement prior to completion of any calendar year and/or
prior
to the publication of the financial statements for a given calendar
year,
Employee shall be entitled to the proportionate share of the Annual
Bonus
and the Target Bonuses (based upon a calculation of the applicable
bonus
for the entire calendar year in which the Employment Agreement has
been
terminated), as the case may be, which shall be paid within the timeframe
provided for in the Addendum.
|
| 4.2. |
Target
Bonuses
|
Options
| 4.2.1. |
Immediately
following the Closing, the Board of Directors of the Parent shall
grant
Employee options to purchase 750,000 shares of the Parent's Common
Stock
(the "Additional
Options")
which shall vest in accordance with the following
terms:
|
| 4.2.1.1. |
Upon
reaching the 2007 Net Profit Target (as defined in, and in accordance
with
the terms of, the Merger Agreement), an aggregate number of Additional
Options shall vest equal to 150,000 multiplied by a fraction (A)
the
numerator of which shall be the excess of Parent’s net income of the
calendar year ending December 31, 2007 over $15,000,000 and (B) the
denominator of which shall be $10,000,000. In no event shall the
fraction
in the preceding sentence exceed one (1); any
of the foregoing Additional Options not vested in accordance with
the
foregoing shall
expire and be of no further effect; and
|
| 4.2.1.2. |
Upon
reaching the 2008 Net Profit Target (as defined in, and in accordance
with
the terms of, the Merger Agreement) an aggregate number of Additional
Options shall vest equal to 150,000 multiplied by a fraction (A)
the
numerator of which shall be the excess of Parent’s net income for the
calendar year ending December 31, 2008 over $20,000,000 and (B) the
denominator of which shall be $25,000,000. In no event shall the
fraction
in the preceding sentence exceed one (1); any
of the foregoing Additional Options not vested in accordance with
the
foregoing shall
expire and be of no further effect;
and
|
| 4.2.1.3. |
450,000
of the Additional Options, a third of which shall vest upon and be
conditional upon achievement of each of the First Share Price Trigger
(150,000 Additional Options), the Second Price Trigger (150,000 Additional
Options), and the Third Price Trigger (150,000 Additional Options)
(as
each term is defined in, and in accordance with the terms of, the
Merger
Agreement). Provided, however, that the First Share Price Trigger,
the
Second Price Trigger, and the Third Price Trigger shall be deemed
to have
occurred only if such relevant Share Price shall have remained
during
any twenty (20) Trading Days during any thirty (30) consecutive Trading
Day period at any time during the period commencing on the Closing
and
ending on the fourth anniversary thereof. Upon
the fourth
anniversary from Closing, any Additional Options not vested in accordance
with the foregoing shall expire and be of no further
effect.
|
| 4.2.2. |
The
foregoing vesting schedule shall be accelerated in every event where
the
Holders and the Derivative Holders (as such terms are defined in
the
Merger Agreement) shall be entitled to acceleration of the issuance
of any
Additional Shares (as such term is defined in the Merger
Agreement).
|
| 4.2.3. |
The
Additional Options shall be granted pursuant to the Parent’s employee
share option plan to be established under Section 102 of the Israel
Tax
Ordinance. The exercise price of the Additional Options shall be
US$5.00
(five US dollars) per share of Parent’s Common Stock issuable upon such
exercise
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Cash
Bonuses
2
| 4.2.4. |
In
addition to the Additional Options, Employee shall be entitled to
the
following cash bonuses:
|
| 4.2.4.1. |
a
cash bonus in the gross amount of US $200,000 (two hundred thousand
US
dollars) upon achievement of the First Share Price Trigger during
any
twenty (20) Trading Days during any thirty (30) consecutive Trading
Day
period at any time during the period commencing on the Closing and
ending
on the fourth anniversary thereof (the "Share
Price Bonus");
and
|
| 4.2.4.2. |
a
cash bonus of the gross amount of up to US$800,000 (eight hundred
thousand
US dollars) (“Second
Bonus”)
upon the employee becoming entitled to the Share Price Bonus under
4.2.4.1
above and
the occurrence of any
one of the following conditions, as follows: (i) if the Parent receives
funds upon the exercise of warrants outstanding on the date of the
Merger
Agreement to acquire shares of Parent Common Stock (“Parent
Warrants”)
of no less than US$ 45 million, the Employee shall be entitled to
the full
amount of the Second Bonus; (ii) if the Parent’s Board calls for the
cashless exercise of the lower of (a) all outstanding Parent Warrants
or
(b) 69% of the Parent Warrants, the Employee shall be entitled to
the full
amount of the Second Bonus; and (iii) if Parent receives proceeds
from the
exercise of Parent Warrants in the amount of less than US$45 million,
then
a proportionate amount of the Second Bonus shall be payable to Employee
-
the sum of which shall be calculated by multiplying the Second Bonus
by a
fraction, the numerator of which shall be the amount of such proceeds
and
the denominator of which shall be US$45 million. Sums payable under
(iii)
above shall be calculated and payable on an annual basis and shall
be
deemed on account of payments due under (i) and (ii) above. Under
no event
will the aggregate amount payable to Employee under this subsection
4.2.4.2 exceed US$800,000.
|
| 4.2.5. |
(a)
cash bonuses in the gross amount of US $200,000 (two hundred thousand
US
dollars) each for the achievement of each of the (i) the Revenue
Target
(as defined in the Merger Agreement) during calendar year 2006; (ii)
the
Second Price Trigger; and (iii) the Third Price Trigger; (b) upon
reaching
the 2007 Net Profit Target, a cash bonus in the gross amount of US$200,000
(two hundred thousand US dollars) multiplied by a fraction (A) the
numerator of which shall be the excess of Parent’s net income of the
calendar year ending December 31, 2007 over $15,000,000 and (B) the
denominator of which shall be $10,000,000. In no event shall the
fraction
in the preceding sentence exceed one (1); (c) Upon reaching the 2008
Net
Profit Target, a cash bonus in the gross amount of US$200,000 (two
hundred
thousand US dollars) multiplied by a fraction (A) the numerator of
which
shall be the excess of Parent’s net income for the calendar year ending
December 31, 2008 over $20,000,000 and (B) the denominator of which
shall
be $25,000,000. In no event shall the fraction in the preceding sentence
exceed one (1). The bonuses included in this Section shall be referred
herein as the “Target
Bonuses”.
|
Provided,
however that the Second Price Trigger, and the Third Price Trigger shall be
deemed to have occurred only if such relevant Share Price shall have remained
during
any twenty (20) Trading Days during any thirty (30) consecutive Trading Day
period at any time during the period commencing on the Closing and ending on
the
fourth anniversary thereof.
| 4.3. |
Section
2.2 of the Employment Agreement shall be amended and restated as
follows:
|
2.2
Company and Employee may terminate this Agreement at any time and for any reason
upon 90 days’ prior written notice to the other party (the “Termination
Notice”).
3
In
the
event that (i) the Company terminates this Agreement for any reason, other
than
a Termination for Cause (defined below); or (ii) the Employee terminates this
Agreement for Justifiable Reason (defined below), Employee shall be entitled
to
the following:
(a)
Salary and benefits set forth in Sections 3, 4, and 5 of the Employment
Agreement which would have been due to him in a twelve-month period following
the furnishing of the Termination Notice (the “Severance
Period”);
and
(b)
un-expired Additional Options not yet vested as of the effective date of
termination shall not expire and shall vest upon the triggering events, if
applicable, set forth in Section 4.2.1 even if those occur after termination;
and
(c)
immediate vesting upon the effective date of termination of all unvested
Corporation Options (defined below);
(d)
extension of the exercise period of all Corporation Options and all vested
Additional Options to the full term of said options pursuant to the relevant
share option plan in place with regard to said options, and in the absence
of a
provision in the share option plan in this regard, the full term of said options
shall be 10 years or earlier upon so called "Change of Control" events as set
forth in the Company's Israeli Share Option Plan ("Plan");
upon a
so called "Change of Control" event such Corporation Options and Additional
Options shall be subject to adjustment/swap/early exercise in the same manner
as
other Options subject to the Plan.
(e)
Target Bonuses and Annual Bonuses which would have been due to him during the
Severance Period; In the event that such Severance Period ends prior to
completion of any calendar year and/or prior to the publication of the financial
statements for a given calendar year, Employee shall be entitled to the
proportionate share of the Annual Bonus and the Target Bonuses (based upon
a
calculation of the applicable bonus for the entire calendar year in which the
Severance Period ends), as the case may be, which shall be paid within the
timeframe provided for herein.
In
addition to the foregoing, in the event that the First Share Price Trigger
during
any twenty (20) Trading Days during any thirty (30) consecutive Trading Day
period is
achieved following the effective date of termination, but before the lapse
of
the fourth anniversary from Closing, the Company's obligation to pay Employee
the Share Price Bonus and the Second Bonus shall survive said termination and
be
payable upon the meeting of any of the conditions in accordance with Section
4.2.4.1 and 4.2.4.2 as applicable.
For
the
avoidance of doubt, the 90-day notice period set forth in the first paragraph
of
Section 2.2 above shall overlap with the Severance Period.
“Termination
for Cause”
shall
mean a termination by the Company as a result of (i) a material breach by the
Employee of the Employment Agreement which is not cured by the Employee within
thirty (30) days after his receipt of notice thereof from the Company; and/or
(ii) any action by the Employee to intentionally harm the Company which is
not
rectified by the Employee within thirty (30) days after his receipt of notice
thereof from the Company (iii) any act of moral turpitude by Employee or action
by the employee to intentionally harm the Corporation.
“Justifiable
Reason”
shall
mean (i) an action by the Company to substantially change the functions, rights
or duties of the Employee; and/or (ii) a material breach by the Company of
any
of the provisions of this Agreement, as amended by the Addendum, which is not
cured within thirty (30) days of the date the Company was notified, in writing,
of such breach; and/or (iii) a requirement by Company that the Employee relocate
to a business location outside of Israel; and/or (iv) any action by the Company
to intentionally harm the Employee which is not rectified by the Company within
thirty (30) days after its receipt of notice thereof from the Employee.
4
| 4.4. |
In
the event of (i) a Termination for Cause; or (ii) a termination by
Employee of the Employment Agreement other than for Justifiable Reason
,
then Employee shall only be entitled to (a) Salary and benefits set
forth
in Sections 3, 4 and 5 of the Employment Agreement and (b) Annual
Bonuses,
Target Bonuses, Share Price Bonus, Second Bonus, and Additional Options
(subject to vesting events and conditions precedent set forth in
this
Addendum ), which would have been due to him in a three-month period
following the furnishing of the Termination Notice. Any Additional
Options
and Corporation Options vested prior to expiry of the three months
period
shall be exercisable no later than 6 months following such date or
earlier
upon so called "Change of Control" events as set forth in the Company's
Plan; upon a so called "Change of Control" event such Corporation
Options
and Additional Options shall be subject to adjustment/swap/early
exercise
in the same manner as other options subject to the
Plan.
|
| 4.5 |
Pre-Closing
Shares
|
| 4.5.1. |
Immediately
prior to the Closing, and as a bonus to Employee for his efforts
in
connection with the consummation of the transactions contemplated
by the
Merger Agreement, the Board of Directors of the Corporation shall
issue to
the Employee that number of shares of the Corporation’s Common Stock,
pursuant to the Corporation’s share option plan established under Section
102 of the Israel Tax Ordinance (the “Shares”),
which upon conversion to shares of Common Stock of the Parent shall
equal
216,000 shares of the Parent’s Common Stock
|
| 4.5.2. |
With
regard to options presently held by Employee to purchase Common Stock
in
the Corporation (the “Corporation
Options”),
Employee hereby waives any acceleration or other rights pertaining
to any
securities held by him which may be triggered by the merger transaction
among the Group.
|
| 5. |
The
parties hereto confirm that the Employee has engaged, and shall continue
to engage, in other business or professional activities as set forth
in
Section 1.2 of the Employment Agreement and that he shall continue
to
devote the same portion of his business time to the fulfillment of
his
duties towards the Company as he has done prior to the date
hereof.
|
| 6. |
The
provisions of this Addendum are subject to the Closing and are in
amendment of the provisions of the Employment Agreement. In the event
of
an inconsistency between the provisions of the Employment Agreement
and
the provisions of this Addendum, the provisions of this Addendum
shall
prevail.
|
| 7. |
For
the removal of doubt it is hereby clarified that, other than as
specifically amended hereby, the provisions of the Employment Agreement
shall remain in full force and
effect.
|
| 8. |
Employee
confirms that for purposes of severance pay under Israeli law and/or
his
Employment Agreement, his employment period commences on January
1, 2006
and any service provided by Employee to the Company prior to such
date in
any capacity shall not be deemed a period of employment for severance
pay
purposes. Employee hereby fully and forever waives any claims and/or
demands for severance pay for the period preceding January 1, 2006.
Employee further confirms that other than an outstanding debt which,
as of
the date of signing this Addendum amounts to US$261,000 (two hundred
sixty
one thousand US dollars) and reimbursement of expenses in the ordinary
course of business, the Company or any of its affiliated entities,
including the Corporation, has no outstanding debts and liabilities
to the
Employee arising under any relationship with the Company preceding
the
signing date of this Addendum and that he has no claims, demands
and
requests from the Company for any such debts and liabilities. For
the
removal of doubt, it is hereby clarified that the foregoing confirmation
does not apply to any debt or liability that may arise following
the date
of signing of this Addendum.
|
| 9. |
If
Employee converts his Employment Agreement into a Service Management
Agreement under Section 7 of his Employment Agreement, then this
Addendum
shall be adjusted accordingly so as to apply to such alternative
legal
relationship with the Employee at no additional cost or expense upon
the
Group.
|
5
IN
WITNESS WHEREOF, the parties hereto have hereby duly executed this Addendum
on
the day and year first set forth above.
| IXI Mobile (R&D) Ltd. | /s/ Xxxxxx Xxxxx | |
| By: /s/ Xxxx Xxxxxx | Xxxxxx Xxxxx |
We
agree to the above:
/s/
Xxxxxx Xxxxxxx
6
